Changes coming for property buyers and investors, from 1 July 2023

As the end of financial year arrives, Avant Law takes a look at some important changes planned in the property law space. Some of these changes may affect your decision to invest in real estate and in which jurisdiction. Here is a snapshot of some of the biggest changes coming.

Nationally

Widening of First Home Buyers Guarantee Schemes

From 1 July 2023, the Federal Government’s First Home Buyers Guarantee (“FHBG”), and Regional First Home Buyers Guarantee (“RFHBG”) schemes, will widen to allow for joint applications to be made by friends, siblings, or other family members. Currently, the schemes only allow for applications to be made by individual, or married or de-facto couple first home buyers. The changes will also allow for non-first home buyers to receive the guarantee, provided they have not owned property within the last 10 years. The FHBG and RFHBG schemes allow eligible first home buyers to purchase a property without Lenders Mortgage Insurance, and with a deposit as low as 5% of the purchase price, with up to 35,000 guarantees under the FHBG scheme, and up to 10,000 under the RGHBG scheme, being issued each financial year.

New South Wales

As rents continue to soar in New South Wales the new State Government is looking to pass new laws requiring owners and agents to notify all rental applicants of offers that are higher than the advertised price. Community groups fear this is legitimising rental bidding and will make matters worse. The planned legislation will require advertisements to include a fixed amount payable for the rent, will prohibit the soliciting of a higher amount than advertised but will not prevent rental bidding, as long as all applicants are notified of the higher offer.

As we have already seen, the first home buyers choice is being scrapped on 30 June 2023 meaning first home buyers up to $1.5 million will no longer be able to chose an annual property tax instead of paying duty upfront.

First home buyers will have windfall after 1 July in that duty exemptions will now apply up to $800,000 (from $650,000) and concessions will apply from $800,000 to
$1 million (previously $650,000 to $800,000).

Queensland

Queensland is set to benefit from a major overhaul to the Property Law Act 1974. These changes, when accented to will see sellers required to provide any buyer with a disclosure document containing all prescribed certificates. Prescribed certificates include body corporate certificates, by-laws, pool compliance documentation, rates and water notices and other relevant documents. If this is not done, a buyer can terminate the contract and recover costs.

It also updates and cements in the electronic conveyancing process and provides some certainty around electronic signatures, service of documents and delays in settlement.

The Palaszczuk Government has also announced that they will commence drafting of amendments to limit the scope for sunset clauses to be included in off-the-plan contracts. The amendments will, at this stage, restrict the circumstances in which a sunset clause may be invoked, to include only when the purchaser has provided written consent for its invoking, under a Supreme Court order, or in another situation prescribed by legislation.

Sunset clauses grant a party the right to unilaterally rescind a contract, if the contract is settled within a specified timeframe, and is commonly invoked by developers of off-the-plan contracts when supply shortages, or other factors, delay construction. These clauses have caused problems amidst the pandemic, with developers allegedly exploiting building supply chain-related shortages to rescind contracts to then enter a new contract for a higher purchase price. While no legislation has yet been tabled, these changes will provide much-needed security, and protections, for off-the-plan property purchases.

In the Build to Rent space, the Revenue Legislation Amendment Bill 2023 was introduced to the Queensland Parliament on 13 June 2023. This Bill will amend multiple laws to provide for land tax cuts for properties for up to 20 years where the development features an affordable housing component of at least 10% of the properties for rent. There will also be exemptions on foreign investor land tax surcharges payable and additional foreign acquirer duty.

1 July will also see the introduction on limiting the number of times landlords can increase residential rents, to once per annum. There is no cap on the amount of the increase, but after 1 July 2023, residential rents in Queensland can only be increased once a year.

Western Australia

Abolishment of paper Certificates of Title – From 7 August 2023, amendments to the Western Australian Transfer of Land Act 1893 will commence, resulting in the removal of the requirement for duplicate certificates of title. The amendments passed in June 2022, and will see duplicate (paper) titles be no longer created or issued, as part of WA’s plan to modernise the state’s e-conveyancing regime. Any duplicate titles issued before the date of commencement will no longer hold legal effect, although any purchaser who is a holder of a duplicate title will not need to take any action to render it invalid. All original certificates of title will still be held by LandGate.

Similar to Queensland, Western Australia will also see land tax exemptions provided to the buyers of land used for new build to rent developments.

Victoria

The recently unveiled 2023-24 Budget announces proposals to reform Land Transfer Duty and Land Tax. In an effort to offset the impact of COVID-19 debt, a 10-year “COVID Debt Levy” is proposed to be implemented from 1 January 2024 on Victorian landholdings. The levy would place an additional annual fixed charge of $500 on landholdings between $50,000-$100,000; an annual fixed charge of $975 on landholdings between $100,000-$300,000; and an annual fixed charge of $975 plus 0.1% of the total value of the landholding, on landholdings valued greater than $300,000. The levy would also reduce the tax-free threshold for general land tax rates from $300,000 to $50,000. This levy would only apply to properties who are currently liable for Land Tax, and therefore family homes and personal residences would not be affected. This proposal is expected to generate $1.1 billion in the 2023/24 financial year, however community groups are concerned that Mum and Dad investors would be discouraged from purchasing rental properties, leading to a decrease in rental supply.

Amendments to land transfer duty have also been unveiled. The Budget proposes to replace transfer duty on sales of commercial and industrial properties with an annual property tax of 0.1% of the property’s unimproved land value. Current owners of commercial properties would not be affected by the change. Purchasers of commercial property after 1 July 2024, however would not be liable for transfer duty, and the annual tax would be applied after a transition period of 10 years from the sale date. This proposal aims to encourage businesses to invest, expand and create more jobs in Victoria.

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