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TAX ALERT: Exploring the Proposed Changes:
The Victorian Treasurer unveils the state's budget for 2023-24.
The Victorian Treasurer unveiled the budget for the fiscal year 2023-24, which includes several proposed changes to taxes. Let's break down each announcement:
1. COVID-19 Levy on Debt
As part of the Covid Debt Repayment Plan, a 10-year temporary and targeted levy will be implemented from July 1, 2023 to June 30, 2033. This levy is made up of two parts: a payroll component and a landholdings component.
From 1 July 2023, the payroll component will temporarily levy an additional payroll tax on large businesses based on the size of their annual national payrolls, as follows:
National payrolls above $10 million - additional payroll tax of 0.5%; and
National payrolls above $100 million –additional payroll tax of 1.0%.
The additional payroll tax rates will be imposed on the Victorian share of wages which exceeds the thresholds above. Payroll tax exemptions will continue to apply for hospitals, local councils, and charities.
From 1 January 2024, the landholdings component will reduce the tax-free threshold for general land tax rates from $300,000 to $50,000.
For general taxpayers, a temporary fixed charge will be levied at different rates based on the value of the taxpayer’s landholdings, as follows:
Landholdings between $50,000 and $100,000 - a temporary flat surcharge of $500;
Landholdings between $100,000 and $300,000 - a temporary flat surcharge of $975; and
Landholdings above $300,000 - a temporary flat surcharge of $975 plus 0.1% of the value of their landholdings above $300,000.
For trusts that hold land, a temporary fixed charge will be levied at different rates based on the value of the trust’s landholdings, as follows:
Landholdings between $50,000 and $100,000 - a temporary flat surcharge of $500;
Landholdings between $100,000 and $250,000 - a temporary flat surcharge of $975; and
Landholdings above $250,000 - a temporary flat surcharge of $975 plus 0.1% of the value of their landholdings above $250,000.
The tax-free threshold will be "phased out" beginning July 1, 2024. The tax-free amount will be reduced for each dollar of wages paid by a business that exceeds $3 million. There will be no tax-free threshold for businesses with wages exceeding $5 million.
2. Transition from Stamp Duty to Property Tax on commercial properties:
The current stamp duty system for commercial and industrial properties will be replaced by an annual property tax beginning July 1, 2024. Landholders who purchase commercial or industrial property after July 1, 2024 will be given a transition period. They can pay the final stamp duty on the property in one lump sum or in fixed instalments over ten years, including interest, using a government-facilitated transition loan. When a property enters the new system, an annual property tax is levied, and stamp duty is no longer levied.
This reform has no bearing on residential properties.
3. Increasing the Payroll tax-free threshold:
The payroll tax-free threshold will increased as follows:
From 1 July 2024 - from $700,000 to $900,000; and
From 1 July 2025 - a further increase from $900,000 to $1 million.
From July 1, 2025: Further increase from $900,000 to $1 million.
4. 'Phase Out' Tax-Free Threshold for Larger Businesses
The tax-free threshold will be "phased out" beginning July 1, 2024. The tax-free amount will be reduced for each dollar of wages paid by a business that exceeds $3 million. There will be no tax-free threshold for businesses with wages exceeding $5 million.
5. Removal of Payroll tax exemption for high-fee non-government schools
The payroll tax exemption for high-fee non-government schools will be removed on July 1, 2024, bringing them in line with the payroll tax treatment of government schools. The Minister for Education and the Treasurer will confirm which schools will remain exempt.
6. Increase in Absentee Owner Surcharge rate
The absentee owner surcharge rate will increase from 2.0% to 4.0% beginning January 1, 2024. The non-trust absentee owner minimum threshold will be reduced from $300,000 to $50,000. In simple terms, the surcharge will apply if the taxable value of Victorian land held by a non-trust absentee owner reaches or exceeds $50,000. The $25,000 minimum threshold for trust taxpayers remains unchanged.
7. Extension of Land Tax Exemption for Construction/ revonation delays due to builder insolvency:
From January 1, 2024, the State Revenue Office will have the discretion to extend the land tax exemption for up to two additional years when construction on a principal place of residence is delayed due to builder insolvency. This exemption applies only if the owner is not entitled to apply the principal place of residence exemption to a second property.
8. Land Transfer Duty and Land Tax Relief for Relatives with Disabilities:
The land transfer duty deduction threshold for principal place of residence transfers for individuals eligible to be beneficiaries of a Special Disability Trust will increase from $500,000 to $1.5 million beginning July 1, 2023. Furthermore, beginning on the same date, the Special Disability Trust land transfer concession will include home transfers valued up to $1.5 million, even if no trust is established. Furthermore, beginning January 1, 2024, a new land tax exemption will be implemented for land owned by an immediate family member and used as the primary residence of an eligible individual, even if no trust is established.
9. Land Tax Transfer Duty Concessions for Pensioners:
Beginning July 1, 2023, the land transfer duty pensioner exemption and concession thresholds will be aligned with the first-time home buyer thresholds of $600,000 and $750,000, respectively. The total value of the purchase will determine eligibility for the concession.
10. Land Tax Transfer Duty Concessions for Pensioners:
Over a 10-year period, the business insurance duty will be abolished by reducing the current 10% rate by 1.0% per year.
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