The Victorian State Budget was handed down on 20 May 2021.
Please find below a summary of the tax announcements impacting property developers in the 2021 Victoria State Budget.
Land Transfer duty – new premium duty rate for contracts entered into from 1 July 2021.
- Property transactions above $2 million will attract $110,000 plus a premium duty rate of 6.5% (currently 5.5%) for dutiable value in excess of $2 million.
- This on top of the foreign purchaser additional duty of 8% so a foreign investor could pay up to 14.5% of duty to purchase residential property in Victoria.
- Consider where possible to enter into contracts to acquire property on or before 30 June 2021 to save on the additional 1% duty.
Land transfer duty – temporary exemption for new residential property in the Melbourne local government areas -100% concession in place for contracts entered into from 21 May 2021 to 30 June 2022 and 50% concession will be in place for contracts entered into from 1 July 2021 to 30 June 2022.
- 50% duty concession for new residential property that has been unsold for less than 12 months since completion, in the Melbourne local government area – 50% concession in place for contracts entered into from 21 May 2021 to 30 June 2022.
- 100% duty concession for purchasers of a new property that has been unsold for 12 months or more since completion, in the Melbourne local government area – 100% concession in place for contracts entered into from 1 July 2021 to 30 June 2022.
- Foreign purchaser additional duty will still apply.
- These measures will assist developers sell inventory in inner-city dwellings.
Land transfer duty – Off-the-plan duty concession temporary increase for contracts entered into from 1 July 2021 to 30 June 2023.
- The threshold for the off the plan concession for land transfer duty will increase to $1 million (contract price minus construction costs) for all home buyers.
- Consistent with existing eligibility requirements, the property must be the principal place of residence for at least one of the purchasers.
- This measure is intended to stimulate buyers to acquire stock before construction progresses.
Windfall gains tax – from 1 July 2022.
- Windfall gains tax will be introduced for properties who’s values is boosted by planning decisions to rezone land.
- The tax is payable on rezonings across Victoria except on rezonings to and from the Urban Growth Zone within existing Growth and Infrastructure Contribution areas, and rezonings to Public Land Zones.
- The tax applies to rezonings between zone types rather than between zone 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.
- It appears therefore that this windfall gains tax may apply on unrealised value increase in land which will create significant funding / project feasibility difficulties.
- The Treasurer has indicated that that the windfall gains tax will be introduced into Parliament in separate legislation which indicates the sensitivity and significant interest this new tax has generated.
Land tax – increase for greater than $1.8 million holding – from 1 January 2022.
- Properties land valued between $1.8 million and $3 million will have an increased land tax rate from 1.3% to 1.55%.
- Properties land valued greater than $3 million will have an increased land tax rate from 2.25% to 2.55%.
- This change will apply to both the general and trust surcharge rates.
Land tax – tax free threshold increase – from 1 July 2022.
- The tax-free threshold for general land tax rates will increase from $250,000 to $300,000.
- This means for land not held on trust, land tax will only be payable if the total taxable value of Victorian land is equal to or exceeds $300,000.
Vacant residential land tax – exemption for new developments – from 1 July 2022.
- The vacant residential land tax exemption for new developments will be extended to apply for up to two years.
- This measure supports the construction sector by providing an exemption for at least two tax years following the completion of a newly constructed dwelling before the vacant residential land tax may apply.
Payroll tax – surcharge for mental health and wellbeing levy – from 1 January 2022.
- 0.5% surcharge will apply for businesses with national payrolls above $10 million.
- Additional 0.5% surcharge will apply for businesses with national payrolls above $100 million.
- Existing payroll tax exemptions for private schools, hospitals, charities, local councils, and wages paid for parental and volunteer leave will apply.
Payroll tax – increase in the tax free threshold – from 1 July 2021.
- Increase of the payroll tax-free threshold from $650,000 to $700,000.
Payroll tax – reduction in regional employer payroll tax rate – from 1 July 2021.
The regional employer rate will reduce from 2.02% to 1.125%.
To learn more about the 2021 Victoria State Budget contact an HLB Mann Judd partner or go to the State’s Treasury and Finance website.
A summary of our 2021-22 Federal Budget can be found here.