The Treasurer has announced a number of measures that will have a positive impact on businesses in regional Victoria, with reductions to transfer duty for commercial and industrial properties and a further reduction in the regional payroll tax rate.
These are welcome measures, given that the Budget also introduced several new taxes, and announced increases to existing ones.
Regional commercial and industrial property transfer duty concession
The Treasurer appears keen to see business thrive in the regions, with a concession that could provide support to existing regional businesses, encourage their expansion, or entice other businesses to relocate to regional areas.
The announcement of a land transfer duty concession for the transfer of commercial and industrial properties in regional Victoria will potentially drive this activity. The concession will operate as a 10% duty concession for transfers resulting from contracts signed from 1 July 2019, increasing by an additional 10% each year to ultimately provide a 50% discount for contracts signed from 1 July 2023. Subject to the scope of the concession, it could have a stimulative effect on the property market, especially in regional Victoria.
The new rules mean purchasers could save a significant amount. Under the current rules, a purchase of a $2 million commercial property in regional Victoria would be subject to duty in the amount of $110,000. However, under the new rules, the duty amount could decrease to between $55,000 and $99,000 (depending on when the contract is entered into) – a potentially significant saving of up to 50%.
It is currently unclear whether the concession will only depend on the timing of the contract and the nature and location of the property, or whether it will also be limited to transfers involving businesses already in, or shifting to, regional areas. Accordingly, those businesses looking to acquire property in regional Victoria should carefully consider their prospects of qualifying for the concession.
New gold royalty
Victoria is set to come into line with all other Australian states, as the last state to impose a gold royalty. The Treasurer has announced that a royalty will be imposed on gold at the rate of 2.75% of the net market value of gold production.
The royalty will take effect from 1 January 2020. This is expected to have a negative effect on gold mining companies and investors in the Victorian gold industry due to the additional cost the new royalty will impose on the miners, which is then likely to be passed on to investors.
Payroll Tax Concession for Regional Employers
The announcement of a further lowering of the payroll tax rate for regional employers will potentially boost employment in regional areas, and will be welcome news for qualifying employers. By 2022-23, the payroll tax rate applicable to regional employers will be cut to 25% of the metropolitan rate. This means that regional employers will pay payroll tax at the rate of 1.2125% from 2022-23, compared to 4.85% for metropolitan employers. The reduction in the regional payroll tax will be phased in over three years from 1 July 2020, with reductions of approximately 0.4% each year.
However, the concession is subject to certain tests, including that at least 85% of the employer’s wages are paid to employees working in regional areas. It is therefore important that businesses consult their advisors to ensure they qualify.
Additional assistance for regional employers will come in the form of further measures to broaden the current payroll tax exemption for maternity leave to all types of parental leave. Also, over the next four years, the payroll tax-free threshold will be increased