Businesses, landlords slugged to claw back Vic debt
New taxes on Victorian housing investors and businesses could be passed on to struggling families and renters, despite the government insisting it is targeting the big end of town to pay back debt.
The 2023/24 Victorian budget, handed down by Treasurer Tim Pallas on Tuesday, detailed a 10-year, two-part levy to repay $31.5b in COVID-19 debt.
From July, businesses with national payrolls above $10 million - or five per cent of the state's employers - will pay a 0.5 per cent payroll tax.
Businesses with a national payroll above $100m will pay one per cent in additional tax, with the move expected to raise $3.9b over the forward estimates.
Property investors will also be slugged extra land tax charges from the start of next year, including a $975 fee on landholdings worth more than $300,000 and an extra 0.1 per cent for every dollar above that.
Those with landholdings worth $50,000 to $100,000 will be charged $500 each year. Those who just own a family home are exempt.
Mr Pallas said about 860,000 Victorian property investors, holiday-home owners and commercial property landlords would affected, with 380,000 of those having not previously paid land tax.
They will on average pay $1300 a year in extra tax.
Mr Pallas described the debt-busting measures as temporary and targeted.
"While our kids will of course have memories of the trauma that was the COVID years, they won't have to necessarily be paying for that trauma for the rest of their lives and for future generations," he said.
Accountancy, developer, community housing, retail and business groups have all warned the additional taxes could be passed on to consumers and renters, as well as lead to job losses.
"Make no mistake, renters will end up footing the bill," said Elinor Kasapidis of peak accounting body CPA Australia.
Mr Pallas disputed the land tax charges would flow through to renters, pointing to land values increasing by 84 per cent in the past decade and rents by 25 per cent over five years.
Other elements of his debt repayment plan are cutting Victoria's public service back to pre-pandemic levels and growing the previously announced $10b future fund, including legislating it to ensure it can only be used for debt reduction.
Up to 4000 workers are expected to lose their jobs as the government eyes $2.1b in savings through fewer corporate and back-office staff and scaling back spending on labour hire and consultancy firms.
Nonetheless, the public service staff bill is still projected to rise from $35.3b next financial year to $38.3b for the 2026/27 financial year due to increasing wage costs.
The 2023/24 budget forecasts Victoria will post a $1b surplus in two years - $100m more than predicted before the November state election - and another of $1.2b for 2026/27.
Net debt is expected to hit $135.4b at the end of the next financial year before rising to $171.4b by mid-2027, equating to 24.5 per cent of gross state product.
In further changes, stamp duty will be scrapped for commercial and industrial properties from mid-2024 to be replaced with an annual property tax once sold.
Reducing and eventually abolishing business insurance duty, increasing the payroll tax-free threshold from $700,000 to $900,000, and removing the payroll tax exemption for about 110 high-fee private schools are among other new revenue measures.
Another $1.6b is forecast to be recouped by increasing the absentee owner surcharge rate from two to four per cent and Victoria's wagering and betting tax rate from 10 to 15 per cent from mid-2024.
The future of major infrastructure projects such as Melbourne Airport Rail and Geelong Fast Rail remain uncertain, with no listed completion dates amid a federal infrastructure review.