How To Avoid Land Banking Tax

The Victorian Government has announced a tax slug that will affect ‘land banking’ property owners from January 1st, 2018. Premier Daniel Andrews has said, “If your property is lying dormant, empty, if it’s not available, we need it to be.” There are currently over 4000 vacant properties in Victoria. There is often vacant property across the Mornington Peninsula for holiday homes, but there will be specific exemptions, including for holiday homes (owned by those with a principal place of residence in Australia), a city unit for work purposes, properties in deceased estates and homes subject to legitimate temporary absences (e.g. medical care, overseas appointments). Keep reading to find out more about reasons property is left vacant in Victoria.

Land Banking as an investment strategy

Whether it's an abandoned property or a new subdivision, land banking can be a profitable form of real estate investment. Land banking refers to the practice of purchasing land based on its potential for future sale or development. If you engage in land banking as an investor, you will typically purchase a property and hold onto it until the price of the property appreciates. Then you can sell it for a profit – this might involve waiting until market conditions are favourable. Land banking typically involves: Acquiring the title to vacant properties or properties that show potential for profit; Making necessary payments to make the property ready for redevelopment; Holding onto the property or increasing its value by improving infrastructure and; Transferring ownership to the new owners once the price appreciates. It is worth noting that the above won't always happen – a decrease in real estate values means some investments will result in a loss.

What does Vacant mean?

A property must be used and occupied as the principal place of residence for more than six months in a calendar year. If the property is only used intermittently throughout the year, it would be considered vacant. For any questions regarding owning property on the Mornington Peninsula, don’t hesitate to reach out the team at Eview Mornington Peninsula on (03) 5971 0300

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