Recently, the Victorian State government released their financial budget and it sees Victorian businesses and landowners carrying the burden of the debt recovery. Some of the announcements include:
Stamp Duty on commercial and industrial properties
Any new acquisitions of commercial and industrial property post 1 July 2024 will incur an additional 1% tax on the unimproved value which will be payable from 10 years after the sale transaction. Also the purchaser can choose whether to pay the stamp duty payable as a lump sum or in fixed instalments over 10 years with interest.
Example – A property is acquired for $10m after 1 July 2024. Based on this value, $630,000 stamp duty is payable. The purchaser can elect to pay this up front or pay $63,000 plus interest over 10 years. If the property was still owned by the same owner at 1 July 2034, an additional 1% will be payable. Assuming the properties unimproved value is $6m, the additional tax will be $60,000 pa.
However, once this property enters the new system after 10 years, no further duty will be payable when the property is sold and the annual property tax will then apply moving forward.
Here are a few things to consider moving forward:
- If you are considering acquiring commercial and industrial property over the next 12 months and hold for the long term, consider acquiring the property prior to 1 July 2024 to avoid the 1% tax.
- If you are considering acquiring commercial and industrial property over the next 12 months and hold for a shorter term, consider acquiring the property post 1 July 2024 may be better as you can cash flow the stamp duty repayments over 10 years and not pay a lump sum up front
- At the moment, the stamp duty tax and thresholds can be adjusted in each budget. This can assist in determining the costs in purchasing a property as the cost is known upfront. However once the property is in 10 year system and the additional tax of 1% applies to a property that you own, the government may increase this rate. This will be an additional cost that you will need to meet.
Land tax changes
The government has announced a change in thresholds that will apply for land tax commencing 1 January 2024.
1. The tax free threshold for general land tax rates will be cut from $300k to $50k. Therefore more properties, including units, will be subject to land tax.
2. The tax payable on the thresholds are as follows:
Landholdings between $50k - $100k $500 annually
Landholdings between $100k - $300k $975 annually
Values > $300k increase of $975 plus 0.1% pa
Payroll tax changes
The government has announced the following changes:
- From 1 July 2023, a levy on payroll of 0.5% will apply to businesses with annual Australia-wide taxable wages above $10m
- From 1 July 2024, the payroll tax free threshold will increase from $700,000 to $900,000, and subsequently increase to $1m from 1 July 2025
- From 1 July 2024, the payroll tax exemption for high-fee non-government schools will be removed.
Workcover premium changes
The Victorian state government has announced changes to the Workcover scheme. The average premium rate is going to increase from 1.27% to 1.8% of remuneration to cover the costs of claims. So in effect premiums will rise by 42%. The workcover system is under review by the state government, so expect further announcements regarding premium increases over the short term. Further information can be found here:
If you have any questions in relation to the proposed changes in the Victorian budget, please contact our office to discuss further.