The Andrew’s Government announced a $10.3b deficit this financial year, with 2023-24 forecasted to decrease to $4b and return to an operating surplus of $1b in 2025-26 and $1.2b in 2026-27.
However, Victoria’s net debt will rise from $135.4b in 2023-24 to $171.4b by 2027, while net operating cash flow is forecasted to experience a slight surplus by $0.8b in 2023-24, increasing to $6.5b in 2026-27.
Key to Pallas’ debt repayment measure is the 10-year COVID Debt Repayment Plan, hitting business with payrolls above $10m a year with an $8.6b debt levy, and landowners and property investors will see higher land taxes, saving the Government $4.7b. Infrastructure projects will also be on hold in the short term to help pay off COVID-related debt.
- $4.9b for Victoria’s healthcare system, including $201m for initiatives for healthcare workers and $162m for regional aged care.
- $2.1b to build and maintain schools.
- $1b to fund the reinstatement of Victoria’s State Electricity Commission.
- $900m for medical research.
- $618m to build nine new local schools.
- Additional $400m for the Power Saving Bonus
- $320m to establish a Hospital Infrastructure Delivery Fund.
- $186m to expand the eligibility criteria for subsidised TAFE training courses.
- $170m for a Building Better TAFE Fund.
- $21m to establish a Manufacturing and Industry Sovereignty Fund to help businesses access the Federal Government’s $15b National Reconstruction Fund.
- $15m Industry R&D Infrastructure Fund.
Revenue and State Tax measures
The State Budget has announced a number of significant changes to stamp duty, payroll tax, land tax and insurance duty.
Stamp Duty: transfer duty for commercial and industrial properties to be abolished
The headlining revenue measure is the Government’s announcement to abolish stamp duty for commercial and industrial properties.
From 1 July 2024, commercial and industrial properties will transition to a new annual property tax system (levied at 1 per cent of the unimproved value) as they are sold. The transition away from stamp duty for commercial and industrial properties will occur after the first sale, with the annual property tax applying 10 years after sale. The Government will consult with businesses and industry in the coming months, with legislation expected to be released by the end of the year.
More information on this announcement is available in our in-depth summary here.
Land Tax and Payroll Tax: property owners and large employers the biggest losers
Property owners and larger employers will be funding a significant part of the COVID Debt Recovery Plan.
The Andrews Government will seek to impose a ‘temporary and targeted’ levy as part of its COVID Debt Repayment Plan. The levy will apply for a period of 10 years, until 30 June 2033, and has two components, land tax and payroll tax.
In some positive news to employers, the Government has also announced an increase to the tax-free threshold for payroll tax from 1 July 2024, with a further increase to $1 million from 1 July 2025. However, a ‘phase out’ of the tax-free threshold will also come into effect resulting in the tax-free amount reducing between 3 million and 5 million, with no threshold for wages over 5 million.
Other Revenue measures
A range of other Revenue measures have been announced, including:
- The progressive abolition of business insurance duty, with the rate of duty, currently 10 per cent, being reduced by 1 percentage point each year from 1 July 2024. General insurance (such as insurance for cars and property) does not appear to be impacted.
- A doubling of the absentee owner land tax surcharge (“foreign land tax surcharge”) from 2 per cent to 4 per cent from 1 January 2024 which currently has the ability to apply to all land in Victoria (including residential, industrial and commercial).
- Payroll tax exemptions for certain ‘high-fee non-government schools’ will be removed from 1 July 2024.
More detail regarding the above tax announcements are available in our in-depth summary here.
Victoria to abolish stamp duty on commercial and industrial properties
Grant Thornton will be following the announcements released as part of the State Budget closely over the coming weeks and months. Please contact a member of the Grant Thornton team if you have any queries or would like to discuss.