This year's delayed Victorian Budget has made headlines for its unprecedented levels of proposed spending, as Victoria seeks to recover from the COVID-19 pandemic.

While highly ambitious and wide-ranging on the spending side, the Budget's stamp duty and land tax changes are limited in comparison. In particular, Victoria will not at this stage follow the NSW Government's proposal to transition away from stamp duty.

Below are the key changes, many of which are contained in the State Taxation Acts Amendment Bill 2020 (Vic) (Amendment Bill).

Stamp duty relief for residential property

In welcome news for both home buyers and developers alike, the most publicised duty measure in the Budget is a reduction in duty for purchases of residential property with a dutiable value of up to $1 million.

The applicable discount is 50% for new residential properties and 25% for existing residential properties, for contracts of purchase entered into between 25 November 2020 and 30 June 2021.

It appears these measures will be implemented pursuant to a Treasurer's direction, which was given in accordance with the emergency tax relief powers contained in Part 9A of the Taxation Administration Act 1997 (Vic).

Stamp duty relief for commercial and industrial properties in regional Victoria

The Budget confirmed a previously announced measure to bring forward a 50% stamp duty discount on the purchase of land to be used for industrial or commercial purposes in regional Victoria. This discounted rate will now be available for qualifying contracts entered into on or after 1 January 2021.

Technical duty changes

While not headline grabbing, the Amendment Bill contains some important technical changes to various provisions of the Duties Act 2000 (Vic) (Duties Act), including the following:

• Partnerships – As outlined in our May 2018 alert, the Duties Act was amended in 2018 to impose duty on the acquisition of an interest in a partnership that holds dutiable property. The Amendment Bill seeks to ensure that the indirect acquisition of dutiable property through more than one tier of partnerships is also subject to duty.

• Fixtures – A significant change in the 2019 Budget involved imposing transfer duty where interests in fixtures are acquired as a stand-alone transaction. This measure has created difficulty and uncertainty for the finance industry. In what will address some (but not all) concerns, an interest in a fixture that is a security interest will be excluded from the definition of 'dutiable property'.

• Corporate reconstructions and consolidations

• Some detailed changes to the corporate reconstruction concession/exemption regime will be made. While these changes will generally not affect the duty outcomes for simple restructures, they will be relevant for restructures that comprise multiple transactions involving direct or indirect dealings in dutiable property.
• The corporate consolidation concession will be amended to confirm that it is only be available in the context of the formation or continuation of a 'consolidated group' for the purposes of the Income Tax Assessment Act 1997 (Cth). In broad terms, this concession can allow for a 90% duty reduction where a new head company is interposed between a company/unit trust and its shareholders/unitholders.

Land tax relief for build-to-rent developments

Following NSW's lead, Victoria will halve the land tax on eligible build-to-rent developments from 1 January 2022 to 2040. These developments will also be exempt from the 'absentee owner surcharge'. We are awaiting further detail on this measure, as it is not contained in the Amendment Bill.

Abolition of 'special land tax'

The 'special land tax' is a one-off tax that is currently charged, at generally 5% of unimproved land value, where certain types of exempt land ceases to be exempt. For example, this includes sporting, recreational or cultural land, rooming houses, residential care facilities, caravan parks and mines.

In what is a welcome announcement for affected owners and developers, the special land tax will be abolished. This measure is due to come into effect from the day after the Act receives Royal Assent, assuming that the Amendment Bill becomes law.

Land tax exemption for not-for-profit clubs

The Amendment Bill proposes a land tax exemption for land owned, and solely occupied by, not-for-profit clubs. These clubs must provide for the social, cultural, recreational, literary or educational interests of their members, and the land must be exclusively used for these purposes.

This measure is expected to have effect for the 2021 land tax year and onwards.

Any land owned by clubs that promote or control horse racing, pony racing or harness racing in Victoria will remain subject to a concessional rate of land tax.

Other land tax measures

The Amendment Bill contains various other land tax measures including:

• a series of technical changes to the principal place of residence provisions;
• enhancing the Commissioner of State Revenue's powers to recover penalty tax and interest on unpaid land tax, including by enabling these items to be included in a first charge on land; and
• replacing the 'land tax clearance certificate' regime in the Land Tax Act 2005 (Vic) with a new 'property clearance certificate' regime in the Taxation Administration Act 1997 (Vic).

Please contact us for advice if you have any questions regarding how these changes might impact you, your business, or your investments.