On 27 August 2024, the Victorian Government released the Short Stay Levy Bill 2024 (Vic). The Bill introduces a levy of 7.5% on booking fees for providers of short stay accommodation from 1 January 2025. This follows the Government’s announcement in September 2023 to introduce a levy as part of its Housing Statement.

The policy aims to increase the supply of long-term rental housing, with revenue from the levy helping to fund Homes Victoria to build social and affordable housing across Victoria (25% of funds are set to be invested in regional Victoria).

The levy

The levy of 7.5% of the total booking fee (including GST) will be payable for each short stay of less than 28 days in Victorian premises that are short stay accommodation.

The levy will be imposed on all bookings made from 1 January 2025. The levy does not apply to a short stay booking made before 1 January 2025, regardless of whether the short stay is completed on or after 1 January 2025.

Short stay accommodation

Short stay accommodation covers any accommodation other than the principal residence of an owner or renter, commercial residential premises (e.g. hotel, motels, caravan parks etc) and certain care and support facilities.

Premises with more than one use can also qualify as short stay accommodation. The levy will be imposed on the part of the property used as short stay accommodation.

Who will be impacted?

Online and offline booking platforms, owners or renters of short stay accommodation are liable for the levy.

The liability for the levy will arise on the completion of a short stay.

Lodgement and registration obligations

Providers of booking platforms, owners or renters accepting bookings for short stays must apply to the Commissioner for registration and lodge returns every calendar year to pay the short stay levy.

Returns must be lodged every 3 months for persons whose total relevant booking fees in a year are $75,000 or more.

Planning and development

Owners’ Corporations can ban short stays in their strata scheme.

There will also be changes to planning systems to allow local councils the power to regulate short stay accommodation.

Details of these changes are yet to be finalised.

How SW can help

Online platforms such as Airbnb and property owners offering short stays should consider the impact of the provisions outlined in the Bill and their reporting and payment obligations in early 2025.

SW can assist in determining whether your premises will be subject to the levy and with registering and lodging returns.

Please contact our SW advisors for more information on how this may impact you.

Contributors

William Zhang

Carmelin De Francesco

Blake Trad

The post Victorian Government introduces 7.5% short stay levy to Parliament appeared first on SW Accountants & Advisors.

The Commercial and Industrial Property Tax Reform Bill 2024 was introduced into the Victorian Legislative Assembly on Wednesday 20 March. This follows the Victorian Government announcement of the final design details of the Commercial and Industrial Property Tax Reform in December 2023. The Government has asked for written submissions or suggested adjustments to the legislation by 3 April.

The CIPT will be an annual property tax with the Bill providing for the transition of qualifying land to the commercial and industrial property tax (CIPT) scheme.

CIPT key points

• The first purchase of a 50% or more interest in a property (directly or indirectly) after 1 July 2024 will be liable to stamp duty (either upfront or via a Government facilitated transitional loan over 10 years).
• Certain subsequent transactions will not be subject to duty under the Duties Act as long as the property remains qualifying land.
• The land will become subject to an annual CIPT after the expiration of 10 years from the land entering into the scheme. The rate of CIPT will be 1% of the site value of the land or 0.5% of the value of BTR land for qualifying build to rent schemes.
• Interestingly, the first purchaser of a 50% or more interest in a property after 1 July 2024 will be subject to both duty and the VCIP after 10 years (so effectively they will suffer double tax).
• The CIPT will not apply to transactions that occur pursuant to an agreement or arrangement entered into prior to 1 July 2024.

What type of properties and land will this apply to?

The reform will apply to Victorian qualifying commercial or industrial use land that fall within the below ranges of the Australian Valuation Property Classification codes (AVCC):

• 200–499, which relate to commercial, industrial and extractive industry uses
•  600–699, which relate to infrastructure and utilities uses or
• the land has been allocated more than one AVPCC in the latest valuation not all of which are in the above ranges, and the land is used solely or primarily for a use described in an AVPCC in the above ranges. Therefore, mixed use properties will be subject to the CIPT where the sole or primary use of the property is one of the above.

