21 June 2023
by David Prichard
- Related topics
- Corporate Tax & Regulatory
The Victorian government unveiled a 10-year fiscal repair plan to tackle the debt that arose due to Dan Andrews war on Covid-19. Business owners, holiday-home owners and landlords will be asked to foot the bill through a ‘Covid debt levy’ (is a levy a tax?) – a two-part tax which they hope raises $8.6billion over the next four years.
Key features of the Victorian budget include:
- Businesses with a national payroll of more than $10 million will pay additional payroll tax of 0.5 per cent, or 1 per cent if their national payroll exceeds $100 million. Small businesses have been offered some budget relief, with the payroll tax threshold rising from $700,000 to $900,000 from July next year, then rising to $1 million in 2025. This is set to apply for 10 years. The deduction associated with the tax-free threshold will begin phasing out for every dollar of wages above $3 million. This means businesses with wages above $5 million will not receive any benefit associated with the payroll tax-free threshold.
- The threshold for Victoria’s land tax (which does not apply to the family home) will be lowered from $300,000 to $50,000.
- A charge of $975 will apply for property landholdings worth between $100,000 and $300,000, while land tax rates for properties above $300,000 will rise by $975 plus 0.1 per cent of the land’s value.
- Stamp duty will be abolished for commercial and industrial properties and replace with an annual property tax (just as NSW has moved away from a similar model).
- The absentee landlord surcharge rate will increase from 2% to 4% with the threshold reducing to $50,000 ($25,000 for trusts).
To expand on this last point – the introduced annual tax would not apply to existing owners but only on commercial and industrial properties sold from 1 July 2024 with the annual property tax to be payable from 10 years after the transaction.
To help ensure a smoother transition, the first purchaser of a property after 1 July 2024 would be able to choose – either pay the property’s final stamp duty liability as an upfront sum or transition to an annual payment by opting to pay fixed instalments over 10 years equal to stamp duty and interest with a government-facilitated loan.
It should be noted, once a property enters the ‘new system’ stamp duty would never be payable again on a transaction and the annual property tax would apply.
Victorian Treasurer Tim Pallas said the budget changes would remove barriers to larger investments and accelerate business growth. Treasurer Pallas announced; “business and industry have told us they want this reform, and we’ve listened, these landmark changes will enable businesses to be more dynamic and agile, and to grow and employ more workers.”
Time will tell if that is the case and if other states follow these Victorian changes.
If you have any further questions about these changes in Victoria and how they will impact you, please reach out to your ESV Engagement Partner.