Insights into the 2024 Victorian State Budget

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Posted By and on 7/05/24 at 8:26 PM

The Labor Government has been tight lipped on the contents of the 2024-25 Victorian State Budget (2024-25 Budget) with Premier Jacinta Allan suggesting the first budget under her reign would be family focused, yet today’s unveiling has brought less-than-optimistic news for some.

The announcement of a pause in infrastructure projects will likely send ripples of uncertainty through businesses and related service providers in the industry. Concurrently, homeowners face continued challenges as increased property taxes are set to proceed.

In this article we break down the key changes ahead.

An additional tax on homeowners?

Many feared a new property tax being imposed after recent reports from the Liberal Government that the Labour Government was set to replace the Growth Areas Infrastructure Contribution (GAIC) charge with a new Victoria-wide tax on all properties across the state. However, the 2024-25 Budget makes no changes to GAIC nor introduces new property related taxes.

This however is likely to provide little relief to homeowners who are facing a slew of new and increased taxes this year including:

  • Increased land tax payments: Under the “COVID Debt Repayment Plan” initiated in the 2023 Budget, the Victorian Labor Government drastically reduced land tax thresholds. Consequently, properties with a capital unimproved value as low as $50,000 are now subject to land tax payments from the 2024 fiscal year. Previously the rate was imposed from $300,000 only. An exemptions for principal place of residence remains, with this land tax only imposed on investment properties.
  • Increased absentee owner surcharges: Despite hopes for relief, the doubling of the absentee owner surcharge introduced in January 2024 remains unchanged, standing firm at 4%.
  • Expanded Vacant Residential Land Tax (VRLT): Effective from 1 January 2025, the VRLT will extend its reach across the entirety of Victoria (previously focused only on Melbourne), targeting residential properties unoccupied for more than six months in the preceding calendar year. Whilst an exemption to the VRLT exists for holiday homes used for at least 4 weeks a year this does not apply to homes owned in a trust or company. Despite previous comments from the Labor Government that such changes would be brought in during the first half of 2024, those changes have not been announced as part of the 2024 Budget.
  • ‘Air BnB Levy’: The Labor Government has been silent on the introduction of the Short Stay Levy, indicating the charge of 7.5% on short term rentals will proceed and come into effect from 1 January 2025.

For further details on these property charges read our prior article here.

More SRO audits on the horizon

In the 2024-25 Budget, the Labor Government has allocated additional funds to bolster the State Revenue Office’s (SRO) Compliance Program. We have seen a surge in SRO audits post-pandemic, and it is imperative for businesses to conduct a thorough review of their tax affairs to avoid potential penalties on audit.

For expert guidance on navigating tax compliance or responding to an audit, reach out to one of our qualified state tax lawyers. 

Land tax exemption for social and emergency housing

In today’s State Budget, the Labor Government announced it will introduce a standalone land tax exemption for land that is used to provide social and emergency housing. The exemption will also apply to charity-owned land where social and emergency housing is under development.

The exemption will commence in the 2025 land tax year (calendar year), but as yet no specifics have been provided.

Payroll tax threshold to increase

As announced in the 2023-2024 State Budget, payroll tax thresholds are to be increased as follows:

  • From 1 July 2024: an increase from $700,000 to $900,000.
  • From 1 July 2025: a further increase to $1,000,000.

These adjustments underscore the importance for employers to reassess their payroll tax position specifically:

  • undertaking a review of how employees and contractors are categorised should be considered and consultation with a state tax specialist is advised. Often mischaracterisations of employees and contractors are picked up on audit by the SRO and can lead to costly penalties for businesses, and
  • the Commissioner has discretion to de-group entities for payroll tax purposes. Consideration should be given to the appropriateness of grouping that may have been applied to your entities. Where the businesses are carried on independently of each other, a de-grouping application may be warranted and potential payroll tax refund due to your business.

We encourage you to get in touch if you have any questions or would like to seek our assistance in undertaking a review of your payroll tax liabilities.

 Business insurance duty to be abolished

As announced in the 2023-24 State Budget, the Government is gradually abolishing business insurance duty over a 10-year period, starting from 1 July 2024. The duty currently charged at 10% will be reduced annually by 1%.

‘Business insurance’ refers to policies taken out by businesses covering public and product liability, professional indemnity, employers’ liability, fire and industrial special risks, marine and aviation insurance.

Concluding thoughts

Amidst the unveiling of the 2024-25 Budget, homeowners and businesses continue to grapple with a difficult state tax and duty landscape in Victoria. While the absence of new property taxes may offer a semblance of relief, the existing onslaught of increased levies—from land taxes to absentee owner surcharges—paints a grim picture.

Reach out to one of our seasoned state tax lawyers for expert guidance on tax compliance and strategic planning.

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KHQ Lawyers - Laura Spencer

Laura Spencer Senior Associate

Laura is a lawyer in our Tax & Structuring team. She has worked in legal and advisory firms both in Australia and the UK, as well as at the State Revenue Office of Victoria... Read More

KHQ Lawyers - Harry Giannakidis

Harry Giannakidis Principal Solicitor

Harry leads our Tax & Structuring team. He has over 20 years’ experience in advising corporate clients, private family business groups (including SMEs and large family businesses) and high net... Read More