The 2024 financial year will be one of the most significant years for tax planning that we have seen in the last 25.  Here are 3 reasons why:

1. The Proposed $3M Super Balance Tax:

• Legislation for this new tax was introduced into Parliament on November 30, 2023, with a planned commencement date of July 1, 2025. (Legislation has not yet passed and amendments are possible).
• If enacted, it will impose a 30% tax regime (an additional 15%) on the earnings (including unrealised capital gains) on the portion of a super fund member’s balance above $3 million.
• Individuals with large super balances should carefully consider their approach in light of this potential tax and seek advice well in advance. This includes considering alternative structures.

2. Land Tax Increases (Victoria):

• Land tax is calculated based on site values, which have significantly increased over recent years.
• In 2023, the Victorian Government introduced changes due to the COVID Debt Repayment Plan:
  • An additional surcharge of $975 was applied.
  • The land tax rate increased by 0.10 percentage points for land valued over $3 million.
  • Foreign owners saw an increase in the Absentee Owner Surcharge (AOS) from 2% to 4%.
• These factors likely contribute to the substantial increases in the 2024 Land Tax Assessment.

3. Proposed Change to Vacant Residential Land Tax in Victoria (VRLT):

• The VRLT targets Victorian land meeting specific criteria:
  • It must be taxable, residential, and vacant.
  • A property is considered vacant if it hasn’t been lived in for more than six months within a calendar year (non-consecutive periods count).
• Exemptions include:
  • Primary production land (PPR).
  • Holiday homes occupied by natural persons for at least four weeks.
  • Properties used for workplace/business purposes.
• Trustees of family and unit trusts are also affected by the VRLT, and SMSFs with residential property need to be aware of the impact.

In summary, these changes are significant for property owners and superannuation fund members. It will be critical review your holdings and plan accordingly. As always, seeking professional advice tailored to your individual circumstances is crucial. Some further considerations to consider are below:

1. Impact on Property Owners:

• Property owners should assess whether their properties fall under the criteria for the VRLT:
  • Is the property taxable, residential and vacant?
  • Has it been unoccupied for more than six months within a calendar year?
• Exemptions (such as primary production land, holiday homes, and properties used for workplace/business) should also be considered.

2. Trustees and SMSFs:

• Trustees of family and unit trusts, as well as SMSFs with residential property, need to evaluate the impact of the VRLT.
• The absence of a holiday home exception (for trusts and SMSFs) means they must comply with the tax requirements.

3. Professional Advice:

• Seeking advice from tax professionals and financial advisors is crucial.
• Property owners can explore strategies to minimize the impact of the VRLT while remaining compliant.

If you have specific questions or need further guidance, please feel free to reach out to your principal accountant, adviser or get in touch with our office.

Paul Tucker, Ian Bennet, Pramesh Billimoria – Principals – SCM Accounting & Advisory