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On 20 May 2021, the Victorian Government handed down its budget.

In its continued efforts to fund Victoria’s COVID-19 recovery, large increases in spending and infrastructure are some of the key measures the Government has put in place. These include:

Increase to payroll tax-free threshold

  • Payroll tax-free threshold lifted from $650,000 to $700,000 for small businesses earlier than planned (expected 1 July 2021).
  • The regional employer payroll tax rate will be reduced to 1.2125 per cent.

Mental health funding

New Mental health and well-being levy (payroll tax surcharge) on wages paid in Victoria by businesses with more than $10 million in national wages to help fund $3.8 billion for mental health.

Summary of rates

  • Rate of 0.5 per cent on Victorian wages on national wages between $10 million to $100 million
  • Additional 0.5 per cent on Victorian wages on national wages greater than $100 million.

Stamp duty increases

A new premium stamp duty rate will apply to property transactions with a value greater than $2million.  The new rate, which will apply to contracts entered into from 1 July 2022 onwards, will be $110,000 plus 6.5% of the dutiable value in excess of $2million.

This compares to the current rate of 5.5% of the dutiable value, effectively representing an additional 1% of stamp duty on dutiable value greater than $2million.

New windfall gains tax

The Victorian Government has announced a new “windfall gains tax” that will apply from 1 July 2022.  Under the new tax, landowners who experience an increase of at least $100,000 in the value of their land as a result of a rezoning decision, will be subject to the new tax on a sliding scale, with a top rate of 50% applying to increases in value of $500,000 or greater.

When combined with existing income tax or capital gains tax, this will result in significant tax bills for holders of land on the urban fringes of Melbourne whose land is rezoned after 1 July 2022, particularly developers and speculators (but not limited to them).

Land tax increases

The general land tax rates for landholdings greater than $1.8million are also increasing from the 2022 land tax year.  The land tax rate will rise by 0.25% (from 1.3% to 1.55%) for landholdings greater than $1.8million and 0.3% (from 2.25% to 2.55%) for landholdings exceeding $3million.

Partially offsetting this, the general land tax threshold will increase from $250,000 to $300,000.

Contact Us

Should you have any further questions about the Victorian budget and how it impacts you, or would like advice on how to plan for the opportunities and challenges as a result of the COVID-19 recovery, please do not hesitate to contact our office to discuss your circumstances.

*** Please note that the Budget announcements discussed above cannot take effect until the proposed legislation has been passed through Parliament. In addition, some initiatives may not commence until a later date – e.g 1 July 2022.

Disclaimer

This information is provided by Arthur Kyriacou & Co. for educational purposes. It does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. In deciding whether to acquire or continue to hold an investment, you should consider the relevant product guide or product disclosure statement.

We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Arthur Kyriacou & Co. will not be liable for any losses arising from reliance on this information.

For any queries, please contact info@alkfinancialgroup.com.au