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Changes to state taxes November 2019

The State Taxation Acts Further Amendment Bill 2019, which received Royal Assent on 19 November 2019, introduced a number of changes to a number of Acts administered by or relied upon by the State Revenue Office.

Land Tax Act 2005

The Land Tax Act 2005 amendments are:

Primary production land exemption for greater Melbourne urban zones

  • The Act has been amended to reinstate the original intent of the primary production exemption by requiring owners of land to:
    • carry on the business of primary production for which the land is solely or primarily used, and
    • be normally engaged in a substantially full time capacity in that business, rather than merely any business ‘of the type carried out on the land’.
  • Various technical changes to the land ownership requirements to modernise the language of the exemption and better balance the treatment of different types of owners.

Vacant residential land tax

  • Vacant residential land tax is extended to residential properties in inner and middle Melbourne that have been uninhabitable for two years or more.  This gives owners of uninhabitable properties two years to make the residence on the land habitable before the tax begins to apply. This amendment ensures that properties cannot remain outside the vacant residential land tax net indefinitely and brings these lands in line with the land tax treatment of residences under construction or renovation.
  • Exemptions for holiday homes and city units used for work purposes now expressly excludes beneficiaries and unitholders who are deemed holders of land held on trust, as well as implied or constructive trust beneficiaries. Vested beneficiaries continue to have access to these exemptions. This ensures consistent outcomes for different lands held on trust.

Principal place of residence

  • Targeted technical changes to the principal place of residence exemption clarify that an owner for these exemptions excludes a beneficiary of an implied or constructive trust. This is designed to restore the original policy of applying the exemption by reference to the legal owner of the land and not the beneficial owner.

Duties Act 2000

The Duties Act 2000 amendments are:

  • The legislative basis for charging duty on an insured person obtaining general insurance from an overseas insurer has been confirmed.  The provision is taken to have come into operation on 1 July 2014 and is consistent with current administrative practice.
  • The primary production requirement for the young farmer duty concession/exemption is now aligned with changes to the land tax exemption for primary production land in greater Melbourne urban zones.

Gambling Regulation Act 2003

The ANZAC Day Proceeds Fund provides support to the veteran community by providing funding for a range of welfare related activities. The Gambling Regulation Act 2003 now establishes a legislative basis for a contribution of a proportion of wagering and betting tax revenue to this fund before the end of each financial year.

One thirtieth of all wagering and betting tax paid or payable for the month of April, representing the notional tax revenue collected on ANZAC Day, will be paid to the fund.

In order to align with the accruals basis (paid or payable) being used by the ANZAC Day Proceeds Fund payment, the Victorian industry support payment changes from cash (paid) to accruals basis. This applies from 1 January 2020.

Valuation of Land Act 1960

The Valuation of Land Act 1960 was amended to set a 30 September deadline (each calendar year) by which municipal councils must issue valuation notices to ratepayers following the general valuation.

Changes to state taxes June 2019

The State Taxation Acts Amendment Act 2019 received Royal Assent on 18 June 2019 and introduces changes to a number of Acts administered by the State Revenue Office. It includes revenue initiatives announced on 27 May 2019 as part of the 2019-20 Victorian Budget.

Budget measures

Duties Act 2000

  • For agreements or arrangements entered into from 1 July 2019, the foreign purchaser additional duty rate is 8 per cent.
  • From 1 July 2019, contracts, arrangements or agreements to transfer commercial and industrial properties in regional Victoria will attract a concessional rate of land transfer duty. The concession is a 10 per cent reduction in the duty otherwise payable. The reduction will increase by 10 percentage points each financial year until 2023–24 when the concession will provide a 50 per cent discount. Regional Victoria for these purposes has the same meaning as it does for the first home owner grant
    To qualify, the dutiable property must be wholly in regional Victoria. It must be used solely or primarily for a qualifying commercial or industrial land use for a continuous period of at least 12 months, commencing in the two years following the date of transfer. Its status as commercial or industrial property is determined by reference to the land uses set out in the Australian Valuation Property Classification Codes.
    The Commissioner of State Revenue can reassess a transaction at the full rate of duty if the use requirement is not complied with. He may vary the requirement if, for example, development is occurring on the land but will not be completed within two years.
  • The rates of motor vehicle duty for registration or transfer of registration of new and used passenger cars have been aligned, including the rates for a change of use of a motor vehicle. There are also new rates for luxury passenger cars and new concessional rates for green cars and primary producer passenger cars .

