Key tax outcomes of the Victorian State Budget 2020-21

The Victorian State Budget for 2020–21 is a big-spending bid to kick-start the economy following the impacts of COVID-19.

A planned recovery spend of $49 billion is an effort to help businesses put people back in jobs, with the goal to create 400,000 jobs by 2025.

The measures, including tax breaks for businesses, as well as property owners and buyers, will bring the state’s debt to almost $155 billion.

However, Treasurer Tim Pallas said the plan would kick-start the economy and massive growth would eventually reduce the deficit.

Here is a snapshot of the key tax outcomes of the Victorian State Budget 2020-21:

Payroll tax

A tax credit scheme intended to encourage businesses to hire new workers is a key feature of the budget. Businesses with a payroll of $10 million or less, will be provided with 10c on the dollar non-refundable credit for every additional dollar spent on wages above the previous year’s wages for the next two years.

From July 1, 2021, the threshold for making annual payroll tax payments will increase from $40,000 to $100,000.

Treasurer Tim Pallas said this will significantly reduce payroll tax, saving businesses an estimated $836 million.

Since March 2020, there has been $1 billion in payroll tax waivers for small businesses.

Land tax

A land tax discount and a land tax exemption are included in the budget.

There is a 50 per cent discount – expected to kick in at the start of the 2022 land tax year – for eligible build-to-rent developments, including an exemption for the absentee owner surcharge, until January 1, 2040. The government hopes this will increase housing supply. It has forecast a $22 million decline in revenue from land tax over the next two years to just under $3.5 billion in 2021-22.

Land owned and occupied by not-for-profit clubs that provide social, cultural, recreational, literary, or educational services will get a land tax exemption beginning in 2021.

Stamp duty

The government will waive up to 50 per cent of stamp duty on homes worth up to $1 million – an increase on the $750,000 threshold – for the remainder of this financial year with the hope of “encouraging Victorians back into the property market”.

New builds will be eligible for the full discount while existing homes can get a waiver of 25 per cent.

Research and development (R&D) loans

The government is providing up to $50 million in low-interest loans to innovative Victorian small-medium enterprises (SMEs) so they can continue research and development (R&D).

The R&D cash flow loans will support innovative SMEs in developing crucial products, services, and technologies.

Those that currently qualify for the Commonwealth’s R&D Tax Incentive will be eligible to apply for these loans.

Home-buying help

In other sweeteners announced by the Treasurer, residential properties will be made more affordable under a $500 million fund to help homebuyers with their deposits.

Money from the fund will go towards the purchase price, in exchange for equity in the property.

The plan will reduce the size of the deposit needed for homes, whether they are new or established.

Speak to the tax experts at LDB

If you need help navigating any of these new tax incentives or if you’d like to find out more about how the Victorian State Budget will impact your personal or business finances, speak to one of our experts.

LDB has a team of trusted tax advisors, real estate and property specialists, and business advisory experts that can guide you on a range of matters. Simply give us a call on (03) 9875 2900 or fill in the contact form below.