Victorian State Budget released

The Victorian State Budget for 2016-17 was released on 27 April 2016 by the Treasurer of Victoria, Tim Pallas MP.

The Victorian Government announced that the stamp duty surcharge applying to 'foreign purchasers' of residential property in Victoria will increase from 3% to 7% for contracts entered into on or after 1 July 2016, resulting in a stamp duty rate of up to 12.5% on the dutiable value of residential property acquired by foreign purchasers. Further, the land tax surcharge will increase from 0.5% to 1.5% for taxable land owned by an 'absentee owner' in respect of the 2017 land tax year onwards, resulting in annual land tax rates of up to 3.75% on the taxable value of all taxable land in Victoria held by an absentee owner.

The Government also announced that the payroll tax-free threshold will progressively increase from $550,000 to $650,000 over the next four years in $25,000 increments, starting with an increase to $575,000 from 1 July 2016. Further, a payroll tax exemption will be introduced for the wages paid or payable by an employer to a displaced apprentice or trainee from 1 July 2016.

Property developer Metricon successful in NSW Supreme Court appeal for primary production land

On 31 March 2016, the Supreme Court of NSW ruled in favour of the taxpayer (a property developer) who claimed the primary production exemption in respect of parcels of land in NSW. The land was mostly used for cattle grazing and partially for residential rent. The taxpayer also incurred over $2.2 million in consultants, planning and development application fees during the review period. No earthworks had commenced. The Court found that the dominant ‘use’ of the property was for primary production, and that the use of the property as a ‘land bank’ for future development was not to be considered for the purposes of the exemption.

The key issue of the case involve the claim by the Chief Commissioner the ‘dominant use’ of the land was not for the maintenance of cattle when compared with other, competing uses of the lands. In summary, the Court found that the primary production use of the land was greater in scale and intensity than the rental use or any other alternate use of the land. The consulting fees were not incurred for the current use of the land and do not alter the dominant use of the land for primary production.

The Metricon decision provides some scope for questioning any denial of the primary production exemption by Chief Commissioner for land tax purposes especially in cases where there has been no change to the physical use of the land.

The Metricon case provides taxpayers, particularly property developers, with some certainty that the primary production land tax exemption may be claimed for land being held for future development. The mere expenditure of costs incurred on intangible planning work – such as property consultants, planning, environment reports and the like –in relation to the future use of the land which does not affect the current physical use of the land does not automatically mean that the primary production exemption will not apply. Therefore, taxpayers who have been denied the primary production exemptions on the basis that their land had alternative use or significant expenses have been incurred in relation to future use of the land should consider reviewing their position in light of this case.