26 May 2023

COVID Debt Levy raises concerns for VIC renters

Changes to Victoria’s land tax threshold will result in an increased tax burden on property owners, potentially leading to higher costs for both landlords and tenants according to the Real Estate Buyers Agents Association (REBAA).

Now that the tax-free thresholds for investment properties and holiday homes have been downgraded from a land value of $300,000 to $50,000, almost every Victorian investor with land holdings will be liable under the new tax regime.

REBAA president Cate Bakos said with most properties falling under the lowered tax threshold as part of the newly announced ‘COVID Debt Levy’, owners may be compelled to sell and consider other classes in which to invest.

Ms Bakos said those who decided to retain their properties would likely aim to offset their elevated taxes and expenses by increasing rents to match market rent at every available opportunity.

“The proposed land tax changes are going to directly hurt renters, and in a climate where rising rents and tough household affordability is already gripping, we feel this is a grave move for Victoria,” said Ms Bakos.

“Victorian investors have already sustained tough blows throughout the COVID lockdown period with mandated rental eviction moratoriums leaving it in the hands of landlords to negotiate with renters.

“During this period many investors received either considerably less rent, and in some cases, no rent.

“The land tax changes are going to impact cashflow neutral investors in particular, who rely on sensitive cashflows to maintain their properties.

“There is a direct correlation between lower priced, cashflow neutral properties and lower rental options, so it’s fair to say that the state’s most vulnerable renters could be seriously impacted.”

Other similar reforms have destabilised other property markets such as Queensland’s recent land tax reform which has subsequently been repealed.

“Many investors fled the Queensland market during 2022 and the continuing rental crisis has caused significant strain for thousands of families,” said Ms Bakos.

Propertyology Managing Director Simon Pressley said landlords have been under pressure since 2015.

“Important asset ownership controls have been removed, a number of expenses and taxes have increased significantly, and their income-earning potential has been restricted,” he said.

“Consequently, the size of Australia’s rental pool is hundreds of thousands properties fewer than demand requires.

“Any logical person can see the order of the day demands that those with the capacity to add rental supply should be encouraged. Their country needs them. Instead, politicians everywhere are punishing them – it’s nonsensical.”