The Victorian government recently announced a number of key state tax changes.
The State Taxation Acts Amendment Bill 2023 (Bill) has passed the Legislative Assembly and has been read for a second time in the Legislative Council.
The Bill makes a number of important changes, implementing some budget announcements as well as introducing other amendments including:
We note that the state budget also announced a change to the charging of duty on commercial and industrial properties. Whilst this is not contained in the Bill, we have set out in this article the known information.
Stamp duty for commercial and industrial properties will be transitioned into a new system whereby, from 1 July 2024, the first purchaser of such a property will be able to elect whether they pay the stamp duty upfront or transition to an annual payment which will be paid in 10 instalments over 10 years with interest applied to the payment.
After 10 years the property will be subject to an annual property tax set at a rate of 1% of the property’s unimproved land value. This will apply regardless of the choice of method to pay the stamp duty liability. The annual property tax will not impact industrial and commercial property acquired before 1 July 2024. Further details on this measure will be released by the end of 2023.
The government has announced that from 1 July 2024 business insurance duty will be gradually abolished over 10 years. The rate will decrease by 1% each year so that it is abolished by 1 July 2033.
From 1 July 2023, businesses with a national payroll above $10 million will pay a temporary additional payroll tax levy on Victorian wages above relevant thresholds of:
The levy will be abolished from 1 July 2033.
From 1 July 2024, the payroll tax-free threshold will increase from $700,000 to $900,000. From 1 July 2025, the threshold will increase to $1 million. The threshold will also be phased out, reducing for each dollar a business pays in wages over $3 million. Businesses with wages over $5 million will not benefit from the tax free threshold.
From 1 July 2024, the payroll tax exemption will be abolished for high fee non-government schools. Approximately 110 schools will lose their exemption.
From 1 January 2024, the government is reducing the tax-free threshold for general land tax rates from $300,000 to $50,000 and imposing a temporary charge of between $500 and $975 for taxpayers with landholdings valued from $50,000 to $300,000.
In addition to the $975 fixed charge, the rate of land tax will be increased by 0.1% for thresholds with taxable holdings above $300,000 for general land tax rates, and above $250,000 for trust surcharge rates.
In the name of harmonisation with NSW, the rate of absentee owner surcharge will double from the current 2% to 4% and the minimum threshold for non-trust absentee owners will decrease from $300,000 to $50,000.
A CCIV is a company limited by shares that has at least one sub-fund. Each sub-fund is not a separate legal entity. The Bill introduces amendments to the Duties Act , the PRT Act and to the Land Tax Act to explain how CCIVs will be treated for duty, payroll tax and land tax purposes. Broadly, each sub-fund will be taken to be a unit trust scheme of which the CCIV is the trustee, the business, assets and liabilities of the sub-fund are the trust property and the members of the sub-fund are the beneficiaries. A CCIV is taken to be a separate person in relation to each unit trust scheme of which it is the trustee.
Amendments have been introduced to address how GAIC applies to a plan of subdivision for which a statement of compliance is not required. This includes excluding events or exempting from triggering a GAIC liability certain transactions under the Duties Act. The Bill also addresses how a GAIC contribution of a parent lot is to be apportioned to child lots when a child lot is wholly outside the contribution area.
Amendments have been introduced so that when the Valuer-General is determining a valuation objection for WGT purposes, a taxpayer must object to both valuations used by the Commissioner in an assessment of WGT (i.e. CIV1 and CIV2). This is the case regardless of whether the grounds for the objection relate to only one of those valuations. This has the effect of allowing the Valuer-General to amend both valuations as part of the objection process.
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Foreign surcharges are payable in addition to ordinary stamp duty or land tax. Victoria and Queensland offer exemptions from the foreign surcharges for certain large organisations.