Student accommodation

Land will have a qualifying use if the land is solely or primarily used for eligible student accommodation which is defined to mean residential premises that are:

• designed for occupation by students of a higher education provider (higher education provider is defined later in this clause) and
• occupied or available for occupation by students of a higher education provider; and
• commercial residential premises within the meaning of section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999.

Entry into the Scheme

Land with a qualifying use enters the scheme on the occurrence of:

• certain dutiable transfers or relevant acquisitions under the Duties Act 2000 in respect of that land and
• certain subdivisions and consolidation involving land already in the scheme.

Generally, a dutiable or landholder transaction brings land into the scheme if the transaction is not fully exempt from land transfer duty or landholder duty, and the transaction relates to an interest in land that amounts to a qualifying interest, being an interest of at least 50% in the land. 

Aggregation

There are aggregation rules that apply in determining if the 50% threshold has been met. Interests acquired with associated persons and acquisition of interests which occur with a 3-year period will be aggerated. Examples are provided in the Bill.

Who pays CIPT?

The owner of taxable land is liable to pay CIPT on the land.

The owner of CIPT taxable land is the same as the owner of the land for the purposes of the Land Tax Act 2005, however, the provisions deeming the holders of beneficial interests in certain trusts to be owners of land for the purposes of imposing land tax surcharges relating to trusts, are not applicable to CIPT.

Rate of CIPT

The rate of CIPT will be:

• for land other than BTR land: 1% of the taxable value of the land
• for BTR land: 0·5% of the taxable value of the land.

The taxable value of CIPT taxable land or part of CIPT taxable land is the same as the taxable value of the land or part under the Land Tax Act 2005. This is usually the site value contained in a valuation of land undertaken by the Valuer-General under the Valuation of Land Act 1960.

Exemptions from transfer and landholder duty on subsequent sales

There will be exemptions from transfer duty and landholder duty for certain transactions in relation to land that has entered the CIPT scheme.

Acquisitions of 100% interest in land

If the tax reform scheme land has entered the CIPT scheme through a transaction involving a 100% interest, no further duty is payable on a subsequent transaction.

Acquisitions of less than 100% interest in land

Where an interest of over 50% is acquired (but less than 100%), a subsequent transaction which relates to a different interest in the land may be subject to duty for a 3 year period or until full duty has been assessed on the interest (whichever occurs sooner).

The Bill includes as an example:

Person A acquires a 50% interest in a landholder under a relevant acquisition which occurs on 1 September 2025. The landholder holds a 100% interest in land. This relevant acquisition amounts to an interest of 50% in the land which is a qualifying interest and the qualifying landholder transaction is an entry transaction. Person B holds the remaining 50% interest in the landholder. On 1 January 2026, Person C acquires a 100% interest in the landholder from Person A and Person B. The value of the land holding of the landholder is to be excluded from the calculation of duty to the extent that the interest acquired by Person C is the same, or substantially the same, as the entry interest for the land (50%). The value of 50% of the land is included for the purposes of assessing duty on the relevant acquisition made by Person C.

Change in use

Where there is a change of use of land to a non-qualifying use (such as a rezoning to a residential use) after an exempt transaction, duty becomes payable on that transaction by the transferee.

Duty is assessed on the previous transaction based on the dutiable value of the land at the time of that transaction, not at the time of the change of use.

The amount of duty is to be reduced by 10% for each calendar year that has elapsed since the date of the transaction that is being assessed for duty. Note this is not necessarily the entry date of the land to the CIPT scheme.

Exclusions from the CIPT

As noted above, only commercial and industrial land (as well as student accommodation) is captured by the CIPT. Properties primarily used for residential, primary production, community services, sport, or heritage and culture purposes will not be captured.

