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Victorian State Budget 2018-19

Victorian State Budget 2018-19

Victorian State Budget 2018-19

Further to last year’s “getting on with the job” theme, Treasurer Tim Pallas handed down his 2018-19 budget speech on 1 May 2018 focusing on “getting things done”.

Headline items from the Budget are:

an operating surplus of $1.4 billion in 2018-19 and surpluses averaging $2.5 billion a year over the forward estimates to 2021-22
total revenue of $69.5 billion, including total tax revenue of $24.1 billion in 2018-19
net debt of $19.6 billion in 2017-18, increasing over the forward estimates to 31.4 billion in 2021-22
3 per cent expected economic growth in 2017-18, slightly decreasing to 2.75 per cent over the forward estimates to 2021-22
retention of the triple-A fiscal rating
unemployment of 5.75 per cent

With the forthcoming State election in November 2018, the government has continued the spending spree on roads and public transport, health, education, job skills and the justice system. Overall, this spending, which is not balanced with the introduction of any new taxes or duties – indeed there is a reduction in payroll taxes for regional Victoria – will likely be well received by businesses.

However, this spending spree is heavily reliant on continuing record revenue from land transfer duty and land tax, as well as the State’s share of the GST. It also relies on revenue from the sale of Victoria’s share in Snowy Hydro Limited to the Commonwealth, proceeds of which will be used to finance regional infrastructure.

Summary

For more information on the Victorian State Budget 2018-19, please read the below summaries:

Major announcements
State tax changes

Major announcements

Specifically, the Budget delivers the following:

Roads and public transport

$4.3 billion for better roads, including
- $2.2 billion for the upgrade of 13 northern and south-eastern suburb arterial roads
- $712 million for the continued upgrade of the Monash Freeway
- $261 million for regional road upgrades
- $229 million for regional road safety upgrades
- $110 million for the design and planning of the North East Link
- $1.9 billion for continued overhaul of the public transport system, including
  - $704 million for regional public transport efficiency and reliability, such as
    - $313 million for the Shepparton line
    - $189 million for VLocity fleet stabling and train maintenance facilities
    - $130 million for rail infrastructure updates from Maryborough and Ararat to Ballarat
$572 million for the duplication of the Cranbourne line, as well as power/ signaling upgrades from the city to Cranbourne and Pakenham
$104 million for five X’trapolis trains

Health

$1.2 billion for building and expanding hospitals, including the first dedicated Heart hospital in Australia
$705 million for mental illness and addiction treatments, including
- $232 million to provide support for 12,800 additional Victorians and fund 89 acute inpatient beds
- $154 million to provide intensive service to current high-need community mental health patients
- $101 million for six new emergency department crisis hubs
- $627 million for improving regional hospitals, including
  - $462 million to redevelop Ballarat Base hospital
  - $115 million to expand Wonthaggi hospital emergency department
  - $619 million for major metro hospital upgrades and new hospital

Education

$2.8 billion investment in schools, including
- $483 million for upgrades to 130 existing schools
- $353 million for 28 new and planned school projects
- $272 million for new school site land purchases
- $180 million for building, planning and upgrading 60 regional schools
- $126 million for relocatable classroom and other school improvement programs
- $288 million to support students with disability and learning difficulties
- $109 million for student career advice

Job skills

$304 million for new TAFE and training places
$172 million for 30 free priority TAFE courses such as nursing, engineering and construction
$120 million to upgrade and modernise Bendigo, Morwell and Port of Sale TAFE facilities

Justice system

$689 million to expand Lara prison
$226 million for expanded child protection services, continuing after-hours emergency services and specialist intervention
$214 million for out-of-home care placements to manage increased demand and support carers though the Carer Kafé program
$160 million for further secure custodial beds at Malmsbury and Parkville youth justice centres
$141 million to provide therapeutic approaches for children in care with complex needs
$129 million for a new Bail and Remand Court
$119 million for more police prosecutors and to better equip the Office of Public Prosecutions

Other

$266 million to protect the environment and natural resources, including park management and improvement, as well as water projects
$231 million to redevelop popular sporting venues such as Etihad Stadium, the MCG National Sports Museum, Whitten Oval and Eureka Stadium
$116 million for self-determination and stronger communities

State tax changes

The budget delivers the following State tax changes:

1. Further payroll tax rate reduction for regional employers

The regional payroll tax rate of 3.65 per cent which was effective from 1 July 2017 will be reduced to 2.425 with effect from 1 July 2018.

This reduced payroll tax rate is available to employers that operate substantially in regional Victoria (defined as businesses with a payroll that comprises at least 85 per cent regional employees). This is equivalent to a 50 per cent reduction in the 4.85 per cent payroll tax rate that currently applies to all employers.

2. Increase to young farmer stamp duty exemption

The stamp duty exemption threshold for young farmers aged under 35 will be increased from $300,000 to $600,000 with effect from 1 July 2018.

Under this exemption, young farmers buying their first farmland will receive a full stamp duty exemption on farm purchases valued up to $600,000, with a duty reduction on a sliding scale applying to purchases valued between $600,000 and $750,000.

3. Specific first home buyer exemption rules for ADF personnel

Australian Defence Force personnel will no longer be required to reside in their home

for 12 months to obtain the first home buyer stamp duty exemption. This change will take effect from 1 July 2018.

As a reminder, other previously announced changes that will soon come into effect include:

1. Payroll tax-free threshold increase

The current threshold of $625,000 for 2016-17 will be increased to $650,000 from 1 July 2018.

2. Annual property valuations for land tax

Property valuations for land tax purposes will be undertaken annually from 2019 by the Valuer-General (instead of the biannual valuations currently undertaken by councils). If property values continue to increase, this will result in higher land tax bills for property investors – both local and foreign.