Here is what you need to know as a property developer / investor arising from the Victorian 2020 State Budget handed down in Parliament on Monday 27 May 2019:
- Foreign Purchaser Additional Duty: This will increase from 7% to 8% from 1 July 2019. Therefore, where possible, it may be preferred for foreign purchasers to enter into a contract on or before 30 June 2019;
- Absentee Owner Surcharge: This will increase from 1.5% to 2% from the 2020 land tax year;
- Principal Place of Residence: Adjoining blocks of land from the main residence on a separate title and without a residence will no longer be eligible for the principal place of residence land tax exemption. This will apply from the 2020 land tax year. Therefore, impacted owners may consider whether to consolidate such land titles;
- Corporate reconstruction exemption: Currently, if entities within the same corporate group move assets between entities, there may be possibility from relief from landholder duty when transferring real estate between members of the corporate group. From 1 July 2019, the value of this concession will be reduced and a duty rate of 10% of the duty otherwise payable will be applied;
- Duty concession for regional business: From 1 July 2019, a land transfer duty concession will be provided to commercial and industrial property transactions in regional Victoria. A 10% concession will be provided from 1 July 2019 scaling to 50% by 1 July 2023.
- Land Tax: Given the recent decline in Property prices and the annual valuations that are being undertaken by the Valuer-General of Victoria, it is expected that there should be minor overall downward valuations for land values. This will reduce the budgeted 2019 to 2020 land tax revenue by the State Revenue Office.
The above changes highlight the continued importance of implementing a business and asset holding structure that is as tax effective as possible to mitigate against any unnecessary landholder duty and land tax costs.
Please contact your HLB Mann Judd adviser if you would like to explore the above issues further for your business.