Victorian State Budget 2019-20

While the Budget included a number of revenue changes, the Victorian Government seems to have taken the opportunity to make additional duties changes which are set out in the State Taxation Acts Amendment Bill 2019 (Vic) (“Bill”) tabled in Parliament today. More on those changes below, including some early insights and observations.

Road, Rail and Infrastructure

• The Suburban Transport Blitz will fund $27.4 billion towards suburban infrastructure. This includes funding for the North East Link, removing dangerous and congested level crossings across Victoria and upgrades to the public transport network.
• The Budget dedicates $2.6 billion to focus on the needs of Victoria’s regional communities, and with a view to adding approximately 4,500 jobs throughout the state.
• The Government will be investing $1.3 billion over the next 10 years to expand Solar Homes, on top of the $74 million already provided. This includes offering rebates for the cost of solar panels, solar hot water systems or battery storage for 770,000 homes around Victoria over the next decade. The program has been expanded to renters, and funding will be provided for training, safety and quality audits to ensure the safety and sustainability of the rollout.

Payroll Tax Changes

• Payroll tax-free threshold to be increased from $650,000 to $700,000 by 2022-23 (through incremental increases of $25,000 in 2021-22 and 2022-2023). The Government estimates that this will reduce the number of businesses paying payroll tax from the current 38,000 by around 700 in 2021-22 and a further 700 in 2022-23.
• The regional payroll tax rate will also be cut from 50% to 25% of the metropolitan rate by 2022-23 alongside with expanded eligibility for concession.
• The regional payroll tax rate paid by eligible businesses will be reduced to 1.2125%, or 25% of the metropolitan rate, by 2022-23.
• From 1 July 2019, the eligibility rules for the regional rate will be simplified by removing the ‘business location test’, which required an employer to have their registered business address in regional Victoria.
• From 1 July 2019, the payroll tax exemption for wages paid to employees on maternity leave will be extended to all types of parental leave. The exemption will apply for up to 14 weeks of wages paid to employees taking parental leave.
• We anticipate that many mid-sized businesses will be beneficiaries of these changes.

Duties Changes

• $5.2b in stamp duty revenue has been written off since last year’s Budget.

Changes to Land Tax

• From 1 January 2020, the absentee owner surcharge for foreign investors will be increased from 1.5% to 2%.
  • While the Government suggests that simply aligns with New South Wales, New South Wales only imposes a surcharge on residential land, and not all taxable land like Victoria (which is the only jurisdiction to do so).
• A land tax exemption for vacant land that is adjacent to a principal place of residence in metropolitan Melbourne will be abolished from 1 January 2020.
  • For land that is genuinely part of an owner’s main residence, the Government suggests that titles can be consolidated so as not to be affected by the new changes.
  • However, that does require action from the land owner, together with incurring the transaction costs to manage the relevant land applications and adviser costs.

Other Changes

• The Government will broaden the royalties regime and will introduce a 2.75% gold royalty on the net market value of gold production from 1 January 2020, which is expected to generate $56 million. Small miners will be exempt from this royalty.