Land tax to be levied on vacant residential properties in ACT

The ACT government’s budget earlier this month signalled three major changes for the property market.

The changes include extension of the land tax to all homes that are not the owner’s principal place of residence, whether they are rented or not, said lawyers Meyer Vandenberg in a note. The new tax is expected to raise an additional $2 million in revenue annually and will be implemented from July 1, 2018.

In a nutshell, it is a vacancy tax. Earlier this year, Victoria had announced a vacancy tax and the Federal Budget also announced a new tax on vacant properties owned by foreigners in its efforts to address housing affordability.

At present, land tax is already paid by owners of residential properties that are rented, or that are owned by a company or a trust. Land tax is not paid by the owners of commercial property.

The basis for calculating land tax, and the marginal rates, will also change on 1 July 2017, said the law firm.

Another change is the stamp duty on the transfer of commercial properties. From July 1, 2018, stamp duty on the transfer of a commercial property valued at less than $1.5 million will be abolished. 

Stamp duty will be paid at a rate of 5% where a property is valued at $1.5 million or more. 

“This will mean that the majority of commercial conveyance transactions in the ACT will not be subject to stamp duty from 1 July 2018,” they said.

Also, from June 7, 2017 stamp duty rates will change for commercial and residential properties. The commercial stamp duty rate will be effectively half of the residential stamp duty rate, they said.

From July 1, the government has also changed the Lease Variation Charge (LVC) applicable to varying crown leases to limit the maximum number of residential dwellings permitted on the land. This applies where a crown lease doesn’t currently specify the maximum number of dwellings.

Currently, a variation of this type of crown lease would incur an LVC of $7,500 per dwelling for the first three dwellings, and $5,000 for each additional dwelling.

“We understand that from 1 July 2017, the new LVC will be calculated on the basis of a flat charge of $30,000 per dwelling,” the note said.

However, development applications which are formally submitted for a completeness check in eDevelopment before 30 June 2017 will incur the current (lower) LVC.