In brief

The 2021/22 State Budget for Victoria, announced on 20 May 2021, makes significant increases to stamp duty, land tax and payroll tax. It also allows some concessions.

In summary:

From 1 July 2021:

  • For contracts entered into from this date, the top stamp duty rate increases from 5.5% to 6.5% for dutiable value above $2 million.
  • The threshold for off-the-plan purchases increases to $1 million for a 2 year period.
  • The payroll tax threshold will increase from $650,000 to $700,000 with further concessions for regional employers.
  • Or potentially earlier, a concession of up to 100% transfer duty for new residential property with a dutiable value of up to $1 million for a two year period.
  • Wagering and betting tax will increase from 8% to 10%.

From 1 January 2022:

  • A new "Mental Health and Wellbeing Levy" will operate as an increase in payroll tax for businesses with national payrolls above $10 million.
  • Certain private clubs will lose their current land tax exemptions.
  • Land tax rates will increase by up to 0.3%.
  • Vacant residential land tax exemption for new developments will be extended.
  • Tax free threshold for land tax will increase from $250,000 to $300,000.

From 1 July 2022:

A new tax will apply to "windfall gains" based on value uplift resulting from rezoning at the rate of 50% of the windfall.

Key Takeaways

Windfall gains tax for high-value landholdings

From 1 July 2022, a tax will apply to large windfall gains associated with planning decisions to rezone land. The total value uplift from a rezoning decision will be taxed at 50 per cent for windfalls above $500,000, with the tax phasing in from $100,000.

The tax is payable on rezonings across Victoria except on rezonings to and from the Urban Growth Zone within existing Growth and Infrastructure Contribution Areas (i.e. where the Growth Area Infrastructure Contribution or "GAIC" already applies) and rezonings to Public Land Zones.

The tax applies to rezonings between zone types (e.g. from commercial to mixed use) rather than between zone sub-categories.

Stamp duty increases

For contracts entered into from 1 July 2021, there will be a premium duty rate on land transfers for high-value properties and a new land transfer duty threshold:

Dutiable value Rate
Up to and including $2 million 5.5%
Above $2 million $110,000 plus 6.5% of the dutiable value in excess of $2 million

The maximum rate currently applying is 5.5% (other than for certain foreign purchasers). This will be the highest duty rate applying anywhere in Australia for purchasers who are not foreign. Transitional relief will be extended to options granted and agreements made before 1 July 2021.

Off the plan duty concession

For contracts entered into from 1 July 2021 to 30 June 2023, the purchase price threshold for the off-the-plan concession for land transfer duty will increase to $1 million for all home buyers. Consistent with existing eligibility requirements, the property must be the principal place of residence for at least one of the purchasers. The current threshold for the concession is $550,000 for the taxpayer's principal place of residence.

Temporary land transfer duty concession

A concession of up to 100% of the land transfer duty payable will be provided on the purchase of new residential property, in the Melbourne local government area, with a dutiable value of up to $1 million. How 'new' the property is will be relevant:

  • For new residential property that has been unsold for less than 12 months since completion, a 50% concession will be provided – this will be in place for contracts entered into from 1 July 2021 to 30 June 2022; and
  • Purchases of a new property that has been unsold for 12 months or more since completion will be exempt from duty – this will be in place for contracts entered into from 21 May 2021 to 30 June 2022 (inclusive).

The exemption/concession will apply to the duty otherwise payable (excluding any foreign purchaser additional duty).

Land tax increases

From 1 January 2022, the land tax rate for taxpayers with larger property holdings will increase:

This change will apply to both the general and trust surcharge rates.

Increase the tax-free threshold for land tax

From 1 January 2022, the tax-free threshold for general land tax rates will increase from $250,000 to $300,000. This means for land not held on trust, land tax will only be payable if the total taxable value of Victorian land is equal to or exceeds $300,000. The trust rate scale will remain unchanged.

Removal of exemptions

From 1 January 2022, private gender-exclusive clubs will no longer be eligible for the land tax exemption for societies, clubs or associations.

Vacant residential land tax exemption for new developments

From 1 January 2022, the vacant residential land tax exemption for new developments will be extended to apply for up to two years. This provides an exemption for at least two tax years following the completion of a newly constructed dwelling before the vacant residential land tax may apply.

New payroll tax levy

From 1 January 2022, a "Mental Health and Wellbeing Levy" will begin. It will be implemented as a payroll tax surcharge on wages paid in Victoria by businesses with national payrolls over $10 million a year.

A rate of 0.5% will apply for businesses with national payrolls above $10 million, and businesses with national payrolls above $100 million will pay an additional 0.5%. The surcharge rates will be paid on the Victorian share of wages above the relevant threshold.

Existing payroll tax exemptions for private schools, hospitals, charities, local councils, and wages paid for parental and volunteer leave will apply for the Levy.

Other changes from 1 July 2021:

  • Payroll tax threshold - the Government will bring forward increases in the payroll tax-free threshold, which will increase from $650,000 to $700,000.
  • Regional employers - the regional employer rate for payroll tax will reduce from 2.02 per cent to 1.2125 per cent from 1 July 2021.
  • Wagering and betting tax - this will increase from 8 per cent to 10 per cent of net wagering revenue from 1 July 2021, bringing Victoria into line with the rate that applies in New South Wales.


The 2021/22 Victorian budget proposes some of the most far reaching changes to the taxation of property seen during recent times. This includes the hikes in rates of stamp duty and land tax, as well as the introduction of the new "windfall gains tax". Such a tax has not been seen in Australia for a long time and if legislated, we expect it will have significant impact on feasibility studies for development projects and other property asset investments.

These measures are accompanied by concessions that will largely benefit smaller businesses and domestic consumers, such as the extension of the off the plan concession (for principal place of residence) and increase in the payroll tax threshold.

The direction Victoria has taken diverges radically from that foreshadowed by the NSW Treasurer's proposal to replace both stamp duty and land tax with a property tax that extends to domestic consumers and their principal place of residence. If the NSW proposal was to be a roadmap for the rest of Australia for the reform of State taxes on property, it is difficult to see this happening in a hurry, given the different direction Victoria is taking. What other States and Territories do remains to be seen.