The Victorian State Budget was delivered on 23 May 2023.
Given the significant Victorian budget borrowings is forecast to hit $171.4 billion by 2026-27, the Government has sought to apply tax increases primarily aimed at large business and landowners. Please see a summary of the key tax announcements in the Victorian State Budget below.
Replacement of stamp duty for commercial and industrial properties with a 1 per cent increase in annual property tax
The Government is seeking to replace stamp duty for commercial and industrial properties with a 1 per cent annual property tax (based on unimproved land value).
From 1 July 2024, every commercial and industrial property will be subject to a “final” stamp duty event. This stamp duty liability can be paid upfront or paid in equal instalments (plus interest) to the Victorian Government over 10 years.
After 10 years, the relevant property will no longer be subject to future stamp duty on ownership transfers but will be subject to an additional annual 1% property tax (based on unimproved land value).
The Government will consult with business and industry with the final form to be detailed by the end of the year.
As the details are limited to a short press release so many further questions will need to be answered such as what constitutes commercial and industrial properties and indirect acquisitions through shares and units in trusts.
Increase in payroll tax for $10m+ payroll businesses
Businesses with national payrolls above $10 million a year will temporarily pay additional payroll tax. A rate of 0.5 per cent will apply for businesses with national payrolls above $10 million, and businesses with national payrolls above $100 million will pay an additional 0.5 per cent (i.e. 1% extra in total).
The additional rates will be paid on the Victorian share of wages above the relevant threshold. The levy will apply until 30 June 2033.
Absentee owner surcharge increase from 2 per cent to 4 per cent
The absentee owner surcharge rate will increase from 2 per cent to 4 per cent from the 2024 land tax year.
Land tax threshold changes
From 1 January 2024, the tax-free threshold for general land tax rates will decrease from $300,000 to $50,000.
A temporary fixed charge of $500 will be levied on taxpayers with landholdings between $50,000 and $100,000, and a temporary fixed charge of $975 on taxpayers with landholdings between $100,000 and $300,000.
For general taxpayers with property holdings above $300,000 (and trust taxpayers with property holdings above $250 000), land tax rates will temporarily increase by $975 plus 0.1 percentage point of the value of their landholdings above $300,000.
Payroll tax free threshold to increase
From 1 July 2024, the payroll tax free threshold will be lifted from $700,000 to $900,000. The payroll tax-free threshold will be lifted to $1 million, from July 2025.
Abolishment of insurance taxes
Abolishment of insurance duties (which apply to public and product liability, professional indemnity, employers’ liability, fire and industrial special risks, and marine and aviation insurance).
Abolition will be achieved by 2033, with the rate of duty, currently 10 per cent, being reduced by 1 percentage point each year from 1 July 2024.
Contact your HLB Mann Judd adviser should you wish to discuss further.