The Victorian Treasurer, Tim Pallas, handed down the State budget on 20 May 2021 that included changes to Payroll Tax, Land Tax and Stamp Duty that will affect a range of Victorian business and investors. The key changes are summarised below.
Payroll Tax
The key changes for Victorian Payroll Tax;
- The Tax-free threshold will increase from $650,000 to $700,000 effective 1 July 2021
- Regional employers payroll tax will reduce from 2.02% to 1.2125% effective 1 July 2021
- To reduce the compliance burden, Victorian businesses from 1 July 2021 can move to annual reporting and payment obligation where their annual payroll tax liability is $100,000 or less (previously $40,000).
- A Mental Health and Wellbeing Levy will be introduced from 1 January 2022, applicable to Victorian Businesses which have annual Australian taxable wages in excess of $10 million.
This will be levied as a payroll tax surcharge as follows:
- 0.5% of the portion of Victorian taxable wages above $10 million
- 1.0% of the portion of Victorian taxable wages above $100 million
Land Tax
The Victorian Government have increased Land Tax rates for the first time in over a decade. Landowners who hold a property or multiple properties with a combined unimproved value of $1.8 million or more will be hit with a significant increase in land tax in 2022. The changes to be effective 1 January 2022 (based on lands held at midnight 31 December 2021) are:
- The Tax-free threshold for Individuals and Companies will increase from $250,000 to $300,000
- Land Tax rate increase for property taxable values between $1.8 million and $3.0 million from 1.3% to 1.55% (19% increase)
- Land Tax rate increase for property taxable values greater than $3.0 million from 2.25% to 2.55% (13% increase)
The increase in land tax rates will impact both landlords and tenants, but ultimately the tenants.
For commercial property landlords, as there has been no change in the land rates for taxable values up to $1.8 million, the recovery of the land tax from tenants is likely to remain unchanged (Landlords can only recover the land tax calculated on a single holding basis). This will mean a substantial increase in the land tax liability for property owners who have holdings in excess of $1.8 million, while the recovery from tenants could remain unchanged.
For residential property landlords, they are not able to recover any land tax from a tenant and therefore their land tax liability will increase substantially where property taxable holdings are greater than $1.8 million.
This increase in land tax for the landlords will invariably result in rent increases payable by the tenants.
Stamp Duty
There were several Stamp Duty changes announced in the budget made up of duty concessions, increases in the premium rate and a new windfall gain tax for developers. In summary the changes are:
- 50% Temporary Stamp Duty concession for properties with the City of Melbourne local government area* for purchase of new residential property that has been unsold for less 12 months up to a value of $1.0 million for contracts entered into between 1 July 2021 and 30 June 2022
- 100% Temporary Stamp Duty exemption for properties with the City of Melbourne local government area* for purchase of new residential property that has been unsold for more than 12 months up to a value of $1.0 million for contracts entered into between 21 May 2021 and 30 June 2022
- The premium rate will increase from 5.5% to 6.5% of the dutiable rate value of $2.0 million for contracts entered into from 1 July 2021
- Temporary increase of off the plan duty concessions ceiling to $1.0m for contracts entered into between 1 July 2021 and 30 June 2023. The current ceiling is $750,000 for first home buyers and $550,000 for other buyers.
- From 1 July 2022 a new windfall gain tax will be payable on the rezoning of land between zone types (but not zone sub-categories). There is limited detail on how this will apply, government and budget papers have indicated this will be assessed at 50% of uplifts greater than $500,000 due to rezoning, with phasing-in of the tax on uplifts from $100,000. This tax will not apply to land subject to the Growth Areas Infrastructure Contribution.
* City of Melbourne local government areas includes the Melbourne Central Business District, Docklands, Southbank, South Yarra, Port Melbourne, East Melbourne, West Melbourne, North Melbourne, Kensington, Parkville, Flemington and Carlton
Should you need to discuss any of the above announcements please do not hesitate to contact our office.
