On 20 May 2021, the Victorian Treasurer Tim Pallas handed down the 2021-22 Victorian State Budget. A number of tax-related measures were announced in a Budget that is designed to assist Victoria in bouncing back from the pandemic, with a focus on creating jobs and caring for Victorians, particularly mental health initiatives.
The main measures affecting land transfer duty, land tax and payroll tax are summarised below.
Land transfer duty
- Property transactions entered into from 1 July 2021 with a value above $2 million will be subject to an increased land transfer duty payable to $110,000 plus 6.5% of the dutiable value over $2 million.
- Introduction of a concession of up to 100% of stamp duty for new residential property with a dutiable value up to $1 million within the Melbourne local Government area when the property has remained unsold for 12 months or more since completion of construction. This applies to contracts entered into from 21 May 2021 to 30 June 2022. For contracts that are not eligible for the 100% concession, a 50% land transfer duty concession will apply for properties with a dutiable value of up to $1 million.
- The threshold for the off the plan concession for land transfer duty will increase to $1 million for contracts entered into from 1 July 2021 to 30 June 2023.
Land tax
- From 1 July 2022, a new windfall gains tax will be introduced for properties which have increased in value by planning decisions to rezone the land (rezonings to and from the Urban Growth Zone within existing Growth and Infrastructure Contribution areas and rezonings to Public Land zones are excluded. The tax also applies to rezonings between zone types not those between sub-categories). The total value uplift from a rezoning decision will be taxed at 50% for windfalls above $500,000, with the tax phasing in from $100,000.
- From the 2022 land tax year, land tax rates will increase by 0.25% for taxable landholdings exceeding $1.8 million and 0.30% for taxable landholdings exceeding $3 million.
- The tax free threshold for general land tax rates will increase from $250,000 to $300,000 with effect from 1 January 2022 (the land tax threshold for land held on trust remains unchanged at $25,000).
- From the 2022 land tax year, the vacant residential land tax exemption for new developments will be extended to apply for up to two tax years, meaning there is an exemption for at least 2 years following the completion of a newly constructed dwelling before the vacant residential land tax applies.
Payroll tax
- From 1 January 2022, a Mental health and wellbeing levy will be introduced, where:
- A 0.5% surcharge will apply for businesses with national payrolls above $10 million
- An additional 0.5% surcharge will apply for businesses with national payrolls above $100 million.
We note that existing payroll tax exemptions for charities, private schools, hospitals and local councils will apply.
- From 1 July 2021 the payroll tax threshold will increase from $650,000 to $700,000. This has been brought forward from 1 July 2022.
- From 1 July 2021 the regional employer rate will reduce from 2.02% to 1.2125%.
Other measures
- From 1 July 2021, the heavy vehicle charge will increase by 2.5%.
- A new Distillery Door Grant scheme for Victorian distilleries will be introduced for the 2021-22 and 2022-23 financial years to provide funding to local distillers who attract tourists and create jobs.
- Over $280 million will be invested in creative industries and jobs, including the screen industry and cultural institutions.
- A number of programs will continue, including the Melbourne City Recovery Fund (jointly funded with the City of Melbourne) and the New Jobs Tax Credit.