The following transactions will also be excluded and will remain subject to duty regardless of whether the land has entered the CIPT transition:

• grant or transfer of leases
• economic entitlements.

Furthermore, transactions eligible for corporate reconstruction and corporate consolidation exemptions or concessions will not trigger entry into the CIPT regime.

Also as noted above, dutiable transactions and landholder acquisitions which are eligible for an exemption will not result in entry into the CIPT transition.

Our observations

• It is clear that there will be a number of complexities in the transition to the new CIPT regime.
• Some transactions, such as the grant of a dutiable lease or an economic entitlement in relation to land that has entered the tax reform scheme will remain subject to duty.
• Some dutiable transactions will not result in qualifying land becoming tax reform scheme land such as an acquisition of a direct interest in land of less than 50% or a landholder transaction involving an interest of less than 50%. Unless aggregated with other transactions to reach the 50% threshold, the land will not enter the scheme. The overlay between the landholder regime and the CIPT regime is complex and require further consideration by the Government.
• If transacted multiple times, the same minority interest may incur multiple amounts of transfer or landholder duty before the land enters the scheme (e.g. a 20% interest in a landholding unit trust that is transferred multiple times may incur duty each time it is transferred but the land will not enter the scheme even though the total duty payable may be equal to or more than the duty payable on a 50% direct interest).
• The application of the aggregation rules are complex but appear to not apply to aggregate interests acquired directly in land with interests acquired in a landholder that holds that same interest in the land.

How SW can help

This is a significant change in the application of duty to commercial and industrial property. For advice on how this will impact acquisitions in your pipeline or for assistance in modelling the tax payable on proposed acquisitions, reach out to your SW contact or one of the key contacts below.

Key contacts

Robert Parker

The post Victorian Property Tax Reform appeared first on SW Accountants & Advisors.

Key takeaways

• Larger businesses and landlords will have to pay additional taxes to help the Government repay the COVID debt
• The Government continues to invest in education and healthcare as this remains a key focus
• Certain infrastructure projects have been paused such as the Melbourne Airport Link. However, the Government continues to invest in road upgrades and railway networks.

What does the State Budget mean for you?

Tax reform & changes

Property & infrastructure

Contributors

Ned Galloway

Blake Rogers

Eric Lay

The post VIC State Budget 2023/24 appeared first on SW Accountants & Advisors.

Key takeaways

• Although there are no key tax measures introduced, direct property taxes will continue to be the source of over 50% of new revenue for the Victorian Government due to increased transaction volume and rising land values (although this is expected to be tampered by forecasted interest rate rises).
• A new Victorian Future Fund will be established to manage the fiscal impact of COVID 19. It will initially be funded from the VicRoads Modernisation joint venture and is expected to have a balance of around $10bn. Investment returns from the Fund is to be quarantined and returned to the Fund to help offset the current debt and return the Budget to surplus by 2025-2026.
• There is a clear focus in this Budget to repair the health system. Included in the Budget is more than $12bn of health-related expenditure including the training and hiring of additional healthcare workers and paramedic staff, funding for Ambulance Victoria to meet growing demand for services and investment to cut surgery waiting lists.
• The two-year Sick Pay Guarantee pilot program will receive $246m in funding to assist provision of a payment of up to five days of sick or carer’s pay at the national minimum wage for insecure work (casual employees).
• $250m provided for a one off $250 Power Saving Bonus to all Victorian households using the Victorian Energy Compare website to locate the cheapest electricity deal. The scheme will run from 1 July 2022 to 30 June 2023.
• A commitment of $111m to support Victoria’s tourism and major events.
• The Victorian Government has allocated $1.8bn to the school building project and plans to continue upgrading schools until it achieves its intended target of 100 new schooling facilities by 2026. The program includes upgrades to 65 schools including 36 special schools, building 13 new schools, additional stages at four more schools, and expanding capacity at two schools to meet enrolment demand.
• The Victorian Government also plans to invest $5bn in early three-year-old childhood education by increasing universal educational access for disadvantaged families as well as providing support to individuals from diverse backgrounds and $131m to assist students from rural areas to access four-year-old early childhood services.

