Tax and legal advice
Nick Holden

Budget 2017 and why time is running out to save on stamp duty in Victoria

By Nick Holden

The federal budget and Victorian state government have made significant changes to depreciation, travel expenses and stamp duty concession. Investors have until 1 July 2017 to save up to $20,000 or more on stamp duty. Here’s what investors need to know.

Depreciation: rewards investors with new properties

Let’s start with what was announced in the budget about depreciation.

Labor has been vocal about what they would do to negative gearing if they get into power. They propose that negative gearing will only apply to new properties.

The main reason behind this stems from one of the goals behind why these tax benefits have been originally introduced: to encourage Australian investors to build more properties, help alleviate a housing shortage and ideally stimulate the economy through the construction industry.

Has this happened? No. Labor quotes that 90 per cent of investors are enjoying the benefits of negative gearing with established properties.

Liberals do not want to change this area of legislation yet they seem to have come up with some common ground to appease the masses who are in support of a change: if you purchase an established property, you cannot claim depreciation for removable items, such as appliances or floor and window coverings.

These items can only be depreciated if you purchase new:

  • For a newly built home
  • If purchased individually to add or replace in an existing property

I think it has some merit.

These changes are rewarding those who are buying new (same goal as Labor) without potentially disrupting the whole industry.

Travel expense: no longer tax deductible

The expense of visiting your investment property is no longer tax deductible, a relatively minor change in the budget. Unfortunately, like a lot of things, this change has been introduced through some people abusing the system and making false or excessive claims.

I think travel to an investment property is a warranted business expense for property investors who are genuinely taking an active role in looking after their investment.

Stamp duty concession in Victoria

So now let’s look at what the Victorian state government has done.

Victoria has been the only state to offer a concession on stamp duty for off-the-plan purchases. Stamp duty is calculated on the improved value of the land at the time of signing the contract of sale.

For example:

If youve purchased a townhouse for $400,000 and construction is yet to begin, stamp duty is calculated on the land value only. This may only be a couple of thousand dollars (depending on the value of the land).

One of the main reasons for this concession is to encourage and incentivise private investors to purchase in the early stages of a development so that developers can get pre-sales and begin construction.

Once again, this concession is set up for similar reasons to negative gearing: to build more properties, help alleviate a housing shortage and stimulate the economy through the construction industry.

Quite frankly, a smart state initiative.

Changes to the stamp duty concession

As of 1 July 2017, the concession will no longer be available to investors. As usual, through short-sightedness, the state government is looking for a cash grab and not looking at what this may do to the industry and the housing market.

So to put things in context, that same $400,000 townhouse will incur a stamp duty fee of almost $20,000.

Investors are no longer rewarded for taking the larger risk of buying early off-the-plan.

One of the hottest topics at the moment is housing affordability.

Surely the government can see with basic supply and demand that the less properties we have in the market, the greater the demand. What does that then do to prices?

Bottom line

Changes to the federal budget and the Victorian state government means:

1. You can’t claim depreciation for removable items in established properties
2. You can’t claim travel expenses to visit your investment property
3. BUT you can get the stamp duty concession – only up to 1 July 2017

So, if you’ve been thinking about purchasing an off-plan apartment or townhouse in Victoria, stop thinking and get onto it now!

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About the Blogger

Nick Holden

Nick Holden

Nick Holden is the Founder of Simple Property Investment, and a qualified, insured Property Investment Advisor who has more than 20 years of investing experience; for himself and his clients. As there is no 'one size fits all' with property investment, he is on a mission to help ordinary Australians create wealth for their futures with personalised strategies and advice. And their best interests at heart.

Nick is an accredited advisor with the ASPIRE Advisor Network, an industry organisation founded out of a desire to provide a genuinely independent, compliant and professional service. ASPIRE is setting the benchmark in the property advice sector.

Email:
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
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A property investment plan years in the making
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  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
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  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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