Victorian budget 2021-22: Changes to stamp duty and land tax

The Victorian State Government delivered its budget on 20 May 2021, which included increases in the rates of stamp duty and land tax.

Legislation in the form of the State Taxation and Mental Health Acts Amendment Bill 2021 (Amending Bill) soon followed; we have summarised below some of the proposed key changes in respect of stamp duty and land tax.

The Victorian Government also announced a new “windfall gains tax” on profits made by landowners as a consequence of rezoning. These changes do not form part of the Amending Bill and are also summarised below.

Stamp duty

The changes introduced to Victorian stamp duty include:

• A new premium general rate of stamp duty of 6.5% for dutiable transactions with a dutiable value of above $2 million. This premium general rate will also apply towards acquisitions of interests in landholders (i.e. certain acquisitions of shares / units in companies / unit trusts, which hold relevant Victorian landholdings with a market value of $1m or more).

Transitional provisions apply where any dutiable transaction or relevant acquisition of an interest in a landholder occurring on or after 1 July 2021 but, under agreements or arrangements entered into prior to the above date are not subject to this new rate.

Note that duty surcharges applying to foreign purchasers apply on top of these new rates.

• A temporary increase in the residential “off-the-plan” stamp duty concession threshold to $1 million for residential "off-the-plan" contracts which meet certain criteria. This increase in the threshold applies only to contracts entered into from 1 July 2021 to 30 June 2023.

• Two temporary schemes specific to transfers new residential properties within the City of Melbourne with a dutiable value of up to $1million and where the residential property has not previously:

  • been occupied as a residence

  • sold under a previous contract as a place of residence, or

  • been occupied for the provision of short-term accommodation,

    • A full exemption of stamp duty is available if:

      • the occupancy permit has been issued for a residential property for at least 12 months prior to the contract being entered into

      • the relevant contract was entered into between 21 May 2021 and 30 June 2022, and

    • A concession of 50% of stamp duty payable is available if:

      • the relevant contract is entered into between 1 July 2021 to 30 June 2022, and

      • the transfer is not otherwise eligible for the full exemption above.

• An exemption for shared equity arrangements – these are arrangements involving the State contributing to the purchase of certain residential property and in exchange takes an equitable interest in the home or land. No duty will be payable to the extent of the beneficial interest owned or taken by the State.

Land tax

In summary, the changes introduced to Victorian land tax include:

• The general land tax rate will be increased for the following relevant landholdings:

Note that absentee (foreigner) land tax surcharges apply on top of these new general land tax rates.

• An increase in the minimum in the general land tax threshold (when land tax becomes payable) from $250,000 to $300,000.

• Amendments to rules in relation to landowners who are structured as partnerships where a partner is taken to have a beneficial interest in each item of partnership property in the same proportion as the partnership's interest (this aligns with similar partnership provisions introduced into the Duties Act 2000 previously following the decision in Commissioner of State Revenue v Danvest Pty Ltd [2017] VSCA 382).

• An extension to the exemption period for vacant residential land tax for new developments to two land tax years where the land has not been used or occupied and has not changed in ownership.

Windfall gains tax

The Victorian Government also announced a new “windfall gains tax” on profits made by landowners where those profits are made as a consequence of planning decisions to rezone land to create new residential estates.

The total uplift in value of land from a rezoning decision will be taxed at 50% for windfalls above $500,000, and the tax is intended to “phase in” from uplifts in value of $100,000.

This scheme is set to apply from 1 July 2022 and the Victorian Government will shortly introduce such legislation.

For further information please contact Wayne Kaplan or Calvin Tay.