For full overview of the infrastructure measures see our breakdown here.

Victorian Industry Fund to support Victorian Businesses

The Government has introduced a $120m fund to support the advancement of domestic manufacturing and other high priority sectors. Some of the initiatives to be supported by this Fund include:

• $40m to provide grants to support rapidly growing businesses
• $40m of targeted financial incentives to attract investment into Victorian businesses
• $20m for an equity investment pilot fund to attract highly innovative companies particularly in areas such as medical technology
• $7m low-carbon manufacturing grant program to help Victorian manufacturers to compete globally in the renewable energy space
• $4.5m for 300 digital jobs for manufacturing internships to help train Victorian workers in this industry. 

Significant Tax Measures

No significant new tax measures were announced in the 2022/23 Budget although there were minor amendments in relation to:

• Equalisation of gambling tax rates for electronic gaming machine operators

• Exemption from motor vehicle duty for wheelchair accessible commercial passenger vehicles that provide unbooked services.

However, as noted above, the State Taxes are to be a major source of revenue for the Victorian Government. The table below shows the annual revenue expected from State Taxes over the next 4 years.

Opportunities

The opportunity for businesses may come from the expected economic growth although this is not anticipated to be significant. Business sectors such as Medtech, pharmaceuticals and manufacturing should benefit from the increase in funding.

Did the VIC Budget measure up to expectations?

The Budget fell short of providing the required assistance to boost businesses which are facing significant uncertainties.

The Government’s commitment to repairing Victoria’s health system in needed and welcomed. However, the Government has not sought to increase property taxes to decrease the State’s debt and is instead relying on solid economic growth to repair the budget.

Please reach out to one of our experts below for assistance navigating the implications and opportunities this Budget presents for you, your business and your industry.

Contacts

Abi Chellapen

Daren McDonald

Stephen O’Flynn

The post VIC State Budget 2022/23 appeared first on SW Accountants & Advisors.

Significant measures

New infrastructure spending:

• $1.6bn for construction and development of new schools and school upgrades
• $1.6bn for construction and development of new hospitals, health facilities and related upgrades
• $2.6bn investment over 4 years in the Commonwealth Games 2026 which includes funding for building and upgrading sporting venues and related supporting infrastructure
• $991m investment in improving Victoria’s roads and rail
• $1bn to fund low interest loans for community housing agencies to deliver social and affordable housing.

Key continuing initiatives from prior Budget announcements:

• Victoria’s Big Build: an average $21.3bn a year over the budget and forward estimates, reflecting the continuation of major productivity-enhancing projects such as the North East Link, the Metro Tunnel, the West Gate Tunnel, the Melbourne Airport Rail, the Geelong Fast Rail, the Suburban Rail Loop and the removal of 85 level crossings by 2025
• $6bn Big Housing Build package – continued investment in new social and affordable homes
• Stamp duty concessions and exemptions for residential property transactions, particularly homeowners
• Victoria’s HomeBuyer Fund of $500m, expanding the HomesVic Shared Equity Initiative by contributing equity to the purchase price for eligible first home buyers
• Continued concessions to eligible BTR developments – a 50% land tax concession for up to 30 years and a full exemption from Absentee Owner Surcharge over the same period.

For all key takeaways of the Victorian State Budget 2022/23 see here.

Opportunities

• Continued focus on infrastructure spending; the 2022-23 Budget provides $22.2bn in output spending and invests $6.7bn in new and improved assets. Investment in hospitals, rail and roads, social and affordable homes will continue to provide opportunities for property sector professionals and contractors
• Wage growth and increased household income will continue to drive demand for residential housing
• Continued stamp duty concessions, coupled with the HomeBuyer Fund funding is also likely to support the demand for residential housing. These initiatives may also mitigate any settlement risk for developer
• Ongoing Build-To-Rent concessions will continue supporting new entrants into that market
• Constraints on construction labour and materials may increase demand and investment in new property technologies aimed at delivering efficiencies in output
• There are no new taxes introduced impacting property purchasers and owners.

