The 2022-2023 Victorian State Budget was delivered by the Victorian Government on 3 May 2022.

As part of delivering the Budget, the State Taxation and Treasury Legislation Amendment Bill 2022 (Vic) (Bill) was introduced into the Victorian Legislative Assembly on 11 May 2022 and introduces various amendments to certain state taxes in Victoria.

While the Budget papers and the Budget speeches did not specifically identify these changes introduced in the Bill, there are a few proposed amendments which will result in significant changes to the administration of state taxation in Victoria.

The key proposed changes to the respective Victorian state taxes are:

1. LAND TAX ACT 2005 (VIC)

Construction or renovation of principal place of residence (PPR) land

The current provisions of this PPR land tax exemption arising from the construction or renovation of PPR land provides for a refund to be obtained should the respective statutory requirements be met, whereas the proposed changes to the exemption provide for an exemption upfront without the need to apply for a refund retrospectively.

While the proposed changes may seem to be a simplification of the PPR land tax exemption, as there no longer is a need to apply for a refund, in reality, the proposed amendments have far-reaching implications for Victorian landowners, most of which seek to further restrict or prohibit landowners from obtaining land tax relief.

First amendment – 4 year limit

The first significant amendment is that the PPR land tax exemption is now limited to a period comprising of 4 years after the ‘works start date’. In comparison, the current provisions of this exemption has no timeframe as to how long it would apply.

Second amendment – New notification requirements

The second significant amendment to this PPR land tax exemption is the various new statutory written notification requirements which have been introduced, namely:

Nomination of works start, including providing evidence of activity
Notice of completion, including providing evidence of the completion
Notice of failure to complete construction or renovation in time
Notice of qualifying person not starting period of residence in time
Notice of qualifying person not completing period of residence in time
Notice of change of ownership

In comparison, the current exemption provision has no such notification requirements.

Third amendment – New notification default consequences

The third significant amendment to this PPR land tax exemption is that it introduces various notification defaults if a landowner fails to notify the State Revenue Office of Victoria (SRO) of certain notification requirements mentioned above.

As a result, should a landowner receive the land tax exemption but then subsequently fail to notify the SRO of any of the above notification requirements, not only will the SRO impose land tax and interest (including retrospectively), but the SRO will most likely also impose penalty tax.

Fourth amendment – New joint ownership restrictions

The fourth amendment to this PPR land tax exemption involves an introduction of new restrictions for joint owners.

The current PPR land tax exemption applies to joint owners so long as at least 1 joint owner satisfies the PPR residence requirements after the completion of the construction or renovation of the residence.

The new proposed restrictions will in essence, only provide land tax relief to those joint owners who each satisfy the PPR requirements.

For example, if there are 2 joint owners of a property and if 1 of the joint owners satisfies the PPR requirements, then the joint owners will not be assessed at the joint ownership level, with only a land tax assessment being issued to the 1 joint owner who did not satisfy the PPR requirements. If this occurs, then that joint owner who is liable to pay land tax will be assessed based on their share of the interest in the residence.

2. PAYROLL TAX ACT 2007 (VIC)

Employment agency provisions

The employment agency provisions in the Payroll Tax Act 2007 (Vic) (PTA) currently contain an exemption for payments made by a contracted worker under an employment agency contract if the wages would have been exempt had the client of the employment agent directly paid the on-hired worker themselves. For example, the exemption within the employment agency provisions provide an exemption where the client is a school or charity, where any wages paid would be exempt from payroll tax.

The current provisions of the PTA do not contain a reciprocal exemption where the worker providing the services to an exempt client is a common law employee of the employment agent.

The Bill introduces amendments to the employment agency provisions to extend this exemption to also apply to any common law employees of the employment agent where such employee provides services to an exempt client.

These amendments seek to introduce further parity in the application of the exemptive provision contained in section 40(2) of the PTA to all employment agency situations.

3. WINDFALL GAINS TAX AND STATE TAXATION AND OTHER ACTS FURTHER AMENDMENT ACT 2021 (Vic)

New exemption for universities

The Bill seeks to introduce a new exemption from windfall gains tax where land is owned by a university and the land is rezoned by a WGT event.

To satisfy the exemption, the university must be a charity and must satisfy the Commissioner that any land revenue from the land will be used to further the university’s charitable purposes.

The exemption is not intended to apply to a university that intends to use revenue generated from the rezoned land to advance non-charitable objects.

The exemption is also not intended to apply where the university adds the revenue generated from the rezoned land for a use to be determined in the future.

The Victorian Government has indicated that it intends the exemption to apply only where there is a link to the intended use of the land revenue and the university’s charitable objects.

While the introduction of this new exemption is intended to provide tax relief, from the manner in which the exemptive provision has been drafted, it appears that it will be a high threshold to satisfy.

It can be foreseen that this difficulty in satisfying the exemption will be exacerbated by the fact that most universities may pursue mixed purposes, including utilising land for commercial purposes despite possessing a charitable purpose.

4. TAXATION ADMINISTRATION ACT 1997 (VIC)

New 5-year limit for out of time objections

Under the Taxation Administration Act 1997 (Vic) (TAA), a taxpayer is entitled to lodge an objection to a notice of tax assessment within 60 days after being served an assessment.

The TAA also states that an out of time objection may be lodged after the expiry of the prescribed 60 days, with no limit on when such an out of time objection must be lodged.

The new amendments to the TAA seek to restrict an out of time objection to a limit of 5 years after the date of service of a notice of assessment or decision on the taxpayer.

The effect of these new amendments will mean that a taxpayer is prevented from lodging an out of time objection if more than 5 years have passed since a taxpayer has been issued a notice of assessment or decision by the SRO.

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If you have any questions in relation to these amendments introduced by the Bill or any state taxation matter, please contact our state taxes specialist team:

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