The Victorian state government’s best-laid plans for vacant residential land tax reform appear to have been shanghaied by the Greens who have refused to play ball unless certain provisions were made.
The state’s Treasurer Tim Pallas got the Green party’s feathers ruffled last month after he unexpectedly announced plans to expand a 1% tax on vacant homes to include the whole state, rather than only Melbourne’s inner and middle rings.
Pallas also proposed to widen the tax to include vacant undeveloped land that is zoned for residential use, if it has not been improved within five years.
Right from the get-go these reforms were destined to be knocked back in Victoria’s upper house given that the state opposition does not support them.
While the Greens always liked the idea of stamping out land banking – where a block is bought without any plans to immediately develop – it didn’t feel the proposed reforms went far enough.
Vacant home tax to triple
After a lengthy impasse, Labor managed to win the support of the Greens by agreeing to:
- Double the 1% tax rate if a home is vacant for two years and…
- Triple it to 3% after three years.
However, exemptions will remain if there has been a genuine attempt to sell the property.
An about-face decision by Victoria to launch a trial – in which the tax was enforceable instead of being self-reporting – means home-owners identified by the State Revenue Office (with potentially empty properties) would be asked to furnish evidence that people actually live at their residence.
In addition to the above concessions, the Greens also managed to secure amendments to a proposal that would have resulted in major increases in the fire services levy on renewable energy projects.
In response to the Greens and clean energy group warnings that it could escalate the cost of the fire services levy, the value of wind farms and solar panels in land valuations will also be cut from 77¢ per $1000 of value to 5.7¢.
To ensure the tax covers more properties that have been missed under the current program, the trial would start in 2024 with apartment towers and expand in 2025 to include inner and middle suburbs of Melbourne.
Meanwhile, exemptions for holiday homes have also been reworded to ensure those owned by family trusts or relatives are still included.
Unfinished business
Commenting on recent developments, Victorian Greens leader Samantha Ratnam also reminded the Allan government that their ability to continue passing the recently published housing statement through parliament, will require ongoing collaboration to fix the current housing crisis.
While Pallas expects tax changes to indirectly provide more options for renters and buyers, shadow treasurer Brad Rowswell says the jury’s out on whether it will increase housing supply.
“The new and increased taxes in this bill will punish Victorians at a time when they can least afford it,” Rowswell said.
Meanwhile, tax amendments coincide with new protections for Victorians left high and when building companies collapse.
The Allan government has introduced new offences for any builder receiving money for domestic work costing $16,000-plus.
Builders and companies can be fined up to $96,000 or $480,000 respectively for not taking out the necessary insurance as required.
