View of the Sydney cityline from a residential suburb.
With the large number of vacant homes in Australia, the Victorian government revealed plans to introduce a new tax on owners who keep their properties vacant for over six months, reported The Straits Times.
Believed to be the first in Australia, Victoria’s vacancy tax – which involves a one percent tax on the home’s value – will commence on 1 January and is expected to raise around A$80 million (S$84.3 million) in four years.
Targeted at freeing up properties within Melbourne’s inner city, Premier Daniel Andrews explained that the new tax will not apply to holiday homes or persons with a city apartment for work purposes.
“This will send a really strong message to people who are effectively banking an empty property and denying that to the market and contributing to the lack of supply,” he said.
Australian Treasurer Scott Morrison said the Australian Capital Territory is also considering a similar tax.
Property experts believe that up to 300,000 homes in Australia are vacant, most of which are owned by investors, majority of them from overseas.
Last year, a study by the City Futures Research Centre at the University of New South Wales (UNSW) found that around 90,000 homes in Sydney are empty. A separate study based on water usage, on the other hand, showed that 4.8 percent of the properties in Melbourne, or around 80,000 homes, were unused in 2014.
The researchers from UNSW blamed the tax breaks offered by the government, particularly “negative gearing” which enables property investors to claim tax deductions for interest paid on loans used to purchase investment properties.
This comes as the tax provides a disincentive to those renting out their homes as they will be forced to claim for a smaller deduction.
This article was edited by Denise Djong.