Our experts explore the key takeaways from the 2025/26 Victorian State Budget and answer what’s on the table for businesses, industries and communities across Victoria- uncovering opportunities of resilience and growth for your financial landscape.

Relevant observations of the Victorian Budget 2025-26 include the following:

• While the Budget focuses on providing cost of living relief to Victorians, it does little to tackle the State’s debt which is forecast to reach a record $194 billion within four years. Notably, the Budget’s operating surplus of $600 million is $1 billion less than was forecast in December. While Victoria will spend $6.5 billion in new initiatives in 2025-26 only half of that will be offset through savings. This will result in a net increase of $3.1 billion in new spending compared to last year’s budget. 
• While no new taxes have been introduced in the Budget, taxation revenue is forecast to be $41.7 billion in 2025-26 and grow by an average of 4.7% per year over the forward estimates. 
• Despite the ongoing fierce debate around the fire services levy and emergency services and volunteers fund levy (ESVFL) (which will come into effect from 1 July 2025), the Budget forecasts that the ESVFL will generate $1.6 billion in 2025-26. This indicates that it is unlikely that the Government will remove or amend the ESVFL, which would create a substantial shortfall in the Victorian Government’s revenue that would cause its thin operating surplus to go into deficit.

What does the State Budget mean for you?

Our Fast Facts provide an overview of the budget insights and highlight potential opportunities for you.

Take a look at what the Victorian State Budget mean for you in 2025 below:

Contributors

William Zhang

Eric Lay

The post VIC State Budget 2025/26 appeared first on SW Accountants & Advisors.

According to the budget papers, for eligible new BTR projects where construction commences after 9 May 2023, the government will : 

• increase the depreciation rate from 2.5 per cent to 4 per cent per year; and 
• reduce the withholding tax (WHT) rate for eligible fund payments from managed investment trusts (MIT) to foreign residents on income from eligible BTR properties after 1 July 2024 from 30 to 15 per cent, subject to further consultation on eligibility criteria. 

These proposed tax changes address a key contentious issue between the BTR industry and government, being that the current MIT WHT rate hits foreign investors twice what they would pay on other eligible property assets. With the MIT tax rate to drop from 30% to 15% from 1 July 2024, the BTR sector will be aligned with other commercial property sectors (i.e office, retail and industrial) and is likely to boost foreign investment in the BTR sector. 

The proposed changes have been welcomed by the Property Council of Australia (PCA) and the Urban Development Institute of Australia (UDIA), both long-time advocates of the industry.

These proposed changes are a welcome first step, although the GST impediments for BTR projects is still to be addressed. We also need to wait for the final legislation to see what is going to be considered a BTR project.  Most State governments have already flagged tax concessions for BTR projects (refer below). However, each State has introduced different regimes and have different definitions of BTR.   

We would hope that the Federal Government’s BTR definition is the least restrictive, and would ensure that if a BTR project qualifies for State tax BTR concessions, that the project will also be eligible for the 15% MIT Withholding Tax (WHT) rate.   

Other considerations 

It will also be important to ensure that the BTR project is structured carefully to ensure that the Trust is not a trading trust (making it ineligible to be a MIT). For example, where BTR developments are structured in such a way to meet the definition of commercial residential premises for GST purposes (so that GST credits can be claimed), there is a risk that the operations may be considered a trading trust.  

State Tax changes 

In addition to the proposed federal tax concessions, there are tax concessions available for BTR developments at the State and Territory level. The most recent State to introduce BTR relief is Western Australia, who introduced new land tax relief for eligible BTR developments on 17 May 2023. We have summarised State and Territory BTR concessions in the table at Appendix A. which we have summarised in the table at Appendix A. 

Greenlight for expanding concessional rate for clean building MITs 

The Federal Budget has also extended the clean building concessional MIT WHT rate of 10% to data centres and warehouses, where construction commences on and after 9 May 2023. The reduced WHT rate will apply from 1 July 2025.  

This measure will also raise the minimum energy efficiency requirements for existing and new clean buildings to a 6-star rating from the Green Building Council Australia or a 6-star rating under the National Australian Built Environment Rating System. 

A MIT will be a clean building MIT where the income is not tainted with income from other assets that are not reasonably incidental. For example, a single MIT cannot hold both a clean building and other non-clean buildings. For MITs that are considering constructing or developing new energy efficient office buildings, shopping centres, hotels, data centres or warehouses, it is important to ensure that you utilise the most appropriate structure to utilise the 10% WHT rate. 

How can we help? 

If you are considering a BTR development or a clean building MIT, we can assist with determining the appropriate structure and provide advice on relevant tax considerations.  

Contributors

Ned Galloway

Eric Lay

Appendix A 

¹ Section 70J, Land Tax Act 2005 (Vic). 
² Section 70K, Land Tax Act 2005 (Vic). 
³ Section 5CA, Land Tax Act 1956 (NSW). 
⁴ Build to Rent – Treasury (act.gov.au) 
⁵ Tax concessions to drive investment into affordable housing – Ministerial Media Statements 
⁶ Queensland Build-to-Rent Pilot Project – Queensland Treasury 
⁷ Exemptions, waiver or relief | RevenueSA 
⁸ Media statements – New land tax relief to bolster Western Australia’s rental market

The post Build-to-Rent Tax Incentives to accelerate Australia’s housing supply and promote sustainable real estate development  appeared first on SW Accountants & Advisors.

This tax briefing covered:

• Federal Budget overview
• COVID measures –state of play
• State Taxes update
• International update
  • Hybrid Mismatch
  • Digital taxes
  • Transfer Pricing update
• ATO activity

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