- Victorian State Budget 2017-18
Boasting that Victoria is Australia’s fastest growing State and continuing the “getting on with the job” theme of last year’s budget, Treasurer Tim Pallas handed down his budget speech on 2 May 2017.
Headline items from the Budget are:
- an operating surplus of $1.2 billion in 2017-18 and surpluses averaging $2.4 billion a year over the forward estimates to 2020-21
- retention of the triple-A fiscal rating
- continued infrastructure spending of $9.6 billion a year over four years, creating over 50,000 jobs
- $4 billion investment in regional Victoria
- $2.9 billion for world-class health care
With the next State election due in 2018, the government added to the unprecedented spending announced in 2016-17, by announcing substantial additional spending on the health system, infrastructure, education, social responsibility, the regions and the justice system. Overall, the spending in these key areas is likely to be well received by business.
However, the government has also announced substantial changes to State taxes, many of which will have a negative impact on property investors. Unlike the 2016-17 State taxes changes which focused on increasing the duty surcharge payable by foreign investors and the land tax surcharge levied on absentee (foreign) owners, many of the changes announced by the government also affect local property investors.
Specifically, the Budget delivers the following:
- $1.3 billion to meet hospital demand for an additional 41,000 admissions and 38,000 emergency treatments in 2017-18
- $498 million for new and upgraded health facilities, infrastructure and vital health equipment
- $406.7 million to meet mental health services needs
- $319.9 million to reduce waiting times for elective surgery, delivering 6,600 new elective surgery procedures in 2017-18 and reducing the waitlist
- $215 million to implement the Government’s Better, Safer Care
- $162.7 million to upgrade and expand inpatient infrastructure at the Northern Hospital
- $700 million for the final upgrade to the M80 Ring Road, to complement the North East Link
- $435 million for the Gippsland Rail Upgrade
- $343 million in road maintenance funding to help fix Victorian roads
- $300 million to build the Mordialloc Bypass, connecting the Mornington Peninsula Freeway to the Dingley Bypass
- $271.6 million for the third stage of redeveloping Melbourne Park to secure the Australian Open until 2036
- $218.1 million to order 10 more Victorian-built E-Class trams and provide new infrastructure to support Melbourne’s modern tram network
- $187.4 million to build new train stables on the Frankston Line at Kananook
- $100 million to complete planning and pre-construction for the North East Link
- $1.3 billion for the education system, including
- $685 million for nine new schools and school upgrades, such as
- $269.6 million to construct, plan and buy land for new schools (including in growth areas)
- $239.6 million to upgrade schools across Victoria
- $685 million for nine new schools and school upgrades, such as
- A $2 billion boost to Victoria Police for 2,700 additional police officers and 10 upgraded police stations
- A further $1.9 billion to deliver on promises to reduce family violence by implementing every recommendation from the Royal Commission into Family Violence, including
- $448.1 million to establish 17 Support and Safety Hubs
- $270.8 million for victim assistance, after-hours crisis support, counselling and therapy
- $269.4 million to enhance the response of Victoria's legal system to family violence
- $133.2 million for housing, including family violence refuges, rental properties and public housing
- $131.9 million for expanded child protection services and placements
- A further $166.2 million in disability-related initiatives to prepare Victoria for the NDIS
- A $162.5 million investment to modernise the Environment Protection Authority
- $100.6 million for Aboriginal affairs
- $4 billion investment in regional Victoria to grow jobs and local economies
- $1.5 billion in projects to address the reliability of the regional rail network, including $435 million in 2017-18
- $556.4 million to improve roads in regional Victoria
- $316.4 million for major maintenance works to boost regional on-time train performance and reliability
- $311.1 million for 39 new VLocity carriages to be constructed in Dandenong to meet demand in regional Victoria
- $110 million to establish a timber plantation in the Latrobe Valley
- $360.7 million to strengthen youth justice facilities in Parkville and Malmsbury, and to build a new fit-for-purpose high security detention centre
- $308.1 million to increase security around high-risk offenders, including detention and supervision schemes, and targeted intervention for serious offenders in custody
- $145.2 million to fund the expanded prison system, ensure prisoner, staff and community safety, as well as reducing the likelihood of reoffending
- $122.9 million to improve public safety and care for offenders with mental illness
- $273.3 million to reduce the impact of bushfires on Victorian communities
State taxes changes
The budget delivers the following State taxes changes:
- Payroll tax-free threshold increase
Bringing forward of the previously announced increases to the payroll tax-free threshold from the current threshold of $575 000 for 2016-17 to $650 000 by 1 July 2018.
- Payroll tax rate reduction for regional employers
The introduction of a lower payroll tax rate of 3.65 per cent from 1 July 2017 for 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 25 per cent reduction in the 4.85 per cent payroll tax rate that currently applies to all employers.
- 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.
- Abolition of stamp duty exemption for transfers between spouses and de facto partners
The exemption for property transfers between spouses and de facto partners will be abolished from 1 July 2017. However, the exemptions for the principal place of residence and transfers following a relationship breakdown will remain in place.
- Rebalancing of the off the plan stamp duty concession
The off the plan concession applies to deduct from the contract price the cost of any construction or refurbishment that occurs on or after the date any contract is entered into.
For contracts entered into from 1 July 2017, the off the plan concession will only be available to buyers who will occupy the property as their principal place of residence. As a result, the off the plan concession will only be relevant for determining the dutiable value of a property for the purposes of the primary place of residence concession, the new first home buyer duty exemption and the new first home buyer duty phase-in concession.
- Abolition of stamp duty for first home buyers
First home buyers that enter into a contract on or after 1 July 2017 to purchase a new or existing home with a dutiable value of up to $600,000 will be entitled to a full exemption from stamp duty.
Further, duty will be phased in for purchases of homes with a value of $600,001 - $750,000.
- Doubling of the first home owner grant for regional Victoria
The regional first home owner grant will be increased from $10,000 to $20,000 in respect of contracts entered into from 1 July 2017 to 30 June 2020 for the purchase of new homes in regional Victoria with a value of up to $750,000.
First home buyers in metropolitan Melbourne will continue to be eligible for a $10,000 grant.
- Introduction of vacant residential property tax
A vacant residential property tax of 1% will be incorporated into the land tax law and will apply from 1 January 2018 on the capital improved value of residential properties located in inner and middle areas of Melbourne. The aim of this new tax is to ensure that property owners do not withdraw the supply of properties that are able to be occupied from the market. Importantly, the vacant residential property tax will only apply in respect of properties that are unoccupied for more than six months in a given calendar year.
The local council areas where this new tax will apply include Banyule, Bayside, Boroondara, Darebin, Glen Eira, Hobsons Bay, Manningham, Maribyrnong, Melbourne, Monash, Moonee Valley, Moreland, Port Phillip, Stonnington, Whitehorse and Yarra.
Exemptions will be available, for example, for properties used as holiday homes by those with a separate principal place of residence, those who need a city unit for work purposes, deceased estates, as well as homes owned by Victorians who are temporarily overseas.
- Increase in new vehicle duty rate
The rate of duty for new passenger vehicle purchases will increase with effect from 1 July 2017 from $6.40 per $200 or part thereof (3.2 per cent) to $8.40 per $200 or part thereof (4.2 per cent), on the dutiable value of vehicles that do not exceed the luxury car threshold.
- Insurance taxes changes
Insurance duty applicable to policies insuring agricultural products against damage from floods, fire and other accidental provisions will be abolished from 1 July 2017. Insurance duty on general insurance premiums will continue to apply at the rate of 10%.