Geelong has a perfect growth potential and affordability, that’s why it became a popular place for property investors. However, these changes mean that more people have to pay land tax, and existing investors have to pay more tax than before. If you own or plan to invest in property in Geelong, you need to understand how land tax works.
What Is Land Tax?
Land tax is a yearly tax that the Victorian government charges property owners. It applies to land that is not your main home. If you own an investment property, a holiday home, or vacant land, you may have to pay land tax.
As of January 1, 2024, some important changes were made:
- Lower Tax-Free Threshold: Previously, land tax applied only to properties valued above $300,000. Now, any property worth more than $50,000 is subject to land tax. It brings many smaller investors into the tax system.
- Higher Tax Rates: Owners of multiple properties now face higher tax rates, increasing the financial burden on investors with larger portfolios.
- Vacant Residential Land Tax (VRLT) Expansion: Previously, this tax applied only to certain areas in Melbourne, but from January 1, 2025, it will cover all of Victoria, including Geelong. If a property remains vacant for more than six months in a calendar year, it will attract an additional tax.
- Emergency Services and Volunteers Fund (ESVF) Levy: This new levy replaces the Fire Services Levy and increases costs for landlords and investment property owners. It is set to be fully implemented by July 1, 2026.
The government justifies these changes as a way to increase tax revenue and create a fairer system.
However, many investors are concerned about the financial strain these changes will bring.
How Does Land Tax Affect Property Investors In Geelong?
The revised land tax regulations have significant implications for investors in Geelong. Here’s how they are being affected:
- Higher Holding Costs: With the new lower threshold, more investors now have to pay land tax, and those who were already paying will see their costs increase.
- Potential Rent Increases: Some landlords may try to pass on the extra tax costs to tenants by increasing rent. However, finding an affordable rental is already challenging, so, increase in rents could make it harder to find tenants.
- Fewer Property Investors: Some investors may decide that property investments are no longer viable due to the rising costs and may sell their properties, leading to changes in the rental market.
- Impact on Property Prices: If fewer investors buy properties, demand could slow down, which will affect property price growth in Geelong.
- Additional Tax on Vacant Properties: There are some investors who hold properties for long-term capital growth but leave them vacant. They could face extra costs due to the expanded Vacant residential Land Tax.
How Can Property Investors Manage Land Tax?
Although land tax increases investment costs, there are strategies to manage the impact effectively:
- Review Your Portfolio: Consider selling underperforming properties to reduce your land tax liability.
- Consider a Different Ownership Structure: Using trusts or company ownership structures may help reduce tax liabilities, but it’s essential to seek professional financial advice before jumping to the final decision..
- Check for Exemptions: Some property types, such as farmland and affordable housing developments, may qualify for exemptions.
- Seek Professional Advice: A financial planner or a tax accountant in Geelong can help you understand your specific situation and give ways to minimise your tax burden.
- Invest in Other Areas: Some investors may choose to diversify their investments by looking at properties in states with lower land tax obligations.
- Keep Properties Occupied: With the expansion of the Vacant Residential Land Tax, ensuring that properties are rented out for at least six months of the year can help avoid additional taxes.
- Stay Updated on Policy Changes: Tax laws and property policies can change, so keeping informed will help you adapt your investment strategy accordingly.
What’s Next For Geelong’s Property Market?
Apart from the land tax increases, Geelong is always an attractive investment location due to its ongoing population growth, infrastructure improvements, and high housing demand. While some investors may reconsider their strategies, others will adapt and continue investing.
To stay ahead, investors should monitor future tax changes, seek professional guidance, and stay engaged with the local property market by attending industry events and networking with other investors.
Conclusion
The recent land tax changes in Victoria have increased costs for many property investors in Geelong. However, by understanding these changes and implementing smart financial strategies, investors can still find opportunities in the market. Staying informed, seeking professional advice, and adapting investment strategies will help property owners navigate these challenges and continue to succeed in the Geelong property market.
If you are looking for expert assistance from a tax accountant in Geelong to understand land tax and other property-related financial matters, KPG Taxation offers tailored solutions for investors. We have a team of professionals who can help you optimise your tax strategy and ensure compliance with the latest regulations. Also, we will ensure compliance with the latest regulations to inform you about investment decisions.
