State and Territory budget snap shot – key business announcements

Earlier this year, National Cabinet agreed that all jurisdictions would defer their respective state and territory budgets to enable each government to focus on the COVID-19 response effort. Following the Federal Government’s budget, which was delivered on 6 October 2020, most states and territories have now handed down budgets for the 2020/21 financial year. The ACT Government, which was returned to office following the 17 October 2020 ACT election, will hand down its budget early in 2021.

We outline below some of the key taxation measures that have been announced. For the ACT, we have highlighted key policies taken to the elections by the re-elected Labor/Greens coalition. As you may expect, many of the measures announced in the budgets are targeted at providing relief to those heavily affected by the ongoing COVID-19 situation and related disruptions to business. As the COVID-19 crisis unfolded, all jurisdictions implemented immediate, specific relief measures for businesses such as grants, tax waivers and deferrals. Many of these measures continue to be offered to businesses in financial distress due to the pandemic. Highlights of the budgets are:

• New South Wales inviting community feedback on the proposed phasing out of stamp duty to be replaced by an annual land tax model.
• Most jurisdictions offering payroll tax and land tax relief in response to COVID-19.
• All jurisdictions exempting JobKeeper payments from payroll tax.
• Victoria waiving stamp duty to the extent of 50% for newly-built homes and 25% for existing properties that are valued up to $1 million where the contract is entered into between 25 November 2020 – 30 June 2021.
• New South Wales and Victoria introducing land tax concessions for build-to-rent projects.
• The Northern Territory providing a wage subsidy to small businesses with a turnover of less than $10 million who hire a Territory resident on JobSeeker.

Click on your state below to view details of the key taxation announcements:

• Victoria
• New South Wales
• Queensland
• South Australia
• Western Australia
• Tasmania
• Australian Capital Territory
• Northern Territory

Victoria

On 24 November 2020, the Victorian Government’s budget for the 2020/21 financial year was handed down. The budget’s key highlights are:

Payroll Tax

• New jobs tax credits: From 1 July 2020, businesses with annual Australian group wages less than $10 million will receive a non-refundable new jobs tax credit of 10 cents for every dollar of Victorian wages paid in 2020-21 and 2021-22 above the previous year’s level.
• JobKeeper: ‘Additional wages’ paid to employees under the Commonwealth JobKeeper are exempt from payroll tax.
• Increased threshold for payroll tax: From 1 July 2021, the threshold for paying payroll tax on an annual basis is set to be increased from $40,000 to $100,000.
• Small/Medium business: Payroll tax relief with full-year refunds and waivers on 2019-20 payroll tax for small and medium-sized businesses with annual Victorian payrolls up to $3 million.

Land Transfer (Stamp) Duty

• Land transfer duty waiver: For the period between 25 November 2020 and 30 June 2021 and for purchases up to $1 million for contracts entered into, there will be a land transfer duty waiver of:
• 50% (excluding any Foreign Purchaser Additional Duty) for new residential property; and
• 25% for existing residential properties.
• Regional commercial and industrial properties: Contracts entered into on or after 1 January 2021 will attract land transfer duty relief for businesses and individuals purchasing commercial and industrial properties in regional Victoria, enabling them to benefit immediately from the full 50% concession announced in the 2019-20 Budget. This brings forward the starting date for the full 50% concession by two-and-a-half years from 1 July 2023.
• Bushfires: land transfer duty relief of up to $55,000 for homeowners who purchase a replacement home.

Land Tax

• Build-to-rent: Starting from 1 January 2022 until 1 January 2040, build-to-rent projects will receive a 50% discount on land tax liabilities and a full exemption from the Absentee Owner Surcharge.
• Clubs: From 1 January 2021, land tax concessions provided to social, cultural, recreational, literary or educational clubs will be replaced with a land tax exemption. The current land tax concession for clubs promoting or controlling horse racing or harness racing will continue unchanged.
• Small/Medium businesses and Landlords: Small and medium businesses that operate from owner occupied properties and landlords who are unable to secure a tenant may also be eligible for a 25% reduction in the property’s 2020 land tax.

