Victorian State Government Budget – 27 May 2019
The Victorian state government recently handed down its annual state budget and there are a number of changes that will impact both business and investors.
A summary of the key items is as follows.
Payroll Tax
The government’s three key changes are:
- Increase in the tax-free threshold to $700,000 from the 1 July 2022
- Reduction in the payroll tax rate for “Regional” employers to 25% of the standard rate (4.85%) to 1.1215% from the 1 July 2022 (refer below – Regional Employers)
- Broadening of the current exemption from wages of maternity leave payments to include all types of parental payments
Payroll Tax Concessions for Regional Employers
A further lowering of the payroll tax rate for regional employers has been introduced. By 2022-23 the payroll tax rate applicable to regional employers will be reduced to 25% of the standard state payroll tax rate. This means regional employers will have a payroll tax rate of 1.2125% compared to the standard state payroll tax rate of 4.85%. The reduction will be phased in over three years from the 1 July 2020 with reductions of around 0.4% each year.
To be eligible for the concessional rate at least 85% of the employer’s wages must be paid to employees working in regional areas.
There is also further assistance for regional employers with the payroll tax-free threshold to be increased over the next four years and there is also the broadening of the current maternity leave exemption to all types of parental leave.
Regional Commercial Property Stamp Duty Transfer Concession
As part of the incentive for businesses to expand or relocate to regional areas the state government has introduced a stamp duty transfer concession of 10% for transfers applying to contracts signed from the 1 July 2019 with the concession increasing by an additional 10% each year to ultimately provide a 50% discount for contracts signed post 1 July 2023.
Under the current rules the stamp duty on a $1m property purchase would be $55,000 and with the advent of the new rules the stamp duty would fall to $27,500 – $49,500 (depending on the date the contract is entered into) providing considerable savings.
The legislation is to be finalised and at this stage it is unclear whether the concession depends on the timing of the contract and location of the property or whether it is also limited to transfers involving businesses already in or shifting to regional areas of Victoria.
Removal of Land Tax Exemption on Second Title
Currently, there is a principle residence exemption for a residence that spreads over two titles and the land is used solely for the private benefit of the person who owns the residence. However from the 2020 land tax year onwards there will no longer be an exemption available for the second title and the exemption will only apply to the title on which the residence has been built. If this situation applies then a consolidation of titles review should be undertaken.
Corporate Re-Structure Duty Exemption Rules
Currently there is an exemption that can fully exempt a transaction involving property from stamp duty if the transaction involves companies or trusts. This exemption is to be amended to now be a partial exemption (instead of a full exemption) with a stamp duty rate 10% of the duty otherwise payable however there will also be an expansion of the qualifying provisions. This change is planned to be effective from the 1 July 2019 and further details are to be released.
Increase in Foreign Purchaser Additional Stamp Duty
The Foreign Purchaser Additional Duty rate is to be increased from 7% to 8% for contracts entered into from the 1 July 2019.
Increase to Absentee Owner Surcharge (Land Tax Surcharge)
The Absentee Owner Surcharge is to be increased from 1.5% to 2.0% effective from the 1 January 2020. This will mean that a top rate of land tax of 4.25% will apply to residential and commercial property that is deemed to have an Absentee Owner. We note, that the Absentee Owner rules also apply to property developers developing land and care needs to be taken here.
