Victorian State Budget – What You Need To Know
The Victorian State Government last week released its 2021-2022 Budget. Although aimed at a broad cross-section of the State, the Budget’s revenue raising measures primarily targeted landowners, property developers and gender exclusive clubs.
The Government has stated that this budget is intended to repair, recover and make Victoria stronger after a turbulent 2020 with a priority on increased funding for mental health, increasing skills in the job market as well as providing more opportunities for work and fiscal measures to support families, investment in road and rail and affordable housing.
Policies aside, what does the Budget and the proposed State Taxation and Mental Health Acts Amendment Bill 2021 mean for Victorians and Victorian businesses particularly those in regional Victoria?
EMPLOYERS
Payroll tax threshold increase
The payroll tax threshold increase will be brought forward to 1 July 2021. From 1 July 2021, the payroll tax threshold will increase from $650,000 to $700,000. As a result a small number of businesses will no longer have a payroll tax liability and a number of other businesses will have a reduced liability.
Regional payroll tax rate decreased further
Reductions in the regional employer rates (which includes Geelong) for payroll tax will be brought forward to 1 July 2021. From that date, the regional employer rate will decrease significantly from 2.02% to 1.2125%. The Government anticipates that this reduction will assist around 4000 businesses.
Mental Health and Wellbeing Levy
To support the Government’s focus on improving access to mental health services, a Mental Health and Wellbeing Levy will apply to certain businesses from 1 January 2022. The Levy will apply as a payroll tax surcharge with the following rates:
0.5% for businesses with national payrolls over $10 million per year;
1% for businesses with national payrolls over $100 million per year.
The surcharge will apply to the Victorian portion of wages above the $10 million and $100 million thresholds. Importantly, payroll tax exemptions provided to hospital, charities, local councils, private schools and wages paid for parental and volunteer leave will still apply for the Levy.
LANDOWNERS
Landowners with high-value landholdings can expect the following increases in land tax from 1 January 2022:
0.25% for taxable holdings valued between $1.8 – $3 million; and
0.30% for taxable land holdings exceeding $3 million
These increases will apply to both the general land tax rates and trust surcharge rates. However small landowners (excluding those holding land on trust) will benefit from an increase in the land tax threshold from $250,000 to $300,000 on 1 January 2022, meaning land tax will only be payable where the total taxable value of Victorian landholdings is $300,000 or more.
There will also be an increase in stamp duty from 1 July 2021 for property transactions with a dutiable value above $2 million. These transactions will be subject to a premium duty rate of $110,000 plus 6.5 per cent of the dutiable value in excess of $2 million.
NEW BUILDS
Whilst purchasing and holding existing properties will see an increase in land tax and duty, the Government has announced incentives for purchases of new builds. The concessions include:
The off-the-plan concession for stamp duty will increase to $1 million for all home buyers for contracts entered into between 1 July 2021 and 30 June 2023. To access the concession the property needs to be the principal place of residence for at least one of the purchasers.
New developments will be exempt from vacant residential land tax for up to 2 years from 1 January 2022.
A number of additional measures apply to the Melbourne area only:
Where a new residential property is purchased in Melbourne with a dutiable value of $1 million or less, the purchaser will be able to obtain up to a 100% concession on any stamp duty payable. This concession will apply to contracts entered into between 21 May 2021 and 30 June 2022 for new properties that have been unsold for at least 12 months since completion; and
A 50% stamp duty concession will also apply to new residential properties purchased in the Melbourne local government area that have been unsold for less than 12 months since completion. The 50% concession will apply to contracts entered into between 1 July 2021 and 30 June 2022.
It should be noted that the 100% and 50% stamp duty concessions will not apply to any foreign purchaser additional duty.
DEVELOPERS
Property developers are facing a significant increase in cost with proposals from the Government to include both the stamp duty and land tax increases noted above.
A new Windfall Gains Tax is to be introduced to tax profits made by taxpayers as a result of the Government rezoning land. The Government expects to generate $40 million each financial year as a result of this measure. The new tax will apply from 1 July 2022 and will phase in from $100,000. The full 50% tax will be levied on gains of more than $500,000.
The tax will not apply to land subject to the Growth Areas Infrastructure Contribution and Public Land Zone rezoning. Additionally, rezoning between zone sub-categories will not fall under the tax.
GENDER EXCLUSIVE CLUBS
After significant lobbying from community members and prominent tax figures for a number of years, the State Government has agreed to remove land tax concessions afforded to gender exclusive clubs. From 1 January 2022 private gender-exclusive clubs will no longer benefit from land tax concessions that are provided to charities, clubs and associations. This measure is aimed to have a significant impact on receipts with the Government anticipating it will result in an increase of more than $380 million per year in land tax payments.
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A number of these measures will have a significant affect on regional Victoria – for landowners, developers and employers in particular. We will keep a close watch on the debate of the State Taxation and Mental Health Acts Amendment Bill 2021 for any changes prior to the enactment of the above measures.
If you have any questions in relation to the proposed measures and how they may affect your business or your clients, contact one of our specialists:
Rob Warnock
Principal Lawyer
T: 03 5226 8541
M: 0419 892 115
E: rwarnock@ha.legal
