2024-25 Budget Update: Key changes to Australian state taxes

By Jinny Chaimungkalanont, Dan Miles, Mark Peters, and Seung Chan Rhee

Victoria and Western Australia are some of the first States to deliver their FY2024-25 Budgets, with Victorian Treasurer Tim Pallas tabling budget papers before Parliament on 7 May 2024, and Western Australian Treasurer Rita Saffioti on 9 May 2024.

The Victorian Budget introduces a new land tax exemption for social and emergency housing, and the payroll tax threshold will be lifted from $700,000 to $900,000 from, 1 July 2024, and to $1 million from 1 July 2025. The Budget also flagged a gradual phase-out of business insurance duties.

These changes are in addition to the significant tax reforms in Victoria commencing on 1 July (see our articles on the new Commercial and Industrial Property Tax).

Victoria

This budget primarily preserves the status-quo, especially given the significant Victorian tax changes of the past three years (including the Windfall Gains Tax and the Commercial and Industrial Property Tax).

The most significant changes are likely to be the new land tax exemption and the lifting of the payroll tax-free threshold. As always, the difficulty will be in the detail, and we should know more about this when the Bill is released.

The Budget papers for 2024-25 include the following tax measures:

• Land Tax: a new land tax exemption for land that is used for social and emergency housing will be introduced. This exemption will also apply to charity-owned land on which social and emergency housing is under development. The exemption will commence from the 2025 land tax year (i.e. on 1 January 2025).

The new exemption is welcome, particularly to the charity sector, given the significant complexities arising from the recent inclusion into the “charities” concession of a requirement that the charity “occupy” the land exclusively for charitable purpose (given the Commissioner’s view in LTA-009 Land Tax – Charity Exemption that land subject to a lease, e.g. residential  leases to social housing tenants, may cease to be occupied by the charity and therefore ineligible for an exemption).

This new exemption is in addition to the land tax relief currently available (a 50% reduction) with respect to build to rent (BTR) developments which provide social or affordable housing. ‘Social’ and ‘affordable’ housing take their meanings, for land tax purposes, from the Housing Act 1983 (Vic) and the Planning and Environment Act 1987 (Vic). ‘Emergency’ housing is currently undefined, and, based on today’s announcement, there appears to be some overlap between the current BTR land tax relief and the new exemption. See our note on BTR concessions here.

The details in relation to this new exemption are expected to be revealed with the release of the State Taxation Amendment Bill 2024 (Vic) (Bill).

• Payroll Tax: the payroll tax-free threshold will be lifted from $700,000 to $900,000 from 1 July 2024. It will then be raised to $1,000,000 from 1 July 2025. In addition, the payroll tax-free threshold will be phased out for larger businesses. We would expect to see the provisions for the phase-out to be contained in the Bill.
• Insurance Duty: The Government has reiterated its intention to gradually abolish business insurance duties which was announced in last year’s budget. Under the proposal, duties on public and product liability, professional indemnity, employers’ liability, fire and industrial special risks, and marine and aviation insurance, will be phased out over a 10-year timespan (that is, full removal by 2033). The rate of duty, currently 10%, will be reduced by 1 percentage point each year. Victoria has already abolished duty on life insurance.
• Compliance: Funding has been provided to further expand tax compliance programs administered by the Victorian State Revenue Office (SRO), and modernise technology in use at the SRO.

The Treasurer also highlighted the introduction, earlier this year, of the Commercial and Industrial Property Tax Reform Bill 2024 (Vic) (which is currently being debated in the Legislative Council), which will transition stamp duty liability on commercial and industrial property to an annualised levy.

Western Australia

Western Australia has not introduced any significant changes in the revenue space, however, further concessions for stamp duty payable by first home buyers have been a prominent part of the highlighted Budget measures.

The Budget papers for 2024-25 include the following tax measures:

• Stamp duty: The Government has announced an increase in the first home owner transfer duty exemption and concession thresholds to $450,000 (from $430,000) and $600,000 (from $530,000) respectively, to be implemented from 1 July 2024. First home buyers who pay duty on agreements entered into between 9 May 2024 and the policy being implemented will be eligible for a refund as necessary. The existing thresholds for purchases of vacant land by first home buyers (a full duty exemption up to $300,000 and a concessional exemption up to $400,000) remain unchanged.
• Discontinuance of user charge initiative on EVs: Western Australia has decided not to proceed with its planned road user charge on zero and low emissions vehicles, following the landmark High Court decision in Vanderstock v Victoria [2023] HCA 30, which ruled Victoria’s distance-based road user charge applying to low emissions vehicles to be an unconstitutional excise.

More to come

The budgets for the remaining States and Territories are expected over the coming months, with the NT budget expected next week.