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Hey big spender! The tax highlights of the 2020-2021 Victorian Budget (COVID Edition)

26 November 2020
craig gibson jai manoharan
Read Time 4 mins reading time

On Tuesday, the Victorian Treasurer handed down the much anticipated 2020-2021 Victoria State Budget (Budget). The Budget, which is usually delivered earlier on in the year, had been pushed back in light of the COVID-19 crisis.

It’s no surprise that the focus of the Government’s spending in the next four years will be primarily to reinvigorate the Victorian economy, with close to $49 billion outlined to repair the damage caused by the pandemic, including $1.5 billion in tax relief.

In this special COVID-19 edition of the Budget, most stakeholders will benefit in one way or another, but some industries will benefit more than others, with the Government prioritising the creation of jobs and affordable housing and announcing a range of measures that will support small or medium sized businesses.

Under the headings below, we have highlighted some of the main taxation and specific funding initiatives provided for in the Budget, outlining how these may impact businesses and households in different sectors and areas of Victoria:

social and affordability housing initiatives – ‘big housing build’

capital infrastructure investment

The Government will spend $5.3 billion on the ‘Big Housing Build’ initiative, constructing 12,000 new homes throughout metro Melbourne and regional Victoria, delivering thousands of new social housing homes, homes for people-at-risk and affordable houses for disadvantaged Victorians. This initiative will be delivered through partnerships with the community housing sector, private sector construction, industry and other investors.

land tax reductions

From 1 January 2022 until 2040, the Government will provide a 50% reduction in land tax for eligible build-to-rent developments, together with an exemption of such land from the Absentee Owner Surcharge (to encourage foreign investment).

land transfer (stamp) duty reductions

A waiver of 50% of the land transfer (stamp) duty on new residential dwellings and 25% for existing residential dwellings will be available for the purchase of residential property with a dutiable value of up to $1 million, where the contract of sale is entered into from 25 November 2020 to
30 June 2021.  No discount is available however for any Foreign Purchaser Additional Duty component.

regional victoria initiatives

covid-19 and the bushfire recovery – stamp duty concession

The Government has brought forward two stamp duty concessions that were intended to commence from 1 July 2023 in light of the impacts of COVID-19 and the 2019-2020 Victorian Bushfires, now commencing on 1 January 2021. The concessions will provide a 50% discount on stamp duty for eligible regional commercial or industrial property acquisitions from 27 January 2020 in the defined State of Disaster Local Government Areas, and from 1 January 2021 in all other regional areas.

payroll tax reduction

The Government has also brought forward a reduction in the payroll tax rate for businesses in communities worst affected by the Bushfires, reducing the rate to 1.2125% (25% of the metropolitan rate) retrospectively from 1 July 2019.

extension of the regional first home owner grant

The regional First Home Owner Grant of $20,000 will be extended and apply to all acquisitions of new homes built or bought by first home owners in regional Victoria on or before 30 June 2021.

covid-19: household and business support

job tax credit

The Government will look to spend $836 million as a means of providing incentives for small and medium-sized businesses to hire / rehire employees and to restore their working hours.

Businesses with annual Australian group wages less than $10 million will be entitled to a non-refundable credit of 10 cents for every dollar of Victorian wages paid in 2020-21 and 2021-22 above the previous year’s wages. These businesses will be able to apply the credit to receive a refund or a waiver of payroll tax liabilities.

increase the annual payroll taxpayer threshold

From 1 July 2021, employers will be given the option to pay payroll tax annually rather than monthly if their annual Victoria payroll tax liabilities are less than $100,000 (an increase from the previous threshold of $40,000). This initiative is predicted to provide an additional $309 million of cash flow support to 7,000 businesses.

covid-19: landlord and tenant Support

At the start and during the course of the pandemic, the Government introduced a range of measures to support landlords and tenants. These measures included:

  • land tax deferral for eligible landlords;
  • land tax reduction for eligible landlords who provided rent relief to their tenants;
  • financial support to landlords and tenants experiencing financial hardship; and
  • a full waiver of the 2021 vacant residential land tax liability.

