With the recent announcement of the Victorian Budget, our Tax team has outlined the upcoming key changes and the dates they will be coming into effect.
Should you wish to discuss any of these changes in more detail, please contact John Caravousanos.
New taxes/increased taxes
| What | Who | Need to know | Important dates |
|---|---|---|---|
| Introduction of windfall gains tax | Owners of high-value landholdings | A tax will apply to large windfall gains associated with planning decisions to rezone land that create an increase in the value of the land of $100,000 or more. The total value uplift will be taxed at 50% for windfalls above $500,000, with the tax phasing in from $100,000. The tax is payable on rezonings across Victoria except on rezonings to and from the Urban Growth Zone within existing Growth and Infrastructure Contribution areas, and rezonings to Public Land Zones. The tax applies to rezonings between zone types rather than between zone sub-categories. | Date of effect: 1 July 2022 |
| Introduction of premium duty rate on land transfer duty | Purchasers of property over $2 million | For contracts entered into from 1 July 2021, a new land transfer duty threshold for high-value property transactions will be introduced. For property transactions with a dutiable value above $2 million, the land transfer duty payable will increase to $110,000 plus 6.5% of the dutiable value in excess of $2 million. | Date of effect: 1 July 2021 |
| Increase in land tax rates for high-value landholdings | High-value property owners | The land tax rate for taxpayers with larger property holdings will increase by: 1. 0.25 percentage points for taxable landholdings exceeding $1.8 million; and 2. 0.3 percentage points for taxable landholdings exceeding $3 million. Applies to both the general and trust surcharge rates. | Date of effect: 1 January 2022 |
| Introduction of Mental Health and Wellbeing Levy | Businesses with national payrolls over $10 million a year | The Mental Health and Wellbeing Levy will be implemented as a payroll tax surcharge on wages paid in Victoria by businesses. A rate of 0.5% will apply for businesses with national payrolls above $10 million, and businesses with national payrolls above $100 million will pay an additional 0.5%. Existing payroll tax exemptions for private schools, hospitals, charities, local councils, and wages paid for parental and volunteer leave will apply for the Levy. | Date of effect: 1 January 2022 |
| Removal of land tax relief under Support to Landlords and Tenants | Landlords and tenants | Removal of land tax relief under the Support to Landlords and Tenants package. | Date of effect: 30 June 2021 |
New concessions/exemptions
| What | Who | Need to know | Important dates |
|---|---|---|---|
| Temporary increase of eligibility threshold for off-the-plan duty concession | Property purchasers | For contracts entered into from 1 July 2021 to 30 June 2023, the threshold for the off-the-plan concession for land transfer duty will increase to $1 million for all home buyers. Consistent with existing eligibility requirements, the property must be the principal place of residence for at least one of the purchasers. | Contracts entered into from 1 July 2021 to 30 June 2023 |
| Temporary land transfer duty concession for new residential property | Purchasers of new residential property within the Melbourne local government area | For contracts entered into from 21 May 2021 to 30 June 2022, a 100% land transfer duty concession will be provided on the purchase of new residential property in the Melbourne local government area with a dutiable value of up to $1 million when the property has been unsold for 12 months or more since completion. For new residential property that has been unsold for less than 12 months since completion, a 50% land transfer duty concession will be provided. These apply to contracts entered into from 1 July 2021 to 30 June 2022. The exemption/concession will apply to the duty otherwise payable (excluding any foreign purchaser additional duty). | Contracts entered into from 21 May 2021 to 30 June 2022 Contracts entered into from 1 July 2021 to 30 June 2022 |
| Extension of vacant residential land tax exemption for new developers | Property developers | Following the completion of a newly constructed dwelling, the vacant residential land tax exemption will apply for up to two years. | Date of effect: 1 January 2022 |
| Increase in payroll tax-free threshold | Business owners | The pay-roll tax-free threshold will increase from $650,000 to $700,000. | Date of effect: 1 July 2021 |
| Reduction in the regional employer rate of payroll tax | Business owners | The regional employer rate of payroll tax will reduce from 2.02% to 1.2125%. | Date of effect: 1 July 2021 |
| Increase of annual payroll tax payment threshold | Business owners | The threshold for paying payroll tax on an annual basis will increase from $40,000 to $100,000. | Date of effect: 1 July 2021 |
This article was written by John Caravousanos, Partner.
