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The Victorian Government released its 2021-22 budget on 20 May 2021.
Taxation revenue is forecast to increase by 13.2% in 2021-22, partly due to economic conditions recovering from the COVID-19 pandemic slump and the introduction of new taxes.
This summary focuses on the particular announcements affecting the Property & Construction Sector.
Land Transfer Duty
For contracts entered into from 1 July 2021, a ‘premium’ rate of land transfer duty will apply to the transfer of Victorian property with a value in excess of $2m.
Duty of $110,000 (or 5.5%) will apply to the transfer of an interest in land with a dutiable value of $2m, with a rate of 6.5% applying to the value over $2m. A Victorian property purchased for $3m would attract duty of $175,000.
The 6.5% duty rate will also apply for landholder duty calculations for the transfer of an eligible interest in a company or trust holding Victorian land from 1 July 2021.
An off-the-plan duty concession will apply to the transfer of Principal Place of Residence properties costing up to $1m where contracts are entered into between 1 July 2001 and 30 June 2023.
The concession discounts the building construction cost in the calculation of duty.
A 100% land transfer duty concession will apply to the transfer of new residential properties located within the Melbourne Local Government Area, with a dutiable value of up to $1m, where contracts are entered between 21 May 2021 and 30 June 2022 and when an occupancy permit for the home issued at least 12 months prior to the date of the purchase contract. A 50% duty concession will apply to the purchase of new residential property in the Melbourne Local Government Area that does not meet the 100% concession. These concessions do not apply to foreign resident purchasers.
Land Tax
Victorian Land Tax revenue is expected to increase by 15% in 2021-22 and will grow by 9% per annum over the forward estimates.
A technical amendment to the Land Tax Act 2005 to overcome the decision in Commissioner of State Revenue v Danvest Pty Ltd [2017] VSCA 382 will be inserted so that partners will be deemed to have a beneficial interest in partnership property in the same proportion to their partnership interest.
First, the good news…
An exemption from vacant residential land tax for new developments will be extended for up to 2 land tax years.
The threshold at which the land tax applies increases from $250,000 to $300,000.
Now for the bad news…
Increase in land tax rates applicable from 2022 for land values above $1.8m.
|
Taxable value of property |
Rate applicable in 2021 |
Rate applicable in 2022 |
|---|---|---|
|
Non trust land $1.8m - $3m |
$9,375 + 1.3% above $1.8m |
$9,375 + 1.55% above $1.8m |
|
Non trust land above $3m |
$24,975 + 2.25% above $3m |
$27,975 + 2.55% above $3m |
|
Trust land $1.8m - $3m |
$15,838 + .7614% above $1.8m |
$15,838 + 1.0114% above $3m |
|
Trust land above $3m |
$24,975 + 2.25% above $3m |
$27,975 + 2.55% above $3m |
|
Absentee owner $1.8m - $3m |
$45,375 + 3.3% above 1.8m |
$45,375 + 3.55% above $1.8m |
|
Absentee owner above $3m |
$84,975 + 4.25% above $3m |
$87,975 + 4.55% above 3m |
|
Absentee trust $1.8m - $3m |
$45,375 + 3.3% above $1.8m |
$51,838 + 3.0114% above $1.8 m |
|
Absentee trust above $3m |
$84,975 + 4.25% above $3m |
$87,975 + 4.55% above $3m |
Windfall tax on land rezoning
The State Taxation and Mental Health Acts Amendment Bill 2021 that contains other tax measures referred to in this summary did not include this measure so the detail about how this tax will be applied is at this stage unknown. The following has been extracted from the Budget Papers.
From 1 July 2022, a tax will apply to large windfall gains associated with planning decisions to rezone land. The total value uplift from a rezoning decision will be taxed at 50% for windfalls above $500,000, with the tax phasing in from $100,000.
The tax is payable on rezonings across 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 tax applies to rezonings between zone types rather than between zone sub-categories.
For More Information
Please contact your local RSM advisor to discuss the implications of this budget for you.