The 2023-24 Victorian State Budget has ushered in substantial tax changes that will, in particular, significantly impact Victorian landowners and small businesses. These changes, ranging from abolishing stamp duty on industrial and commercial land acquisitions to decreases in land tax thresholds, are aimed at recouping funds expended during the COVID-19 pandemic.
In this article, we shed light on the key changes to be introduced.
Farewell to stamp duty for industrial and commercial land
In an unexpected move, the government has chosen to abolish stamp duty on commercial and industrial properties. While this may initially appear as a cost reduction for landholders, it will be replaced by an alternative tax: property land tax. This will not affect current owners of commercial and industrial land but will affect any future transactions.
The specifics of this announcement are yet to be finalised. It is expected that they will be finalised at the end of 2023. The new system will then come into place from 1 July 2024.
Payroll tax threshold to increase
The Victorian State Budget proposes two increases in the payroll tax threshold, scheduled 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 aim to provide relief for small businesses and alleviate the tax burden on employers. They also serves as a timely reminder for employers to review their payroll tax obligations to ensure:
- all appropriate payments are included, this may include payments made to contractors in certain circumstances; and
- the appropriateness of grouping that may have been applied.
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.
Introducing the COVID Debt Levy
To offset the costs incurred by various pandemic response measures implemented over the past three years, the Victorian State Budget includes the introduction of a new COVID Debt Levy.
Companies with a payroll exceeding $10 million will be subjected to an additional payroll tax of 0.5 percent. If their national payroll surpasses $100 million, this levy will rise by an additional 1 percent.
The Levy is intended to be temporary only, in place for 10 years until 30 June 2033.
Decrease to land tax threshold
A second element of the COVID Debt Levy is the reduction in the the tax-free threshold for land tax. The threshold will decrease from $300,000 to $50,000, effective from 1 January 2024. This change is estimated to impact approximately 380,000 homeowners.
Off the back of significant increases in interest rates and property prices throughout the state it is an interesting move by the Government to further burden homeowners at the more modest end of the market.
This measure is intended to be temporary only, in place for 10 years until 30 June 2033.
Increase in absentee owner surcharge
Owners of holiday homes or second residences will face an increased absentee owner surcharge, with the rate doubling from the current 2 percent to 4 percent from 1 January 2024. Additionally, the minimum threshold for non-trust absentee owners will decrease from $300,000 to $50,000.
The absentee owner surcharge is aimed at taxing owners who do not use the property as their main residence to encourage owners to make such properties available for rent. The absentee owner provisions are complex and particularly where land is held by trusts careful analysis should be made to ensure it is not an absentee owner.
Concluding thoughts
The recent tax changes introduced in the Victorian State Budget carry far-reaching implications. We encourage you to reach out to us for guidance on any of these measures. Our team of state tax experts can offer comprehensive support to help you navigate the evolving tax landscape with confidence.