Did the VIC Budget measure up to expectations?

There are no new tax relief measures introduced for Victorian property purchasers, developers nor landowners. The constraints on residential and non-residential construction output, such as ongoing shortages of construction materials and labour shortages are also acknowledged but not addressed by any direct Budget initiatives.

The increases in costs of construction will be driven by projected wage growth of minimum 2.75% in the construction industry. This coupled with increase in cost of construction materials, also due to shortages, will continue to increase the price of newly constructed property.

While there are tax measures aimed at providing relief to homeowners (potentially neutralised by today’s interest rate hike) there is little relief provided in the Budget for the rest of the property sector participants such as property investors and developers.

Please reach out to one of our experts below for assistance navigating the implications and opportunities this Budget presents for you, your business and your industry.

Contacts

Daren McDonald
Director, Chair of Property &
Infrastructure Industry Group
SW

Matt Birrell
Director, Tax
SW

Sejla Kadric
Director, Private Business Client Advisory
SW

The post VIC State Budget 2022/23 – Property & infrastructure appeared first on SW Accountants & Advisors.

SW’s James Ye (叶嘉) and Robert Parker will be joining experts Mark Dawson (Urbis), Sean Ryan (Greystar) and Meg Lee and Eugene Chen (Hall & Wilcox) at the next Hall & Wilcox property sector event in Melbourne.

Global players in the market are already turning their eyes towards Victoria and investing heavily.

The panel will discuss:

• The BTR tax concession
• Learnings from approved BTR projects
• How to present a BTR project for planning approval.

Event details

The post Build-to-Rent and Windfall Gains Tax panel discussion appeared first on SW Accountants & Advisors.

Agencies will need to align with the VGPB policies by 30 June 2022. It’s imperative that agencies review their compliance immediately to address any discrepancies between their current procurement policies and the VGPB policies and procedures prior to the deadline.

Who do the VGPB policies now apply to?

The VGPB’s goods and services policies apply to:

• departments and specified entities including VGPB expansion agencies from 1 July 2021
• Victoria Public Sector Commission
• offices or bodies specified in section 16(1) of the Public Administration Act 2004, and
• Administrative Offices established in relation to a department under section 11(a) of the Public Administration Act 2004.

A full list of the departments, agencies and VGPB expansion agencies who these changes will impact is available on the Buying For Victoria website.

Key next step: Gap analysis

A gap analysis and action plan is necessary to understand and develop key processes for adoption of the VGPB requirements. The VGPB requirements are  seen as best practice procurement, not just for government agencies, but across all sectors.

Common gaps in procurement frameworks

SW has extensive experience in undertaking procurement reviews as internal auditors, probity auditors and advisors to assist clients to comply and ensure best practice. Through this work, common gaps that have been identified include:

• inadequate policies and associated procedures to support consistency and hence demonstrate compliance
• lack of checklists to facilitate compliance and monitoring
• a lack of training and awareness on the what and why of the compliance requirements, and
• tendering processes lacking adequate evidence gathering and recordkeeping to support a probity audit and/or compliance.

How SW can assist

Contact one of our experts below to discuss how the changes to the VGPB may affect your procurement requirements.

We can:

• conduct a gap analysis
• assist you to design/amend policies, procedures and templates to address the gaps
• develop and deliver the required training and awareness programs
• assist to embed the policies and procedures, and
• develop monitoring procedures (including data analytics and software based checklists).

Don’t get caught out last minute!

The post Victorian Government Purchasing Board procurement requirements appeared first on SW Accountants & Advisors.