UPDATE May 2021

This update outlines changes to Victorian taxes resulting from the 2021 Victorian Budget

VICTORIAN BUDGET

The Victorian Budget, delivered on 20 May 2021, made many changes to the taxes levied by Victoria, mostly new taxes or increases to exiting taxes.

Duty

The Bad News

For contracts entered into on or after 1 July 2021 the rate of duty on contracts with a dutiable value exceeding $2,000,000 is raised to 6.5% (currently 5.5%) on that part of the value which exceeds $2,000,000.

Example: transfer of Victorian land with a dutiable value of $3,000,000

Current duty: $165,000

New duty: $175,000

(This is the highest rate of duty ever levied by Victoria, including in wartime.  In raising this tax, Victoria has gone against the national trend.  SA, ACT and NSW have taken steps to reduce duty by lowering the highest rate or providing alternatives to the payment of duty)

The Good News

A temporary concession for new residential property within the City of Melbourne with a dutiable value of up to $1,000,000

• Where property has been on market for 12 months or more: No duty
• All other cases: 50% duty

The total exemption applies to contracts entered into on and between 1 July 2021 and 30 June 2022, the 50% concession applied to contracts entered into on and between 21 May 2021 and 30 June 2022.

A temporary concession for off the plan purchases with a dutiable value of up to $1,000,000:

• No duty for contracts entered into on and between 1 July 2021 and 30 June 2022

Land Tax

The Bad News

The land tax rate from the 2022 tax year has been increased for ‘high value’ land holdings:

• For taxable landholdings exceeding $1,800,000, the rate has been increased by 0.25% and
• For taxable landholdings exceeding $3,000,000, the rate has been increased by 0.3%

The increases apply to both the general rate and the trust rate for land tax year 2022.

The Good News

The exemption for vacant residential land tax for new developments will apply for two years (increased from one) where the land has not been used or occupied and has not changed in ownership

The general rate tax free threshold will increase from $250,000 to $300,000 for land tax year 2022.

No change to trust rate.

Payroll Tax

The Bad News

A payroll tax surcharge on taxable Australia wide wages paid in Victoria by businesses with annual Australia wide wages over $10,000,000 million.

The rate for those businesses with a payroll which exceeds $10,000,000 is 0.5% of the surplus over $10,000,000, but less than $100,000,000 and 1% on that part of the surplus which exceeds $100,000,000.

This will apply from 1 January 2022.

In 2007 there was a largely successful move to harmonise Victoria’s payroll tax with that of New South Wales.

Currently Victoria is less favourable compared with New South Wales for business of all sizes.  The surcharge will exacerbate the position.

Before the levy, Victoria was competitive with the other states (except NSW) for medium and large businesses.  After the introduction of the levy, this will not be the case.

The Good News

Increase in the tax free threshold commencing on 1 July 2021 from $650,000 to $700,000

Decrease in payroll tax for regional employers from 2.02% to 1.2125%

Windfall Gains Tax

A New Tax

This tax will be applied to planning decisions to rezone land from 1 July 2022.

The tax will be applied at 50% for windfalls above $500,000.  There will be no tax for windfalls of less than $100,000 and a phasing in for windfalls between these amounts.

The tax will apply to only some rezonings: it will not apply to rezonings to and from the urban Growth Zone withing the existing Growth and Infrastructure Contribution Areas and to rezonings to Public Land Zones.

There is no indication of the value prior to and after rezoning will be calculated; there in no indication of when payment of the tax is to be made; there is no indication of what if any expenses can be deducted from the profit.

Treasury estimates that the tax will raise $38,700,000 in the 22-23 period and $41,000,000 in the 23-24 period.  (By comparison, the increase in land tax is predicted to raise about ten times these sums, the increase in duty about three times this amount)

Wagering and Betting Tax

This has been raised from 8% to 10% ‘bringing Victoria in line with the rate which applies in New South Wales’.

Penalty Units

This has been raised by 10% form 1 July 2021.  All fines and penalties will increase by 10% on 1 July 2021.

(All Victorian fines and penalties are expressed in terms of a number of penalty units.  Elsewhere, a penalty unit is given a specific dollar value)

The overall impression this budget gives it that it grabs money from anywhere with little relief and no consideration of the economic consequences,

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