Jump to Section
Payroll Tax
Change to Payroll Tax Thresholds
A couple of noteworthy changes have been announced to Victorian Payroll Tax. First of all, there will be an increase to the tax-free threshold for Payroll Tax purposes. Payroll Tax is only payable once an employer’s payroll exceeds the “threshold”. The threshold will increase from $700,000 to $900,000 as of 1 July 2024, and then again from $900,000 to $1M from 1 July 2025. No change to the general Payroll Tax rate of 4.85% was announced.
| Income Year | Payroll Tax threshold |
| 2023-24 | $700,000 |
| 2024-25 | $900,000 |
| 2025-26 | $1,000,000 |
This will assist smaller businesses with relatively small payrolls. It’s estimated that this change to the threshold will exempt around 6,000 businesses from paying Payroll Tax and reduce the Payroll Tax bill for at least a further 20,000 businesses. The impact can be seen using the below example for a business with a payroll of $2M:
| 2022-23 | 2024-25 | 2025-26 | |
| Wages | $2,000,000 | $2,000,000 | $2,000,000 |
| Threshold | $700,000 | $900,000 | $1,000,000 |
| Taxable wages | $1,300,000 | $1,100,000 | $1,000,000 |
| Payroll Tax | $63,050 | $53,350 | $48,500 |
On the larger end of the scale, the Government has also announced that going forward, the tax-free threshold for Payroll Tax will be phased out for larger businesses.
Covid Debt Levy on Payroll Tax
The news isn’t as good for larger employers, as the State Government announced they are seeking to recoup some of the debt amassed during Covid through the imposition of a temporary Covid Debt Levy on Payroll Tax. From 1 July 2023, businesses with annual Australia-wide wages greater than $10M will be required to pay 0.5% more than the usual 4.85% Payroll Tax rate on Victorian wages exceeding the $10M threshold. For businesses with Australia-wide wages greater than $100M, the levy will increase by a further 0.5% for wages above the $100M threshold.
Additionally, the existing Mental Health and Wellbeing Levy on Payroll Tax will continue into 2023-2024 for businesses with Australia-wide payrolls above $10M.
These levies will be in place until 30 June 2033. These levies do not apply to employers with existing Payroll Tax exemptions.
Payroll Tax Exemption to be Removed for Non-Government Schools
The Payroll Tax exemption will be removed for High-fee non-Government schools from 1 July 2024. Given that a significant cost of schools are salaries, the removal of the payroll tax exemption will likely have a significant impact on a School’s finances. The most likely outcome is that this soon to be additional cost for schools, may be passed onto families through increased school fees.
Land Tax
Covid Debt Levy on Land Tax – Change to Land Tax Threshold and Additional Surcharge
In addition to Payroll Tax, the temporary Covid Debt Levy aiming to recoup Government revenue lost during Covid is also being applied to Land Tax.
A temporary surcharge will be applied on top of the regular Land Tax rates, depending on the taxable value of the property. The surcharge will apply to landowners with a taxable property value starting at $50,000, therefore effectively decreasing the general tax-free threshold for Land Tax from $300,000 to $50,000. Clients with investment properties valued at less than $300,000 for Land Tax purposes who may not have historically been subject to Land Tax may now be issued with Land Tax assessments.
These changes are summarised in the table below:
| Land value | Additional land tax surcharge |
| $50,000 – $100,000 | $500 |
| $100,000 – $300,000 | $975 |
| > $300,000 | $975 + 0.1% on the value above $300,000 |
| > $250,000 for trusts | $975 + 0.1% on the value above $250,000 |
Only the surcharge itself will apply to property values between $50K and $300K for general landholders. However, for property values above the previous threshold, the surcharge will be added to the existing Land Tax rates ($300K for general landholders and $25K for trusts).
The following example demonstrates the impact of these changes on Victorian landholdings of $2M and $4M for a general landholder (ie. not owned by a trust):
| Taxable Property Value | $2,000,000 | $4,000,000 |
| Existing Land Tax | $12,475 | $53,475 |
| Surcharge | $2,675 | $4,675 |
| Total Land Tax | $15,150 | $58,150 |
Absentee Owners Surcharge
The absentee owner surcharge is applied in addition to the general or trust Land Tax rates and applies to absentee owners. From 1 January 2024, the absentee owner surcharge rate will increase from 2% to 4%.
All current Land Tax exemptions will continue to apply, including the main residence exemption. The temporary Covid Debt Levy measures on Land Tax will remain in place until 30 June 2033.
End to Stamp Duty on Commercial and Industrial Properties
In a significant change, Stamp Duty on the acquisition of commercial and industrial properties is set to be replaced by an ‘annual property tax’. While the details are still yet to be worked out by the State Government, the initial proposal imposes an annual property tax of 1% of the unimproved value of the land for all acquisitions that occur after 1 July 2024.
However, while the transition to this new system will commence on 1 July 2024, it appears the new tax will not come into effect immediately. Upon the first purchase that occurs after 1 July 2024, the acquirer of the eligible commercial and industrial property will have the choice to either pay the property’s final stamp duty up front, or in fixed instalments over 10 years (plus interest). After this 10-year period (or sooner if the property is sold prior to 10 years), the eligible property will officially enter the new system, with annual property tax imposed and no future stamp duty payable on future sales of the property.
This measure attempts to encourage future growth and investment by abolishing the significant up front stamp duty costs for businesses. While the change may improve cash flow and free up capital for acquisitions, the overall costs for purchasers with the intention of holding the property long-term may outweigh the initial benefit.
It is worth noting however, that this should result in a benefit for income tax purposes, as rather than capitalising the stamp duty costs, businesses should be able to claim an income tax deduction for the annual property tax.
Abolishing Business Insurance
Whilst most of the tax measures are focused on raising additional revenue, there will be a gradual reduction in duty paid on insurance policies.
Business insurance duties (which apply to public and product liability, professional indemnity, employers’ liability, fire and industrial special risks, and marine and aviation insurance) will be eliminated. Abolition will be achieved by 2033, with the rate of duty, currently 10%, being reduced by 1 percentage point each year from 1 July 2024.
* * * * * * * *
The above tax summary is intended to be general in nature. Should you believe that any of the above matters may be relevant to you or your Group’s particular circumstances, please discuss the specific details with your Slomoi Immerman Partners advisor.
