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2021 Victorian State Budget - Prepare for tax increases

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The Victorian State Budget for the 2021-2022 year brings with it particularly broad-ranging state taxation measures that will impact a diverse cross-section of the Victorian community. The changes include increased land tax and transfer (stamp) duty rates as well as new tax measures such as the windfall gain tax on rezoned land and a mental health and wellbeing levy (payroll tax surcharge).

The Victorian Budget reveals that total revenue is forecasted to increase by 4.4% to $74.6 billion in the 2021-2022 year from targeted revenue initiatives, with a focus on Victoria’s property-related taxes and payroll tax revenue.

While the news is mostly bad for Victorian businesses, landowners and property developers, there are some pockets of good news for consumers. The proposed State tax focused measures that were announced include:

LAND TAX

Increase in land tax for values between $1.8 million and $3 million

  • The land tax rate will increase from 1.30% to 1.55%. This increased land tax rate will apply from 31 December 2021 (ie for the 2022 land tax year).

Increase in land tax for land with values above $3 million

  • The land tax rate will increase from 2.25% to 2.55%. This increased land tax rate will apply from 31 December 2021 (ie for the 2022 land tax year).

Minor increase in the land tax free threshold

  • The general land tax threshold will increase from $250,000 to $300,000.

  • The land tax threshold for trusts remain unchanged at $25,000.

Private gender exclusive clubs lose land tax exemption

  • Land tax concessions for private gender exclusive clubs will be removed for the 2022 land tax year.

Temporary exemption from vacant residential land tax for new developments

  • New developments will be exempt from vacant residential land tax for up to 2 years from 1 January 2022.

LAND TRANSFER (STAMP) DUTY

Premium land transfer (stamp) duty rate introduced for land above $2 million

  • Transfers of property with a dutiable value above $2 million will be subject to a new premium rate of duty from 1 July 2021.

  • The duty payable for properties above $2 million under the premium rate of duty will be $110,000 plus 6.5% of the dutiable value above $2 million.

  • ”Arrangements” entered into prior to 1 July 2021 will not trigger the new rate.

Off-the-plan concession temporarily expanded to purchases up to $1 million

  • The off-the-plan concessions will apply to all home purchases valued up to $1 million where the home is to be the taxpayer’s principal place of residence.

  • This measure will apply to contracts entered into on or after 1 July 2021 and on or before 30 June 2023.

Temporary land transfer duty concessions for purchases of new properties under a $1 million

  • Two temporary land transfer duty concessions will apply for new residential property within the City of Melbourne local government area with a dutiable value of up to $1 million.

  • Up to a 100% exemption will apply for new residential properties in the City of Melbourne local government area that have remained unsold for 12 months or more since completion of construction. This exemption applies to contracts entered into on or after 21 May 2021 and on or before 30 June 2022.

  • A 50% duty concession will apply for new residential properties in the City of Melbourne local government area that have been unsold for less than 12 months after completion. This concession applies to contracts entered into on or after 1 July 2021 and on or before 30 June 2022.

  • The 100% and 50% stamp duty concessions will not apply to any foreign purchaser additional duty.

WINDFALL GAIN TAX

  • A new windfall gain tax comprising of 50% of the uplift in value of land greater than $500,000 due to rezoning will be imposed.

  • There is to be a phasing-in of the tax on uplifts for uplifts in value of land between $100,000 and $500,000.

  • Land that is subject to the Growth Areas Infrastructure Contribution (GAIC) will not be affected.

  • The new windfall gain tax is to commence from 1 July 2022.

  • Effectively, planning decisions to rezone land from 1 July 2022 will be impacted by this new tax.

  • Rezoning between zone sub-categories will not fall under the tax.

CONGESTION LEVY WAIVER TO EXPIRE

  • 25% waiver of the 2020 congestion levy liabilities to end.

PAYROLL TAX

Payroll tax threshold to increase

  • From 1 July 2021 the tax-free threshold increases are to be brought forward, with the result that the tax-free threshold will increase from $650,000 to $700,000.

Regional employer rate discounts to be brought forward

  • The regional employer rate will reduce from 2.02% to 1.2125% from 1 July 2021.

Mental Health and Wellbeing Levy (payroll tax surcharge)

  • From 1 January 2022, the Mental Health and Wellbeing Levy will be implemented as a payroll tax surcharge on wages paid in Victoria by businesses with national payrolls over $10 million a year. The surcharge applies on the Victorian portion of wages with the following rates:

  • 0.5% for businesses with national payrolls above $10 million per year.

  • 1% for businesses with national payrolls above $100 million per year.

  • Existing payroll tax exemptions for private schools, hospitals, charities, local councils and wages paid for parental and volunteer leave will apply for the Levy.  

If you have any questions, please contact our specialist team:

Thomas Abraham
Senior Assoicate
M +61 3 9611 0139 | T +61 438 401 853
E tabraham@sladen.com.au

Laura Spencer
Senior Associate
M 0436 436 718 | T +61 3 9611 0110
E: lspencer@sladen.com.au

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au

Phil Broderick