Around 860,000 Victorians will have to bear the burden of a COVID-19 tax, with some individuals paying up to $1,300, as Victoria’s Premier, Dan Andrews, grapples with a dire financial situation resulting from the strictest lockdown measures in the world. The state budget, announced by Treasurer Tim Pallas, outlines a 10-year debt repayment plan amounting to $31.5 billion, with large businesses, landlords, and private school students shouldering the majority of the debt.
A key component of the repayment plan is an $8.6 billion levy, targeting the top five percent of businesses with national payrolls exceeding $10 million. Notably, hospitals and charities will be exempt from this levy. Additionally, the tax-free threshold for general land tax in Victoria will be lowered, and a fixed charge will be imposed on those who own multiple properties.
Around 860,000 landlords, including individuals who own holiday homes and commercial properties, will be affected by these measures. For example, an average landlord with $650,000 worth of land holdings can expect to pay approximately $1,300 per year as part of the levy. This levy is projected to generate a collective sum of $8.6 billion over the next decade.
Importantly, these measures will not impact family homes. The government aims to restore Victoria’s public service to pre-pandemic levels and grow the previously announced $10 billion Future Fund, which will be legally bound to only be used for debt reduction.
While these debt-busting measures are described as temporary and targeted, the budget forecasts a $1 billion surplus within two years, surpassing the initial prediction made before the state election. However, it also anticipates a rise in net debt, reaching $135.4 billion by the end of the next financial year and peaking at $171.4 billion by mid-2027.
To address the housing market, stamp duty will be eliminated for commercial and industrial properties from mid-2024 and replaced with an annual property tax equal to one percent of the property’s unimproved land value. This transition will occur when these properties are sold, and the annual property tax will be payable ten years after the transaction.
Other measures introduced in the budget include the gradual elimination of business insurance duty, an increase in the payroll tax-free threshold from $700,000 to $900,000, and the removal of the payroll tax exemption for high-fee private schools. These initiatives aim to generate additional revenue for the government.
Furthermore, the absentee owner surcharge rate will double from two percent to four percent, and the wagering and betting tax rate will increase from ten percent to fifteen percent from mid-2024. These changes anticipate a substantial boost to revenue in the racing industry.
The 2023/24 budget prioritizes key sectors such as health, education, transport, emergency services, and justice. Investments include funds for hospital infrastructure, construction of new residential facilities, PET scanners, women’s health clinics, and upgrading schools across the state. Additionally, initiatives to address gambling harm, improve ambulance capacity, and support Aboriginal Victorians and justice reform are also included.
Despite the challenges posed by the pandemic, the Victorian government is committed to ensuring that future generations are not burdened by COVID-19 debt. The budget forecasts a rise in tax revenue and significant investments in infrastructure, ultimately working towards a surplus and reducing the state’s debt.
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