Other Key Announcements

• Congestion levy: The government has announced a waiver of 25% of the 2020 levy for car park owners and operators.
• R&D cash flow loans: Eligible small and medium organisations will be able to access a $50m fund to provide low interest loans for up to 80% of an organisation’s forecast refundable tax offset that it anticipates claiming through the Commonwealth Government’s R&D Tax Incentive program.  The aim of this is to help Victorian businesses maintain cash flow to continue their R&D programs.
• Distance-based charge for zero and low emission vehicles: From 1 July 2021, Victoria will charge 2.5 cents/km for electric and other zero emission vehicles (including hydrogen vehicles) and a 2.0 cent/km charge for plug-in hybrid electric vehicles that are not predominantly powered by fuel sources subject to Commonwealth Government’s fuel excise.

New South Wales

On 17 November 2020, the New South Wales Government’s budget for the 2020/21 financial year was handed down. The budget’s key highlights are:

Stamp (or Transfer) Duty

Proposed transition to a property tax model: The NSW Government has invited community feedback on its proposal to phase out stamp duty to be replaced by an annual property tax. Below is a summary of the key features of the proposed changes.

• Taxpayers will be given the choice of paying stamp duty up front or paying a much smaller annual property tax. However, once a property has been opted-in to the property tax, the property would remain subject to the property tax for all subsequent future buyers of that property.

• The property tax would consist of a fixed amount plus a rate applied to the unimproved land value of an individual property, and not aggregate landholdings.
• There is no double taxation (i.e. the property tax is not payable if stamp duty has been paid).
• Existing stamp duty concessions for first home buyers could be replaced with a grant of up to $25,000.
• Price thresholds may be used to restrict the number of properties that can opt-in to the property tax in the initial years. This approach would allow the least expensive properties to transition to the property tax from the outset.
• The Government is considering a limited window for a retrospective opt-in to the property tax and refunding the stamp duty buyers previously paid to ensure they do not delay their purchases because they would like to opt-in to the property tax.

Payroll Tax

• Increase in tax free threshold: From 1 July 2020, the tax-free threshold for payroll tax was permanently increased from $900,000 to $1,200,000.
• Temporary rate reduction: The payroll tax rate was temporarily reduced from 5.45% to 4.85% for two years from 1 July 2020 to 30 June 2022.
• Exemption for JobKeeper: Employers are exempted from paying payroll tax on any additional wages paid to employees to meet the requirement that employers must pay their employees an amount at least equal to the JobKeeper payment.

Land Tax

• Relief for landlords who reduce the rents of tenants affected by COVID: Landlords can receive land tax relief of up to 50% of their land tax liability in the 2020 land tax year relating to the land leased. This measure has been extended so as to provide land tax relief of up to 25% for the 2021 land tax year for landlords of retail tenants.
• Concession for build-to-rent properties: Land tax concessions of up to 50% until 2040 will be available for new build-to-rent developments that commenced construction on or after 1 July 2020. Build-to-rent properties will be exempt from foreign investor surcharges.

Queensland

On 1 December 2020, the Queensland Government’s budget for the 2020/21 financial year was handed down. The budget’s key highlights are:

Stamp (or Transfer) Duty

• There were no announcements in relation to stamp duties.

Payroll Tax

• Small businesses: a two-month waiver of payroll tax for July and August 2020 for businesses with annual Australian taxable wages up to $6.5 million.
• Deferred liabilities: businesses will be allowed to pay off existing payroll tax deferred liabilities over the course of 2021.
• Exemption for JobKeeper: Employers are exempted from paying payroll tax on any additional wages paid to employees to meet the requirement that employers must pay their employees an amount at least equal to the JobKeeper payment.

