Victorian Government outlines tax measures to drive recovery
The 2020 Victorian Budget featured a range of measures which are aimed at reinvigorating the Victorian economy after an extended period of strict lockdown. We have set out a high level overview of the major tax-related items which form the foundation of the Victorian Government’s recovery effort.
Duty concessions for residential land
There will be a stamp duty concession of 50 per cent for new residential properties valued up to $1 million. For existing residential properties up to $1 million, the exemption is 25 per cent. This concession applies to contracts entered into on or before 30 June 2021.
The $1 million threshold is based on the dutiable value of the property - i.e. it will be the higher of either the market value or the contract price and includes any GST payable. This concession does not extend to foreign purchaser additional duty.
In addition to this, the $20,000 First Home Owner Grant for people buying/building a new home in regional Victoria has been extended to apply to contracts of sale entered up until 30 June 2021.
Duty concession for industrial/commercial land in regional Victoria
Currently, there is 50 per cent duty relief on transfers of commercial property which are located in regional “state of disaster areas” (i.e. areas which were affected by the bushfires at the start of the year). Originally, this relief was set to extend to all of regional Victoria on 1 July 2023.
However, as was announced just ahead of this budget, the concession will be brought forward to 1 January 2021. From that date all ‘eligible transfers’ of commercial property across regional Victoria, which is used solely or primarily for a “qualifying use” will have the 50 per cent duty discount apply.
Land tax concession and VRLT waiver
In an effort to encourage more build-to-rent projects, there will be a 50 per cent land tax discount for eligible new developments from an expected start date of 1 January 2022 until 1 January 2040. This is part of Victoria’s “Big Housing Build” initiatives and is designed to incentivise developers to build quality housing to hold rather than to sell. These eligible developments will also be exempt from the Absentee Owner Surcharge over the same period, which should help facilitate foreign investment.
Currently, land owned and occupied by not-for-profit clubs that provide certain benefits for their members was taxed at a concessional rate, as outlined in section 73 of the Land Tax Act 2005 (Vic). As was announced in the Budget, from the 2021 land tax year, this land now becomes exempt from land tax.
Furthermore, as was previously announced, there will also be a full waiver provided for all 2021 vacant residential land tax (VRLT) liabilities that arise for properties which are vacant at 31 December 2020. This will be welcome relief for many property developers holding vacant, un-sold stock.
In addition to the budget announcements, the subsequent State Taxation Acts Amendment Bill 2020 (Vic) proposes to abolish special land tax.
Employer related tax items
There were also changes announced in the payroll tax space.
A payroll tax credit of 10 cents for every dollar a business increases taxable Victorian wages. This will apply for the 2020-21 and 2021-22 payroll tax years, to businesses with a payroll of less than $10 million and is set to run for two years.
Further, from 1 July 2021, payroll tax will only be payable annually if a business’s annual payroll tax liabilities are less than $100,000 (up from the current threshold of $40,000). Any payments to employees under the Commonwealth’s JobKeeper program are exempt from payroll tax.
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