Don't be caught out - what you need to know.
Significant changes to Victoria's property tax regime will impact various property ownership stakeholders. In addition, payroll tax changes form part of a tough Victorian State Budget.
The changes are primarily tied to the "COVID Debt Repayment Plan" to help repair the State's financial position. However, a little respite in the form of stamp duty changes for commercial and industrial property provides some balance.
Victorian Government – Land Tax Changes
There are several property taxes in Victoria. Other than traditional stamp duty, the primary property tax is "land tax." Land tax is based on the value of land owned in Victoria, excluding the value of any buildings or structures.
Starting 1 January 2024, there are a number of changes to Land Tax including:
- An rate increase by 0.1% for owners holding land with taxable value over $300,000
- A new fixed charge of $975 for land with a taxable value above $100,000
- A decrease in the land tax-free threshold from $300,000 to $50,000
These changes will see many investors paying land tax for the first time. More broadly, the changes confirm that Victoria has the highest property taxes, even before adding the new Windfall Gains Tax, which will commence for the 2023 financial year.
Calculating Land Tax
Land tax is based on the total taxable value of land holdings, usually, the site value found on council rate notices. It is calculated by applying the appropriate land tax rate to the total taxable value of land holdings, excluding exempt land such as your home.
The impact of the changes each year, including the debt levy, is reflected in the table below:
| Taxable Value | Current Payable | New Payable | Change |
| $500,000 | $775 | $1,950 | $1,175 |
| $1,000,000 | $2,975 | $4,650 | $1,675 |
| $2,000,000 | $12,475 | $14,750 | $2,275 |
The State Government estimates an impact on around 860,000 taxpayers, with nearly 400,000 paying land tax for the first time.
Absentee Owner Land Tax Surcharge
With effect from the 2024 tax year, the State Government proposes increasing the absentee owner's surcharge land tax rate from 2.0% to 4.0%.
Commercial & Industrial Property – Stamp Duty Reform
There are stamp duty changes from July 2024 for the purchasing of commercial and industrial properties. Existing properties purchased before this date will not be impacted.
There will be a transition period where the first purchaser of commercial or industrial property on or after 1 July 2024 will be able to choose to either:
- Pay the stamp duty liability as an upfront lump sum as normal; or
- Use a Government 'transition loan' and pay the stamp duty liability (plus interest) over a 10 year period.
Payroll Tax
Lastly, the Government announced an increase in the payroll tax rate by 0.5% for businesses with national payrolls over $10 million, plus an additional 0.5% for businesses with national payrolls over $100 million. Certain payroll tax exemptions will continue to apply (e.g. for hospitals, charities, local councils and wages paid for parental and volunteer leave).
As an offset for small business, the payroll tax-free threshold will increase from $700,000 to $1 million with implementation phased to July 2025.
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