Tax Alert – Victorian Budget 2023

Tax Alert – Victorian Budget 2023–24

Lowe Lippmann Chartered Accountants

Victorian Budget 2023–24

Yesterday the Victorian Treasurer released the state’s Budget for 2023–24, which included a number of proposed tax changes.

We have considered each announcement in detail.

COVID-19 Debt Levy

As part of the Covid Debt Repayment Plan, a temporary and targeted levy will be introduced for 10 years, from 1 July 2023 until 30 June 2033. The COVID-19 Debt Levy has two distinct components: a payroll component and a landholdings component.

From 1 July 2023, the payroll component will temporarily levy an additional payroll tax on large businesses based on the size of their annual national payrolls, as follows:

National payrolls above $10 million - additional payroll tax of 0.5%; and
National payrolls above $100 million –additional payroll tax of 1.0%.

The additional payroll tax rates will be imposed on the Victorian share of wages which exceeds the thresholds above. Payroll tax exemptions will continue to apply for hospitals, local councils, and charities.

From 1 January 2024, the landholdings component will reduce the tax-free threshold for general land tax rates from $300,000 to $50,000.

For general taxpayers, a temporary fixed charge will be levied at different rates based on the value of the taxpayer’s landholdings, as follows:

Landholdings between $50,000 and $100,000 - a temporary flat surcharge of $500;
Landholdings between $100,000 and $300,000 - a temporary flat surcharge of $975; and
Landholdings above $300,000 - a temporary flat surcharge of $975 plus 0.1% of the value of their landholdings above $300,000.

For trusts that hold land, a temporary fixed charge will be levied at different rates based on the value of the trust’s landholdings, as follows:

Landholdings between $50,000 and $100,000 - a temporary flat surcharge of $500;
Landholdings between $100,000 and $250,000 - a temporary flat surcharge of $975; and
Landholdings above $250,000 - a temporary flat surcharge of $975 plus 0.1% of the value of their landholdings above $250,000.

Existing land tax exemptions will continue to apply, including for primary places of residence, land used by charities and farm land. This means the value of exempt property is not included in the total landholding value.

A move from stamp duty to property tax on commercial properties

From 1 July 2024, the current stamp duty system for commercial and industrial properties will move to an annual property tax. A transition period will be provided to landholders on the first purchaser of a commercial or industrial property after 1 July 2024, giving landholders a choice between either:

Paying the property’s final stamp duty liability as an upfront lump-sum; or
Paying fixed instalments over 10 years equal to stamp duty and interest with a government-facilitated transition loan.

These proposed new arrangements will not apply to the current owner of any commercial or industrial property purchased before 1 July 2024. Importantly, once a property does enter the new system after 1 July 2024, the annual property tax will apply and stamp duty will never again be imposed.

Moving forward, the annual property tax for commercial and industrial property will be set at 1.0% of the property’s unimproved land value.

The final details of the transition will be confirmed by the end of 2023 after a consultation with business and industry groups during the next few coming months.

To be clear, this reform does not apply to residential properties.

Increasing the payroll tax-free threshold

The payroll tax-free threshold will increased as follows:

From 1 July 2024 - from $700,000 to $900,000; and
From 1 July 2025 - a further increase from $900,000 to $1 million.

‘Phase out’ the benefit of tax-free threshold for larger businesses

From 1 July 2024, a “phase out” of the tax-free threshold will be implemented, as follows:

Reducing the tax-free amount for each dollar a business pays in wages over $3 million; and
There will be no tax-free threshold for businesses with wages over $5 million.

Removing payroll tax exemption for high-fee non-government schools

From 1 July 2024, the payroll tax exemption for high-fee non-government schools will be removed, in line with the payroll tax treatment of government schools.

The Minister for Education and the Treasurer will make an announcement to confirm the non-government schools that will remain exempt from payroll tax.

Increasing the absentee owner surcharge rate

From 1 January 2024, the absentee owner surcharge rate will increase from 2.0% to 4.0% and the minimum threshold for non-trust absentee owners will decrease from $300,000 to $50,000.

In other words, if the total taxable value of Victorian land held by a non-trust absentee owner is equal to or exceeds $50,000 the surcharge will be payable. There will be no change to the minimum threshold of $25,000 for trust taxpayers.

