How the Government is Driving the Housing Affordability Crisis

Some Direct Taxes that impact developers, since 2017 that you should be aware of:

Income tax: Property developers may also be subject to income tax on any profits they make from their property development activities.

1.  Vacant Residential Property Tax (introduced in 2017)

2.     Point of Consumption Tax (introduced in 2018)

3.     Fire Services Property Levy (introduced in 2019)

4.     Windfall Gains Tax (introduced in 2020)

5.     Open Plan Contributions 

6.     Cladding Rectification Levy (introduced in Feb 2020)

7.     Social Housing Levy (To be announced in the May Budget 2023)

Overlayed with the following taxes in place.

1.     Goods and Services Tax (GST): Property developers are generally required to pay GST on the sale of new residential properties, including apartments and townhouses.

2.     Stamp duty: In Victoria, stamp duty is payable on the purchase of land or property. The amount of stamp duty payable depends on the value of the property and other factors such as whether you are a first-time buyer or a foreign purchaser.

3.     Land tax: Land tax is payable on any property that you own in Victoria that is not your primary residence. The amount of land tax payable depends on the value of the property.

4.     Capital gains tax (CGT): CGT is payable on any profit you make from the sale of an investment property. The amount of CGT payable depends on a number of factors, including how long you have owned the property and whether it is held in a company or trust structure.

How the tax dumps impacted the end user, the buyer?

According to the Australian Bureau of Statistics (ABS), the median price of a new residential dwelling in Australia was AUD 549,918 in the September quarter of 2017. 

The median price continued to increase over the years, reaching AUD $621,200 in the December quarter of 2018, 

AUD $636,900 in the December quarter of 2019, 

AUD $680,000 in the December quarter of 2020, and

AUD $730,800 in the March quarter of 2021.

Additionally, taxes such as land tax and capital gains tax may encourage property developers to hold onto properties for longer periods, which can reduce the supply of housing available for sale or rent. This can contribute to higher property prices, as demand outstrips supply.

Now imagine another 700,000 new migrants to Australia over the next two years?

The average project takes approx. 36-48 months to complete, end to end.

Demand will outstrip supply, which will cause a price surge, rental prices to increase further and housing prices to be pushed to unaffordable rates for the median income earner in this country.  Owning your dream home, is fast becoming dead.

We should be providing greater tax incentives for developers, not adding more layers of costs, as many feasibilities are simply unfeasible currently.

A quote we often use, “Behind every failed project, was a successful feasibility”

Please note; It is important to seek professional advice from a tax accountant or lawyer to ensure that you are meeting all your tax obligations as a property developer in Victoria, Salvest is not providing financial or tax advice.  

Please note that these figures are based on national averages and can vary depending on factors such as location, size of the home, and local market conditions.