The Victorian government has released its Budget for 2021-22, which includes proposed increases in the rates of stamp duty, land tax and payroll tax as well as the proposed introduction of certain temporary exemptions and concessions and a new tax on windfall gains from land rezonings.
Tax on rezonings – new windfall gains tax
Property developers are the big losers under the Victorian Budget and will now face a new windfall gains tax that aims to tax landowners (typically property developers) at a rate of up to 50% for windfalls above AU$500,000 (with the tax phasing in from AU$100,000). This is intended to tax large gains arising from planning decisions to rezone land in Victoria (except on rezonings to and from the Urban Growth Zone within existing Growth and Infrastructure Contribution areas, and rezonings to Public Land Zones). The proposed tax will apply to rezonings between zone types (rather than between zone sub-categories) from July 1, 2022.
The proposed stamp duty measures include:
- A new premium rate of stamp duty of 6.5% for dutiable transactions entered into from July 1, 2021 with a dutiable value above AU$2 million (ie, duty increases to AU$110,000 plus 6.5% of the dutiable value above AU$2 million).
- A temporary increase in the threshold for the existing “off-the-plan” concession to AU$1 million for certain “off-the-plan” contracts entered into from July 1, 2021 to June 30, 2023 if certain requirements are satisfied.
- A temporary stamp duty exemption for transfers of eligible property (being a new home within the City of Melbourne that has a dutiable value of AU$1 million or more) where:
- The occupancy permit has been issued for the home, for at least 12 months prior to the relevant purchase contract being entered into;
- The purchase contract has been entered into between May 21, 2021 and June 30, 2022; and
- The home has not previously been occupied or sold as a place of residence or occupied for the provision of short-term accommodation.
- A temporary stamp duty concession of 50% for transfers of eligible property (being a new home within the City of Melbourne that has a “dutiable value” of AU$1 million or more) where:
- The purchase contract is entered into between July 1, 2021 to June 30, 2022; and
- The transfer is not otherwise eligible for the full exemption (i.e. such as where it has not been in existence for at least 12 months prior to the relevant purchase contact).
- An exemption for certain ‘shared equity arrangements’, (such as an arrangement involving the State where the State contributes to the purchase of certain homes or land on which a relevant home will be affixed, and takes an equitable interest in the home or land).
The land tax measures include:
- Various changes to the rates and thresholds;
- Treating a partner of a general law partnership as having a beneficial interest in each item of partnership property in the same proportion as the partner’s interest in the partnership;
- Extending the exemption for vacant residential land tax for new developments to apply for up to two land tax years where the land has not been used or occupied and has not changed in ownership (i.e. to allow developers more time to build without being subject to additional land tax); and
- Removing the land tax exemption for private gender-exclusive clubs, which from July 1, 2022 will no longer be eligible for the land tax exemption for societies, clubs or associations.
The proposed payroll tax changes include:
- The introduction of a new surcharge (referred to as the mental health and wellbeing surcharge) from January 1, 2022;
- Raising the payroll tax annual threshold from July 1, 2021 (i.e. instead of from July 1, 2022); and
- A reduction in the payroll tax rate for regional employers with effect from July 1, 2021.