There are some increased taxes and duties in
Victoria's budget, but also some higher thresholds and extended
Foreign buyers of residential property and absentee landlords
will face higher costs under tax and duty changes announced in the
2016/17 Victorian budget on 27 April 2016:
Land transfer duty surcharge on foreign buyers of residential
property will be increased from 3% to 7% on the greater of the
purchase price or the market value of the property in addition to
any other stamp duty payable. This means the highest marginal rate
of land transfer duty for foreign purchasers of residential
property will be 12.5%. The new rate applies to contracts entered
into or after 1 July 2016.
The absentee landowner surcharge will increase from 0.5% to
1.5% for the 2017 land tax year. This means the highest marginal
rate of land tax for absentee landowners will be 3.75%.
Funds will be invested in a State Revenue Office Land Tax
Compliance Program (covering both stamp duty and land tax). The
State Revenue Office will receive additional funding to establish
and expand compliance programs involving the land tax principal
place of residence exemption, foreign purchaser additional duty,
absentee owner surcharge, undeclared changes in the composition of
business partnerships that own land, and land held in undeclared
The payroll tax threshold will be lifted from $550,000 to
$650,000 progressively over 4 years ($25,000 each year), commencing
on 1 July 2016. The threshold of $650,000 will be reached in
A payroll tax exemption will be available for wages paid by
businesses to a displaced apprentice or trainee from 1 July
Land tax exemption for primary production land in an urban zone
will be extended to land owned by certain family superannuation
Discretionary exemptions for foreigners
Although the increase in land transfer duty surcharge for
foreign purchasers of residential property is quite significant,
foreign purchasers of residential property should be aware that
there is a discretionary exemption from the additional duty which
has been available since the introduction of the additional 3% duty
for foreign purchasers on 1 July 2015. So far there is no
indication that this exemption will not be made available to the
new 7% rate of duty for foreign purchasers. Based on the gazetted
guidelines, the exemption is intended to apply to corporations and
trusts that are Australian based (albeit foreign owned) and whose
commercial activities add to the supply of housing stock in
Victoria (either through new developments or through
re-development, where that development is primarily residential).
As the exemption is discretionary, taxpayers should seek to apply
for the exemption prior to entering into any transactions.
A similar discretionary exemption is available for the land tax
surcharge imposed on absentee corporations who are landowners.
Based on the gazetted guidelines, the exemption in the land tax
context is intended to apply to corporations which conduct
commercial operations in Australia and whose commercial activities
make a strong and positive contribution to the Victorian economy
and community by engaging local labour and utilising local
materials and services.
A different take on partnerships?
It is interesting that the State Revenue Office Land Tax
Compliance Program mentions undeclared changes in the composition
of business partnerships that own land. The newly announced focus
on undeclared changes in business partnerships that own land
suggest that there may be a change in the stance of the State
Revenue Office on a type of transaction which previously would have
been thought not to trigger any duty implications. The Victorian
duties legislation is and remains the only duties legislation which
is silent on the duty treatment of dealings in partnership
interests where the partnership property includes land. Nor does
the State Revenue Office website give any guidance on the duty
treatment of dealings in such partnership interests. Taxpayers
investing in Victoria using partnership structures should be
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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ATO has released 2 draft fact sheets relating to the 2010 amendments to corporate law and tax in relation to dividends.
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