From 1 July 2019, the rates will be:

Passenger car Rate of duty per $200, or part, of the dutiable value of the motor vehicle
Dutiable value at or below the luxury car tax threshold $8.40
Dutiable value above the luxury car tax threshold ($67,525 for 2019-20) and at or below $100,000 $10.40
Dutiable value above $100,000 and at or below $150,000 $14.00
Dutiable value above $150,000 $18.00
Green car (any dutiable value) $8.40
Primary producer passenger car (any dutiable value) $8.40
  • From 1 July 2019, service demonstrator vehicles are exempt from motor vehicle duty on registration. These are motor vehicles used solely or primarily by a licensed motor car trader to promote sales by making the vehicle available to customers as a courtesy vehicle while their car is being serviced.
  • Changes to the corporate reconstruction provisions for arrangements or transactions entered into on or after 1 July 2019 include:
    • Replacing the corporate reconstruction exemption, corporate consolidation exemption and exemption for the exchange of stapled ownership interests with a concession equal to 10 per cent of the duty otherwise payable on an eligible transaction (inclusive of foreign purchaser additional duty).
    • Enabling more transactions to access a concession, for example, an eligible transaction for corporate reconstruction and corporate consolidation now includes certain lease arrangements referred to in section 7(1)(b)(v) and (va) of the Duties Act 2000.
    • Removing the post-association requirements that previously applied to members of a corporate group.
    • Making all corporate consolidation transactions, such as interposing a head company between a corporation that is a member of a corporate group and the shareholders or unitholders of that corporation, eligible for a duty concession. Previously, only the first consolidation was eligible for an exemption from duty, and full duty was payable on subsequent consolidations.
    • Exempting corporate reconstruction arrangements where multiple eligible transactions occur in relation to the same land or motor vehicle(s) so that only one lot of duty is chargeable. To be entitled to this exemption, the eligible transactions must be between members of the same corporate group and the transactions being tested must occur within 30 days of the first eligible transaction on which concessional duty was chargeable.

Land Tax Act 2005

  • For the 2020 and subsequent land tax years, the absentee owner surcharge rate is 2 per cent.
  • From 2020 onwards, the exemption from land tax for land contiguous to that of a principal place of residence (PPR) in metropolitan Melbourne will be removed. The exemption remains for land contiguous to a PPR in regional Victoria if the contiguous land is owned by the same owner, enhances the PPR land, is used solely for the private benefit and enjoyment of the owner, and does not contain a separate residence. Regional Victoria for these purposes has the same meaning as it does for the first home owner grant.
  • A land tax exemption continues to apply in metropolitan areas for separately titled car parks or storage cages connected with a PPR unit in a strata subdivision.

Payroll Tax Act 2007

  • The tax-free threshold for payroll tax will be increased to $675,000 in 2021-22 and $700,000 in 2022-23.
  • The regional payroll tax rate will reduce to 2.02 per cent from 1 July 2020, 1.62 per cent from 1 July 2021 and 1.2125 per cent from 1 July 2022.
  • From 1 July 2019, the requirement for a regional employer to have a registered business address in regional Victoria to qualify for the regional payroll tax rate will not apply. This extends the reduced rate to businesses that have a registered business address outside regional Victoria, such as businesses with a head office in Melbourne. Regional employers are still required to pay at least 85 per cent of their Victorian taxable wages to regional employees.
  • From 1 July 2019, the payroll tax exemption for wages paid to employees on maternity leave will expand to include any type of parental leave taken by an employee. The exemption applies for up to 14 weeks of wages paid to an employee taking leave as a primary caregiver (an employee who is pregnant with a child or has the principal role of providing care and attention to a child) or a secondary caregiver (the spouse or domestic partner of a primary caregiver).

Valuation of Land Act 1960

The specific valuation provisions that applied to heritage properties no longer apply. This means that heritage properties will have their site value determined according to highest and best use principles, taking into account the effects of heritage status. Site value is used for land tax purposes. This change commences from 19 June 2019 and has effect in relation to any objections, appeals or reviews to a site value as at 1 January 2018 or a later date (including objections, appeals or reviews that were already on foot at the commencement of the amendment). This does not prevent a site value from being adjusted on other grounds in an objection, review or appeal.

Other amendments

Duties Act 2000

The Duties Act 2000 has been amended to:

  • Support the collection of duty on arrangements where fixtures of significant value are acquired independently of the underlying land.
    A threshold value test will ensure that the acquisition of insignificant fixtures, such as part of the sale of a small retail business, will not be subject to duty. Duty is phased-in so that a concession applies for fixtures valued between $2 million and $3 million, with full duty only payable where the fixture is more than $3 million in value.
    This amendment applies to arrangements made or on after 19 June 2019.
  • Remove a restriction preventing a unit trust scheme that was, at any time, eligible for registration as a wholesale unit trust scheme, from being a public unit trust scheme for landholder duty purposes. This amendment applies on or after 19 June 2019.
  • Impose land transfer duty on the acquisition of economic entitlements, with a focus on the relevant land, such as rights to participate in the income, rents, profits or capital growth of the land, rather than the landholder. The economic entitlement provisions in Chapter 3 of the Duties Act 2000 that apply to acquisitions of economic entitlements that relate to rights to participate in the dividends, or income of a private landholder, remain.
    A land value threshold of $1 million applies before duty is imposed on the acquisition of an economic entitlement to ensure that duty only applies to economic entitlements where the land is of significant value. The new provisions also provide for the phasing-in of duty so that a duty concession applies to land (subject of the economic entitlement) valued between $1 million and $2 million, with full duty only payable where the value of the land is more than $2 million in value.
    This amendment applies to arrangements made or on after 19 June 2019.
Last modified: 31 May 2022
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