Melbourne developer, Resi Ventures announced today the new legislation would scuttle its plans to bring future lots to market using the Land Development Agreement (LDA )model.
“Imposing a tax upfront is a draconian measure, stamp duty is not normally paid until settlement so this accelerated taxing treatment will torpedo a number of deals Resi Ventures has in the pipeline,” Resi Ventures director Mr Anthony Braunthal said.
He said the Stamp Duty changes, due to be law as soon as Wednesday, would kill one of the principle methods by which land is delivered to Victorian home buyers as LDAs become unviable.
A number of Melbourne’s leading developers had done these type of deals across the states urban growth zones, including
- Cloverton - 25,000 pop. Town is an LDA between Stockland and land owners
- Mt. Atkinson Current Stockland project
- Harpley - Lendlease LDA in Wyndham Vale
- Woodlea is a JV with Mirvac and the original land owners Peng Heng Wong's company
“The Victorian Government will not receive the tax windfall it expects as a result of its new Stamp Duty changes and may even see revenue fall.
Developers will use alternate methods, such as structured sales on extended terms, that will push out stamp duty revenue into the future and will likely result in higher land prices as a delivery bottleneck is created with landowners more reluctant to sell and supply will start to dry up,” he said.
Under the previous taxation model a Development Agreement (DA) structure defers Stamp Duty until the project is ready to proceed and after the infrastructure costs have been absorbed.
“DAs have been falsely portrayed as a tax loop hole that benefit developers rather than a means of inducing landowners into arrangements that unlock land supply,” Mr Braunthal said.
The Stamp Duty changes will be imposed upfront rather than be collected at the settlement of a transaction.
“This will further reduce affordability and have the exact opposite effect of what was intended. If any of these deals proceed the Stamp Duty cost will simply be passed on to the home buyer.
“If the Victorian Government had consulted the industry they would have quickly realised this will signal the death knell of Development Agreements & Joint Ventures.
“Developers are the very organisations that create jobs and pay significant amounts of tax. More should be done to drive affordability down by reducing regulation and taxation - not increasing imposts on development,” Mr Braunthal said.
Find out more about Resi Ventures LDA https://blog.resiventures.com.au/land-development-agreement