Land Tax

• Relief for landlords: an existing measure implemented by the Queensland Government in response to the COVID-19 pandemic is the ability for landlords to apply for a land tax rebate reducing land tax liabilities by 25% for eligible properties for the 2019-20 and 2020-21 assessment years. The rebate for the 2019-2020 year is no longer available. Applications for 2020-2021 close 26 February 2021.
• Land tax deferral: there is a 3 month deferral of land tax liabilities for the 2020-21 assessment year. Taxpayers do not need to apply for the deferral.
• Foreign surcharge: there is a waiver of the land tax foreign surcharge for the 2019-20 year.

 

South Australia

On 10 November 2020, the South Australian Government’s budget for the 2020/21 financial year was handed down. The budget’s key highlights are:

Stamp Duty

• There were no announcements in relation to stamp duties.

Payroll Tax

• JobKeeper exemption: There is an exemption from payroll tax on all Commonwealth JobKeeper payments.
• Small and medium businesses: For the period from April 2020 to June 2021, small and medium businesses with annual Australian grouped wages of up to $4 million will pay no payroll tax.
• Businesses which are eligible for JobKeeper: For the period of January 2021 to June 2021, businesses which are eligible for the extended JobKeeper payment from 4 January 2021 will be eligible for a payroll tax waiver.
• Large businesses not eligible for JobKeeper but still adversely affected by COVID-19: Businesses with payrolls greater than $4 million and who were also adversely affected by COVID-19 are able to defer their payroll tax due for the period April 2020 to December 2020. Extended payment arrangements will be available for these deferred payroll tax liabilities.
• New apprentices and trainees: Wages paid to eligible new apprentices and trainees who commence between 10 November 2020 and 30 June 2021 will be exempt from payroll tax for 12 months.

Land Tax

• Residential and non-residential landlords: Landlords can receive relief of up to a 50% reduction on their 2019-20 land tax liability on affected properties if either of the following apply:
  • reduction in rent is passed on to an eligible tenant of at least the same amount as the land tax relief; or
  • if the landlord lost rent because of an untenanted property over the relevant period where that property was tenanted before 31 March 2020.
• Commercial owner-occupiers: Commercial owner-occupiers who own the land where they operate their business will be eligible to receive relief of 25% off their 2019-20 land tax liabilities where:
  • they are eligible for the Commonwealth Government’s JobKeeper payment from 31 October 2020; and
  • they have an annual turnover of not more than $50 million.
• Businesses and individuals: A business or individual paying their 2019-20 land tax liability quarterly is able to defer payment of their third and fourth quarter instalments for up to six months.
• Land tax transition fund: Relief for taxpayers who have been negatively affected by changes made to the aggregation of land rules will be increased from 50% to 100% of the relevant increase in an eligible taxpayer’s land tax assessment in 2020-21, 2021-22 or 2022-23. A taxpayer may be eligible to apply for relief if its land tax assessment increased by between $2,500 and $102,500, and this did not result from:
  • higher trust rates of land tax that may be payable by certain trusts;
  • a nomination of beneficiaries/unitholders/a designated beneficiary (for fixed trusts, unit trust schemes and discretionary trusts respectively);
  • purchasing additional land;
  • an exemption from land no longer applying; and/or
  • an increase in site value.

Western Australia

On 8 October 2020, the Western Australian Government’s budget for the 2020/21 financial year was handed down. The budget’s key highlights are:

Stamp Duty

• There were no announcements in relation to stamp duties.

Payroll Tax

• Increase in tax free threshold: From 1 July 2020, the tax-free threshold for payroll tax was increased from $950,000 to $1,000,000.
• Payroll tax waiver: Payroll tax was waived for small to medium-sized businesses with Australia-wide annual wages of <$7.5 million in 2019-20.  

• Exemption for JobKeeper: JopKeeper payments have been exempted from payroll tax.

Land Tax

• Commercial landlord tax grants: grants are being offered to landlords who have waived the rent of small business tenants that have experienced a 30% reduction in turnover due to COVID-19. The tenant’s rent must have been fully waived for three months or equivalent (i.e. 50% over six months) starting from a date between 1 September 2020 and 31 December 2020. Applications for the round two grants close on 28 March 2021.

