27 October 2023

Three-year stamp duty exemption to boost take-up of dual occupancies on RZ1 blocks

| Claire Fenwicke
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dual-occupancy dwelling

More Canberrans have been given the chance to establish second dwellings (like this one in Torrens) on housing blocks through changes announced earlier this year. Photo: Claire Fenwicke.

A new stamp duty exemption will be introduced from next month for dual occupancies on suburban residential blocks in RZ1 areas.

But some think the incentives could have gone further.

The ACT Government announced earlier this year that dual occupancy dwellings would now be allowed in these residential zones in an attempt to boost housing choice, access and affordability in established suburbs.

The plan was met with mixed reactions as some felt that only opening up this option to blocks more than 800 square metres in size wasn’t enough.

Now the government will apply a stamp duty exemption to the first transfer of unit-titled dwellings on RZ1 blocks sold for less than $800,000 from 27 November 2023 to 30 June 2026.

Chief Minister Andrew Barr said this created another incentive to subdivide.

“This incentive provides a discount of up to $25,150 on the final sale price, removing a barrier to home ownership and will bring an incentive for the delivery of more well-located and affordable homes,” he said.

The government has also announced changes to the lease variation charge (LVC) to further support the development of more dual occupancy homes across the Territory.

Once the new Territory Plan has started, lessees will be given a choice about how the LVC is calculated for the maximum number of dwelling lease clauses on RZ1 blocks.

“This will put choice in the hands of lessees as to whether they prefer the certainty of codified values or the flexibility to seek a bespoke valuation to test the value uplift,” Mr Barr said.

The second option would extend to 75 per cent of the value uplift as measured by an accredited valuer.

This choice would be available until 30 June 2026.

The temporary LVC changes will also allow the government to monitor developments and sales to ensure codified values are set at the right level.

“[Both] changes will support the development of more dual-occupancy homes in our suburbs, provide more opportunities for Canberrans to find a home, including existing families looking to downsize, in the same suburbs they’ve lived in for many years,” Mr Barr said.

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But questions have been raised over how this will incentivise owners of RZ1 land to unit title and build.

Shadow Planning Minister Peter Cain argued while the saving benefitted the purchaser, the owner would still have to undertake “considerable expenditure” to have the land ready for purchase.

“This is surely an afterthought on a rushed policy,” he said

“Further, the LVC, no matter how it is calculated, will significantly add to the owner’s expenditure and should not be payable until the owner has had the benefit of the sale of the newly built residence.”

Master Builders ACT (MBA) CEO Michael Hopkins agreed with the statements on the LVC changes.

He said while the stamp duty exemption was in line with the government’s policy to eliminate this fee, the LVC reforms came in months after the charges were “substantially increased” in the 2023/24 ACT Budget.

“While the government has described LVC as a ‘windfall gains tax’; in reality, LVC is a major barrier to providing affordable housing in Canberra, and the method of calculating the charge is highly uncertain and subject to challenge by the government,” Mr Hopkins said.

He made a number of suggestions that he said would better encourage people to utilise the new dual occupancy option.

“Development approval timeframes need to be improved, decisions shouldn’t be appealed by government or third parties, and the amount of government tax needs to be certain,” Mr Hopkins said.

“In the upcoming inquiry into the new planning system, the MBA will call on the government to be more ambitious in its housing policy to address the chronic shortage of affordable and appropriate housing.”

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However, the Property Council of Australia commended the LVC valuation change, stating it would provide more confidence in redevelopment within RZ1.

“When the redevelopment for a dual occupancy happens under the RZ1 reform, this will change the value of the property and you would normally be required to pay the LVC codified charges,” ACT and Capital Region executive director Shane Martin said.

“This new change will mean an owner can opt to have their own valuation done if they disagree with this amount. Once their valuation is concluded, they are able to pick the lowest amount.”

The organisation still has problems with the size limit of second dwellings allowed on these dual occupancy blocks.

“Property Council is of the view that this initiative could go a step further beyond the 120 square metre GFA [gross floor area] limit,” Mr Martin said.

“We should be permitting duplexes of equal size to allow for a more comprehensive shift, whilst still maintaining the desired character in established suburbs.”

More information on the stamp duty exemption and LVC changes can be found through the ACT Revenue Office.

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