Michelle Bennett, Tessa Livingston and Sara Wemyss-Smith discuss proposed measures which seek to address the headline $5.2 billion reduction in stamp duty, as a result of the slump in the real estate market.
The Victorian Government has announced tax increases of $700 million over four years in its 2019 budget, which was released on Monday.
The proposed measures seek to address the headline $5.2 billion reduction in stamp duty, as a result of the slump in the real estate market. Little mention was made of the significant increase in forecast land tax collections which flow from overall gains in value, unaffected by the fall in market volumes, and which partially offset the stamp duty loss. The key sweeteners for business are significant infrastructure spending, payroll tax reductions and a number of measures to attract and support business in regional areas.
There is a mixed ‘blessing’ in the form of proposed changes to the corporate reconstruction exemption which Treasurer Tim Pallas considered will promote “greater business efficacy by making it easier for corporate groups to restructure”. The current corporate reconstruction exemption provides a full concession for duty for most restructures within a wholly-owned corporate group. From 1 July 2019, the qualifying provisions are proposed to be expanded, however, the 100 percent exemption will be reduced to a 90 percent concession. As a result, companies and unit trusts undertaking a qualifying business restructure will now be liable for duty on 10 percent of the dutiable value of the business assets.
The proposed changes will impact companies and trusts who have land within Victoria, and are undertaking restructures which are not expected to complete by 30 June 2019. While details are yet to be released, it is likely that the collection of duty on previously exempt transactions, at an effective rate of 0.55 percent, will significantly increase disclosure obligations and cost to taxpayers. However, it is hoped that the broadening of the concession will allow concessional re-organisations for businesses currently unable to qualify for the existing exemption.
A number of concessions have also been introduced to bolster forecast improvements in employment and support regional development.
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