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Victoria State Budget 2021-22

The 2021-22 Victorian Budget has been delivered with key takeaways highlighting a reliance on new taxes and an increase to existing ones. 

On the taxation front, key measures include: 

  • the introduction of a premium rate of stamp duty: For contracts entered into from 1 July 2021, a new stamp duty bracket of approximately 6.5% will apply to transactions with a dutiable value in excess of $2 million;

  • an increase in land tax marginal rates: From 1 January 2022, marginal land tax rates will rise by 0.25% for taxable landholdings exceeding $1.8 million, and by 0.30% for taxable landholdings exceeding $3 million;

  • the introduction of a mental health and wellbeing surcharge: From 1 July 2022, businesses that pay more than $10 million in wages nationally will be required to pay a 0.5% surcharge on wages paid in Victoria; and a further 0.5% will be levied on employers who pay more than $100 million in national wages; and

  • the introduction of a ‘windfall gains tax’: From 1 July 2022, windfalls associated with planning decisions to rezone land will be subject to a new tax. The total value uplift from a rezoning decision will be taxed at 50% for windfalls above $500,000, with the tax phasing in from $100,000. The precise details of how this tax will operate are not yet available.  

The State Taxation and Mental Health Acts Amendment Bill 2021 (Vic) (Bill), introduced on 20 May 2021, includes other proposed amendments that did not make the headlines. Outlined below are some of the more notable proposals in relation to stamp duty, land tax and payroll tax. 

Stamp duty

1. Introduction of ‘premium stamp duty’

The Bill includes the amendments necessary to implement the proposed introduction of a new rate of duty of approximately 6.5% on transactions with a dutiable value in excess of $2 million. The new rate will come into effect from 1 July 2021 and will also apply to acquisitions of a landholder entity. 

Transitional relief will be available for transactions that occur under an agreement or arrangement entered into before 1 July 2021, even if completion occurs on or after that date. Taxpayers who are currently negotiating contracts involving Victorian dutiable property or landholder entities should consider the possibility of executing transaction documents before 1 July 2021.

Although the Victorian Government has indicated that this change is expected to impact less than 4% of transactions, our expectation is that a significant proportion of business transactions will be effected by the new duty rate. This is particularly given Victoria’s expansion of the duty base in recent years to include items fixed to land (even if they are not common law fixtures) and economic entitlements (which broadly applies where a person acquires economic benefit in relation to land without otherwise acquiring a dutiable interest in the land). 

The current and proposed rates are compared in the table below:

Dutiable value range

Current rate

Proposed rate

$0 – $25,000 


No change

$25,001 – $130,000

$350 plus 2.4% of the dutiable value in excess of $25,000

No change

$130,001 – $960,000

$2,870 plus 6.0% of the dutiable value in excess of $130,000

No change

Greater than $960,000

5.5% of the dutiable value

5.5% of the dutiable value (but only where dutiable value is not more than $2,000,000).

Greater than $2,000,000

$110,000 plus 6.5% of the dutiable value in excess of $2,000,000

In addition, foreign purchasers of residential property are subject to an 8% duty surcharge. This means that foreign purchasers are potentially subject to duty at a rate of approximately 14.5%.

2. Other proposed duty amendments

Other notable proposed duty-related amendments include:

  • new rules in relation to shared equity arrangements, being an arrangement whereby the State contributes to the purchase of certain homes and takes an equitable interest in the property;

  • a temporary increase in the eligibility threshold for the off-the-plan duty concession in relation to principal place of residences. For contracts entered into between 1 July 2021 and 30 June 2023, the threshold will be up to $1 million; and

  • a temporary exemption and concession (depending on the relevant property profile) for the transfer of new homes located wholly in the City of Melbourne local government area, where the dutiable value is less than $1 million. 

Land tax

1. Changes to land tax general rates

The Bill proposes to:

  • increase the land tax exemption threshold from $250,000 to $300,000;

  • increase the rate of land tax by 0.25% where the taxable value of a taxpayer’s land holdings reaches $1.8 million; and

  • increase the rate of land tax by 0.3% where the taxable value of a taxpayer’s land holdings $3 million or more. 

 2. Other proposed land tax amendments

Other notable proposed land tax amendments include:

  • an extension of an exemption from vacant residential land tax for land that becomes residential land for two years, where the land has not been used or occupied and there has been no change in ownership; and

  • the introduction of provisions that largely mirror the amendments made to the Duties Act 2000 (Vic) after the Commissioner’s loss in Danvest Pty Ltd v Commissioner of State Revenue [2017] VSCA 382. In particular, to deem a partner in a partnership to have a beneficial ownership of each item of partnership property in the same proportion as the partner’s partnership interest (including look through provisions). 

3. Removal of land tax concessions for private gender-exclusive clubs

The Budget Papers included an announcement that private gender-exclusive clubs will no longer be eligible for the land tax concession applicable to societies, clubs and associations from 1 January 2022. 

This would appear to represent the Government’s change of heart in relation to such clubs, noting that the Land Tax Act 2005 (Vic) was amended less than six months ago to provide such clubs with a full exemption from land tax from 1 January 2021 (compared to a previous concession at a 0.357% rate of land tax). 

The Bill does not however include proposed amendments in relation to this particular announcement. Watch this space.

Payroll tax

1. Introduction of a mental health and wellbeing surcharge

The Bill amends the Payroll Tax Act 2007 (Vic) to introduce a new surcharge on wages paid in Victoria, to be known as the ‘mental health and wellbeing surcharge’. The surcharge, which will apply from 1 January 2022, is intended to be charged at the following rates: 

  • 0.5% for employers (or groups of employers) with national payrolls above $10 million a year; and

  • 1.0% for employers (or groups of employers) with national payrolls above $100 million a year. 

2. Other payroll tax amendments

Other notable payroll tax amendments proposed under the Bill include:

  • retrospective amendments, to apply from 1 July 2019, in relation to the calculation of payroll tax for bushfire relief regional employers;

  • bringing forward the increase in the payroll tax threshold to $700,000 with effect from 1 July 2021 (instead of 1 July 2022); and

  • bringing forward the reduction in regional payroll tax rate to 1.2125% with effect from 1 July 2021 (instead of 1 July 2022).

Other announced measures: Introduction of windfall gains tax regime 

The Budget Papers also included proposed measures relating to the new ‘windfall gains tax’ announced by the Government on 15 May 2021. This new tax is intended to apply from 1 July 2022, is proposed to be levied against uplifts in property value associated with planning decisions to rezone land, other than land that is subject to the Growth Areas Infrastructure Contribution. The total value uplift is intended to be taxed at 50% for windfalls above $500,000, with the tax phasing in from $100,000. 

The Bill does not however include proposed amendments in relation to this measure so the mechanics are at this stage unclear. Watch this space.

The road ahead

It would seem from this Budget that Victoria has chosen to rebuild the economy in the aftermath of COVID-19 by increasing the rates of stamp duty and land tax, and by introducing two new taxes (mental health and wellbeing surcharge and windfall gains tax). Given NSW Treasurer Dominic Perrottet’s proposals to replace stamp duty with a broad based property tax, it will be interesting to see what path New South Wales takes when its Budget is delivered next month.




This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.

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