Victoria’s budget: New tax for $1 million property projects to fund Plan Melbourne scheme

A new levy on planning permit application fees will fund the Victorian government’s $62.8 million commitment to the Metropolitan Planning Authority (MPA).

The Plan Melbourne strategy was drafted by the Coalition government in October last year. Plan Melbourne’s initiatives include accelerated investment in metropolitan hubs and outer growth areas, strategies to facilitate the supply of affordable housing and transport infrastructure investment.

The Victorian government will provide $51.6 million over four years to the Metropolitan Planning Authority to implement Plan Melbourne, which has not yet been finalised.

An additional $11.2 million will be provided over four years to fund short term actions including the delivery of major urban renewal sites and a local “pocket park” fund. The government has also committed cash for a “20 minute neighbourhood” fund. The 20 minute neighbourhood strategy aims to see retail, job, education and recreation precincts within 20 minutes travel time of every home, with a strong focus on non-car transport.

The spending commitment will be funded by new planning permit application fee tax for projects worth more than $1 million. The levy is forecast to raise an estimated $17.1 million per year. To be introduced on 1 July 2015, it is estimated that the levy will be charged to approximately 6% of all planning permits.

According to Minister for Planning Matthew Guy, the increased levy costs would be offset by the benefits of the new planning system.

“Developers face millions in land holding costs every week across Victoria. A fully funded MPA will reduce overall development costs over time by bringing land to market earlier,” said Guy, who claimed that the funding will help drive job creation and investment opportunities.

“Plan Melbourne supports the Coalition government’s commitment to building a stronger Victorian economy by working with development industry to create more jobs right across the State,” said Guy.

“This funding is an important boost for jobs and productivity, by helping the growth and development of significant employment hubs across the metropolitan area and driving the expansion of the central city.

“It will kick start the major employment clusters at Monash, Latrobe, Sunshine and Fishermans Bend, urban renewal a framework for expanding the central city and a metropolitan-wide open space strategy, to promote growth and investment, further increasing their attraction as great mixed use places for businesses, workers and new residents.

“These job centres are a fundamental principle of Plan Melbourne, our new plan for the city, and they mean more jobs and services in Melbourne’s middle and outer suburbs,” he said.

Planning will also begin for urban renewal areas at Cremorne and Collingwood, and along railway corridors from Huntingdale to Dandenong, Brunswick to Batman, and North Richmond to Victoria Park, according to Guy.

“Unlocking land opportunities across Victoria and expanding our central city and urban renewal areas will not only deliver more jobs, more housing and transport options, it will be a major boost for the State’s productivity and economic growth over the next 50 years,” said Guy.

The Victorian branch of the Property Council of Australia has criticised the Victorian government's new property tax despite supporting the increased infrastructure investment, with deputy executive director Asher Judah claiming that the government has an "unhealthy addiction to property taxation."

"The Property Council will vigorously oppose the introduction of a new $17.1 million tax on apartment buyers to fund the activities of the new Metropolitan Planning Authoirty," said Judah.

"While we welcome the increase in funding for the MPA, a government projecting multi-billion surpluses shouldn’t be introducing new property taxes. This action combined with the 2013 expansion of the Congestion Levy exposes a Government with an unhealthy addiction to property taxation.

"Property owners across Victoria will also be uneasy about the government’s plans for new taxes via asset value capture mechanisms (AVC). AVC already exists in the form of land tax and local council rates. Any move by the government to triple tax property value uplift will face fierce opposition from the industry.

"Over the next four years, tax revenue sourced from property will increase by over $2.3 billion. Increases in Stamp Duty, Land Tax, Fire Services Property Levy and the Car Parking Levy each reflect a growing and unhealthy addiction to property taxation."