Significant duty changes to be intoduced in Victoria

The Victorian State budget has introduced changes, which will come into effect as of July 1 2021 with the key points being: 

• A premium stamp duty will be introduced for property transactions above $2 million 
• Land tax is to be increased by 0.25% for taxable land holdings from $1,800,000 to $3,000,000
• Land tax is to be increased by 0.30% for taxable land holdings above $3,000,000
• Developers and investors owning properties that are rezoned will incur a 50% tax if the gain is over $500,000

I have included below an abbreviated article from Clayton Utz (Clayton Utz 2021) which outlines the specific property changes that are to be made in Victoria. 

Article : Victorian Budget 2021-22: Significant duty changes to be introduced

By Keshni Maharaj, David Wong, Kelvin Ng, Rebecca Wong and Cameron Forbes  

The Victorian budget was delivered on 20 May 2021 and included a number of significant measures including proposed increases in the rates of stamp duty, land tax as well as the proposed introduction of certain temporary exemptions and concessions. 

Stamp duty 

Broadly, the main proposed Victorian stamp duty changes include: 

The introduction of a premium “general” rate of stamp duty of 6.5% for “dutiable transactions” with a “dutiable value” above $2 million (ie. an increase in the previous highest “general” rate of 5.5% which will instead only apply to “dutiable transactions” with a “dutiable value” of between $960,000 to $2 million); 

A temporary increase in the threshold for the existing “off-the-plan” concession to $1 million for certain “off-the-plan” contracts entered into from 1 July 2021 to 30 June 2023 where the relevant criteria are satisfied; 

A temporary stamp duty: 

• Exemption for transfers of “eligible property” (being a new home within the City of Melbourne that has a “dutiable value” of $1 million or more) where: 
• the occupancy permit has been issued for the home, for at least 12 months prior to the relevant purchase contract being entered into; 
• the relevant purchase contract has been entered into between 21 May 2021 and 30 June 2022; and 
• The home has not previously been occupied or sold as a place of residence or occupied for the provision of short-term accommodation 
• Concession of 50% for transfers of “eligible property” where: 
• The relevant purchase contract entered into between 1 july 2021 to 30 june 2022; and 
• The  transfer is not otherwise eligible for the aforementioned full exemption (ie. such as where it has not been in existence for at last 12 months prior to the relevant purchase contracts). 

Land Tax

Broadly, the main proposed Victorian land tax changes include: 

• An increase in the general land tax rate for relevant landholdings with a table value between $1.8 million to $3 million from 1.3% to 1.55%; 
• An increase in the general land tax rate for relevant landholdings with a taxable value of $3 million and above from 2.25% to 2.55% (ie. noting that an “absentee” could potentially pay Victorian land tax at the rate of up to 4.55% (ie. the “general” rate of 2.55% and the absentee surcharge rate of 2%));
• An increase in the threshold for when land tax becomes payable from $250,000 to $300,000; 
• In relation to land owning structures involving partnerships, a partner is taken to have a beneficial interest in each item of partnership property in the same proportion as the partnership’s interest (ie. these amendments are intended to align with similar partnership provisions which were introduced into the Duties Act 2000 in 2018)
• Extending the exemption for vacant residential land tax for new developments to apply for up to 2 land tax years where the land has not been used or occupied and has not changed in ownership (ie. it is intended to allow developers more time to build without being subject to additional land tax).