Land tax exemption extended when construction or renovation of a principal place of residence is delayed due to builder insolvency

From 1 January 2024, where additional time is required to complete construction on a principal places of residence due to builder insolvency, the State Revenue Office will have the discretion to extend the land tax exemption for (up to) 2 additional years.

In line with the current exemption, the owner must not be entitled to apply the principal place of residence exemption to a second property.

Land transfer duty and land tax relief when providing a home for a relative with a disability

From 1 July 2023, in circumstances where the occupant is eligible to be a beneficiary of a Special Disability Trust, the land transfer duty deduction threshold will be increased from $500,000 to $1.5 million for principal place of residence transfers.

Also from 1 July 2023, eligibility for the Special Disability Trust land transfer concession will be expanded to include those transferring a home valued up to $1.5 million to an individual eligible to be a beneficiary of a Special Disability Trust, even where no trust has been established.

From 1 January 2024, a new land tax exemption will be introduced for land owned by an immediate family member and used as the home of an individual eligible to be a beneficiary of a Special Disability Trust (where no consideration/rent is provided), even where no trust has been established.

Land tax transfer duty concessions expanded for pensioners

For contracts entered into from 1 July 2023, the land transfer duty pensioner exemption and concession thresholds will be aligned with the thresholds for first home buyers, at $600,000 and $750,000 respectively.

In addition, eligibility will be assessed on the total value of the purchase.

Abolish business insurance duties

Business insurance duty will be abolished over a 10-year period, by reducing the current 10% rate by 1.0% per year.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation

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Practice Update – October 2025

October 3, 2025

ATO interest charges are no longer tax deductible – What you can do As we explained in our Practice Update for September, general interest charge ( GIC ) and shortfall interest charge ( SIC ) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years. With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy. Refinancing ATO debt Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities. While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as: GST; PAYG instalments; PAYG withholding for employees; and FBT. However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not. Individuals If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity: Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible. Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.

Audit Lowe Down – Costs incurred in acquiring / forming a business

September 9, 2025

Costs incurred in acquiring / forming a business. Further to the recent blog about capitalisation of costs when acquiring an asset, we have received a number of questions in relation to costs incurred in setting up / purchasing a business. Formation costs on establishing a business: These costs would include: Incorporation fees ASIC registration fees Legal fees Business name registration Pre-operating costs Pre-opening costs. The relevant standard for these costs is AASB 138 Intangible Assets and paragraph 69a confirms that these start-up costs are expensed when incurred. There is no identifiable asset controlled by the entity when the costs are incurred as the entity does not exist. Business acquisition costs These costs would include: Legal and accounting fees Due diligence and valuation costs Stamp duty Advisory or brokerage fees Project management costs related to the acquisition Internal costs allocated to the transaction In contrast to the asset acquisition discussed previously, AASB 3 Business Combinations requires all acquisition costs to be expensed as incurred. This means that they are not included as part of the consideration paid and therefore do not affect calculated goodwill. Entities purchasing businesses should be aware that these costs are not able to be capitalised as they can often be substantial, and purchasers often do not expect the costs to be taken directly to the income statement

Practice Update – September 2025

September 8, 2025

ATO to include tax 'debts on hold' in taxpayer account balances From August 2025, the Australian Taxation Office ( ATO ) is progressively including 'debts on hold' in relevant taxpayer ATO account balances. A 'debt on hold' is an outstanding tax debt where the ATO has previously paused debt collection actions. Tax debts will generally be placed on hold where the ATO decides it is not cost effective to collect the debt at the time. The ATO is currently required by law to offset such 'debts on hold' against any refunds or credits the taxpayer is entitled to. The difficulty with these debts is that the ATO has not traditionally recorded them on taxpayer's ATO account balances. Taxpayers with 'debts on hold' of $100 or more will receive (or their tax agent will receive) a letter before it is added to their ATO account balance (which can be viewed in the ATO's online services or the statement of account). Taxpayers with a 'debt on hold' of less than $100 will not receive a letter, but the debt will be included in their ATO account balance. The ATO has advised it will remit the general interest charge ( GIC ) that is applied to 'debts on hold' for periods where they have not been included in account balances. This means that taxpayers have not been charged GIC for this period. The ATO will stop remitting GIC six months from the day the taxpayer's 'debt on hold' is included in their account balance. After this, GIC will start to apply.