Vacant Residential Property Tax hits property owners in Melbourne

Vacant Residential Property Tax hits property owners in Melbourne

12 January 2018

Starting 1 January 2018, vacant home owners in inner-Melbourne will be hit with a new tax, reports Melbourne’s Herald Sun.

The Vacant Residential Property Tax (VRPT) came into effect on 1 January 2018 and is predicted to raise more than $80 million over four years.

The tax, which affects 16 councils in Melbourne’s inner and middle suburbs, will see owners pay one percent of the property’s capital improved value if they do not live in the house for more than six months a year.

The Age reports the tax is expected to bite hardest in the Melbourne City Council area, where more than 2,500 properties—mostly high-rise apartments—are vacant.

Premier Daniel Andrews said the vacancy tax would send a strong message to property owners who were “land banking” that they needed to sell or rent those homes.

“If you’ve got a property in those local government areas and it’s sitting vacant doing nobody any good at all you need to speak to a real estate agent otherwise you’re going to get a bill,” he said.

Census figures from 2016 showed that Australia had 200,000 more homes sitting empty than it did a decade ago.

A report earlier in The Age in March claimed that at least 24,000 properties were “demonstrably unoccupied” in Melbourne in 2014, according to a study conducted by Prosper Australia. The study also suggested the number of empty properties might be much higher based on an examination of water use.

The government hopes the new tax—the first of its type in Australia—will encourage owners to rent or sell their properties rather than leave them vacant.

“This is a really powerful signal to the market not to be leaving properties vacant at a time when so many people are finding it so hard to get into the market,” Mr Andrews said.

Similar tax measures recently came into force in Vancouver and Paris, notes the ABC News.

The new policy will not apply to holiday homes, city units used for work, deceased estates or homes owned by Victorians who move temporarily overseas.

The new levy has been criticised for relying heavily on owners reporting that their properties remain vacant.

“While in the first instance this will be a self-reporting tax, there are opportunities through utilities data and other data for us to check on compliance,” Mr Andrews said.

“If you fail to report, there are some very significant penalties,” he warned.

In Queensland, the Greens have proposed a similar tax on those homeowners who deliberately leave their property vacant, says The Urban Developer.

The Greens say a five per cent tax would channel $800 million over five years into affordable housing, funding the construction of 200,000 homes over 10 years.

Such a tax “sends a clearer price signal and will have a stronger impact in freeing up under-utilised properties,” says Jonathan Sri, Greens Councillor for the Gabba Ward.

The AFR recently reported that second-hand residential property investor could typically be more than $4,000 a year worse off due to changes in depreciation allowances approved by federal parliament.

The new laws mean property investors can no longer claim depreciation for plant and equipment, such as air conditioning, solar panels or carpet in second-hand residential properties purchased after May 9 this year.

The new rules will not apply to investors who purchased their properties before May 9, new residential properties, or commercial owners who use their properties for conducting a business.