Our previous insight provides a comprehensive overview of these initiatives – for further information, please click here.

not-for-profit support

From 1 January 2021, land that is owned and occupied by not-for-profit clubs for social, cultural, recreational, literary or educational interests of their members will receive a land tax exemption. This exemption replaces the former concessional discount provided to these clubs. The concessional rate will still be available for clubs promoting horse or harness racing.

The Government will also look to a invest in a range of alternative not-for-profit initiatives, such as
$1 million to the Community Advancement Fund (which provides grants to deliver community-level initiatives and support to not-for-profit organisations), $1.1 million over the next two years to the Veterans Capital Works Fund (which provides grants to not-for-profit service organisations to maintain facilities that are safe for veterans and their families), and over $10 million in supporting youth groups and communities.

our thoughts

This year’s State Budget is clearly geared towards dragging Victoria out of the economic recession caused by the COVID-19 pandemic, with the Government borrowing a record level of debt.

Many small and medium sized businesses and regional businesses will benefit with the introduction of further taxation concessions, exemptions and initiatives seeking to provide immediate tax relief and cash-flow support in the short-term.

While these initiatives are certainly welcomed in light of the pandemic, the focus now shifts to the effectiveness of these measures and whether this will be enough to meet the Government’s ambitious target of creating 400,000 jobs in the next five years and delivering the social and affordable housing that Victoria desperately needs.

If you or your business would like to explore whether you are eligible for any of the newly announced tax concessions, exemptions or other reliefs, please get in contact with us.

Macpherson Kelley’s Tax, Not-for-Profit, Property and Construction teams have specialist knowledge and experience in obtaining stamp duty, land tax and payroll tax concessions and exemptions for our clients, advising on affordable and social housing developments, and otherwise guiding not-for-profits through grant programs and associated compliance requirements.

stay up to date with our news & insights

Hey big spender! The tax highlights of the 2020-2021 Victorian Budget (COVID Edition)

26 November 2020
craig gibson jai manoharan

On Tuesday, the Victorian Treasurer handed down the much anticipated 2020-2021 Victoria State Budget (Budget). The Budget, which is usually delivered earlier on in the year, had been pushed back in light of the COVID-19 crisis.

It’s no surprise that the focus of the Government’s spending in the next four years will be primarily to reinvigorate the Victorian economy, with close to $49 billion outlined to repair the damage caused by the pandemic, including $1.5 billion in tax relief.

In this special COVID-19 edition of the Budget, most stakeholders will benefit in one way or another, but some industries will benefit more than others, with the Government prioritising the creation of jobs and affordable housing and announcing a range of measures that will support small or medium sized businesses.

Under the headings below, we have highlighted some of the main taxation and specific funding initiatives provided for in the Budget, outlining how these may impact businesses and households in different sectors and areas of Victoria:

social and affordability housing initiatives – ‘big housing build’

capital infrastructure investment

The Government will spend $5.3 billion on the ‘Big Housing Build’ initiative, constructing 12,000 new homes throughout metro Melbourne and regional Victoria, delivering thousands of new social housing homes, homes for people-at-risk and affordable houses for disadvantaged Victorians. This initiative will be delivered through partnerships with the community housing sector, private sector construction, industry and other investors.

land tax reductions

From 1 January 2022 until 2040, the Government will provide a 50% reduction in land tax for eligible build-to-rent developments, together with an exemption of such land from the Absentee Owner Surcharge (to encourage foreign investment).

land transfer (stamp) duty reductions

A waiver of 50% of the land transfer (stamp) duty on new residential dwellings and 25% for existing residential dwellings will be available for the purchase of residential property with a dutiable value of up to $1 million, where the contract of sale is entered into from 25 November 2020 to
30 June 2021.  No discount is available however for any Foreign Purchaser Additional Duty component.