Tasmania

On 11 November 2020, the Tasmanian Government’s budget for the 2020/21 financial year was handed down. The budget’s key highlights are:

Stamp Duty

• There were no announcements in relation to stamp duties.

Land Tax

• Relief for commercial land owners: A land tax exemption is available in 2020-21 for taxpayers who own commercial land as at 1 July 2020, where they are able to satisfy the Commissioner they were adversely financially affected due to COVID-19. 

Payroll Tax

• JobKeeper payments: The payroll tax waiver for JobKeeper payments will apply in 2020-21.
• Apprentice rebate scheme – Specific: The rebate scheme for employers who paid payroll tax and employed apprentices, trainees and youth employees in specific industries is extended until 30 June 2022.
• Apprentice rebate scheme – General: The payroll tax rebate scheme has now been extended to apply to apprentices and trainees in all industries from 1 January 2021 until 30 June 2022.
• Youth Employees: The payroll tax rebate scheme for new youth employees (persons under 24 years) will operate from 31 December 2020 to 30 June 2022.

Australian Capital Territory

On 17 October 2020, the Labor/Greens coalition government was re-elected. The Government plans to hand down its budget for the 2020/21 financial year in early 2021. Relevant policies which it took to the election include:

Stamp Duty

• Continued reduction of stamp duty: The ACT will continue its stamp duty reform program and cut stamp duty by:
  • Fully removing stamp duty for eligible first home buyers
  • Until 30 June 2021, significantly reducing the stamp duty for eventual owner-occupiers on the purchase of:
    • New land single residential blocks, to zero;
    • Off-the-plan apartment and townhouse purchases up to $500,000, to zero; and
    • Off-the-plan apartment and townhouse purchases between $500,000 and $750,000, by $11,400.

Payroll Tax

• JobKeeper payments: Businesses are exempt from any payroll tax on wages subsidised by the Commonwealth JobKeeper payment scheme from 30 March 2020.

Land Tax

• There were no announcements in relation to land tax in Labor’s policy statement.

Annual rates

• Maximum annual increase: The government has committed to setting the annual rates increase at an average of 3.75% a year for the next five years. As the ACT has a single level of government, property rates are put towards services that are usually a state’s responsibility.

Northern Territory

On 10 November 2020, the Northern Territory Government’s budget for the 2020/21 financial year was handed down. The budget’s key highlights are:

Stamp Duty

• There were no announcements in relation to stamp duties.

JobMaker Booster

• Supplement to the Commonwealth’s JobMaker Hiring Credit: The NT Government will provide a wage subsidy to small businesses with a turnover of less than $10 million who hire a Territory resident on JobSeeker. The weekly rate will be:
  • $100 for new employees aged 30 to 35; and
  • $200 for new employed aged over 35.

Payroll Tax

• JobKeeper payments exempt: Payroll tax does not need to be paid on JobKeeper payments.
• Exemption for hiring NT resident employees: The payroll tax exemption for hiring NT resident employees will continue until 30 June 2021. Employers may be exempt from payroll tax for up to two years in relation to wages paid to a Territory resident who, when hired, increases the total number of Territory residents employed by that business.
• Business Hardship Package: This package will continue until 1 July 2021. Businesses with a turnover less than $50 million who can demonstrate a reduction of turnover of 30% or more due to COVID-19 can access the following support:
  • waiver of payroll tax for the March 2020 to April 2021 return periods for employers with Australian wages for 2019-20 below $7.5 million where turnover has been reduced by at least 30%; and
  • deferral of payroll tax payment of one or more monthly returns between March 2020 and April 2021 until 21 May 2021 for employers with Australian wages for 2019-20 above $7.5 million where turnover has been reduced by at least 50%.
  • Commercial landlords who negotiate rent relief to commercial tenants experiencing economic hardship in good faith may be eligible to receive payroll tax relief, council rate concessions and utility bill relief.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).