Victorian Budget 2023-24 tax changes

The Victorian Budget was handed down on 22 May. The main tax change evolves around ‘The COVID Debt Repayment Plan’, which includes:

• From 1 July 2023, large businesses with national payrolls above $10 million a year will temporarily pay additional payroll tax. A rate of 0.5 per cent will apply for businesses with national payrolls above $10 million, and businesses with national payrolls above $100 million will pay an additional 0.5 per cent. The additional rates will be paid on the Victorian share of wages above the relevant threshold and are estimated to raise $3.9 billion to repay COVID Debt over four years
• From 1 January 2024, the tax-free threshold for general land tax rates will temporarily decrease from $300 000 to $50 000. The family home will remain exempt from land tax. Those who pay land tax will attract a temporary additional fixed charge starting at $500 for landholdings between $50 000 and $100 000. There will be a $975 fixed charge for landholdings above $100 000 and the tax rates will temporarily increase by 0.1 per cent for both general and trust taxpayers with holdings above $300 000 and $250 000 respectively. These changes are estimated to raise $4.7 billion to repay COVID debt over four years. 

It is expected these tax changes will apply until 30 June 2033.

Another tax measure is stamp duty reform, i.e. from 1 July 2024, the lump-sum stamp duty system for commercial and industrial properties will transition to an annual property tax to be payable from 10 years after the transaction. The key features of the measure are as follows:

• The first purchaser of a commercial or industrial property after 1 July 2024 will be able to choose to either pay the property’s final stamp duty liability as an upfront lump sum, or transition to an annual payment immediately by opting to pay fixed instalments over 10 years equal to stamp duty and interest with a government-facilitated transition loan.
• Once a property enters the new system after this time, stamp duty will never again be payable on a transaction and the annual property tax will apply.
• The annual property tax that will ultimately replace stamp duty for commercial and industrial property will be set at a flat 1% of the property’s unimproved land value.

Other tax measures contained in the Budget include:

• from 1 July 2024, the tax free threshold for payroll tax will increase from the existing $700,000 to $900,000, with a further increase to $1 million from 1 July 2025
• from 1 July 2024, removal of the payroll tax exemption for high-fee non-government schools
• from 1 January 2024, an extended land tax exemption for up to 2 years where construction of a principal place of residence is delayed due to builder insolvency
• from 1 January 2024, an increase in the “absentee owner surcharge rate” from 2% to 4% with the minimum threshold being decreased from $300,000 to $50,000 and
• from 1 July 2023, an increase in the Special Disability Trust (SDT) land transfer duty threshold from $500,000 to $1.5m for transfer of a principal place of residence.