regional victoria initiatives

covid-19 and the bushfire recovery – stamp duty concession

The Government has brought forward two stamp duty concessions that were intended to commence from 1 July 2023 in light of the impacts of COVID-19 and the 2019-2020 Victorian Bushfires, now commencing on 1 January 2021. The concessions will provide a 50% discount on stamp duty for eligible regional commercial or industrial property acquisitions from 27 January 2020 in the defined State of Disaster Local Government Areas, and from 1 January 2021 in all other regional areas.

payroll tax reduction

The Government has also brought forward a reduction in the payroll tax rate for businesses in communities worst affected by the Bushfires, reducing the rate to 1.2125% (25% of the metropolitan rate) retrospectively from 1 July 2019.

extension of the regional first home owner grant

The regional First Home Owner Grant of $20,000 will be extended and apply to all acquisitions of new homes built or bought by first home owners in regional Victoria on or before 30 June 2021.

covid-19: household and business support

job tax credit

The Government will look to spend $836 million as a means of providing incentives for small and medium-sized businesses to hire / rehire employees and to restore their working hours.

Businesses with annual Australian group wages less than $10 million will be entitled to a non-refundable credit of 10 cents for every dollar of Victorian wages paid in 2020-21 and 2021-22 above the previous year’s wages. These businesses will be able to apply the credit to receive a refund or a waiver of payroll tax liabilities.

increase the annual payroll taxpayer threshold

From 1 July 2021, employers will be given the option to pay payroll tax annually rather than monthly if their annual Victoria payroll tax liabilities are less than $100,000 (an increase from the previous threshold of $40,000). This initiative is predicted to provide an additional $309 million of cash flow support to 7,000 businesses.

covid-19: landlord and tenant Support

At the start and during the course of the pandemic, the Government introduced a range of measures to support landlords and tenants. These measures included:

  • land tax deferral for eligible landlords;
  • land tax reduction for eligible landlords who provided rent relief to their tenants;
  • financial support to landlords and tenants experiencing financial hardship; and
  • a full waiver of the 2021 vacant residential land tax liability.

Our previous insight provides a comprehensive overview of these initiatives – for further information, please click here.

not-for-profit support

From 1 January 2021, land that is owned and occupied by not-for-profit clubs for social, cultural, recreational, literary or educational interests of their members will receive a land tax exemption. This exemption replaces the former concessional discount provided to these clubs. The concessional rate will still be available for clubs promoting horse or harness racing.

The Government will also look to a invest in a range of alternative not-for-profit initiatives, such as
$1 million to the Community Advancement Fund (which provides grants to deliver community-level initiatives and support to not-for-profit organisations), $1.1 million over the next two years to the Veterans Capital Works Fund (which provides grants to not-for-profit service organisations to maintain facilities that are safe for veterans and their families), and over $10 million in supporting youth groups and communities.

our thoughts

This year’s State Budget is clearly geared towards dragging Victoria out of the economic recession caused by the COVID-19 pandemic, with the Government borrowing a record level of debt.

Many small and medium sized businesses and regional businesses will benefit with the introduction of further taxation concessions, exemptions and initiatives seeking to provide immediate tax relief and cash-flow support in the short-term.

While these initiatives are certainly welcomed in light of the pandemic, the focus now shifts to the effectiveness of these measures and whether this will be enough to meet the Government’s ambitious target of creating 400,000 jobs in the next five years and delivering the social and affordable housing that Victoria desperately needs.

If you or your business would like to explore whether you are eligible for any of the newly announced tax concessions, exemptions or other reliefs, please get in contact with us.

Macpherson Kelley’s Tax, Not-for-Profit, Property and Construction teams have specialist knowledge and experience in obtaining stamp duty, land tax and payroll tax concessions and exemptions for our clients, advising on affordable and social housing developments, and otherwise guiding not-for-profits through grant programs and associated compliance requirements.