Thousands of large businesses and landlords will foot most of Victoria’s COVID-19 debt bill under a $31.5 billion state budget repayment plan.
The 2023/24 Victorian budget, handed down by Treasurer Tim Pallas on Tuesday, detailed a 10-year COVID debt levy as part of a three-pronged strategy.
The $8.6 billion levy will firstly target the top 5 per cent of businesses with national payrolls above $10 million but include exemptions for hospitals and charities.
Victoria’s tax-free threshold for general land tax will be lowered and a fixed charge added for those who own multiple properties under the second part of the levy.
Mr Pallas said about 860,000 Victorian landlords, people with holiday homes and commercial property owners will be affected.
An average landlord with $650,000 of land holdings would pay $1300 a year as part of the levy, which is expected to collectively raise $8.6 billion over the forward estimates.
“It’s fair that Victorians with multiple properties make a modest contribution to repaying COVID debt,” Mr Pallas said.
Family homes won’t be affected by the changes.
Other elements of the strategy are returning the size of Victoria’s public service back to pre-pandemic levels and growing the previously announced $10 billion Future Fund, including legislating it to ensure it can only be used for debt reduction.
About 3000 to 4000 public sector workers are expected to be affected by the cuts but frontline workers will be spared.
The public service staff bill is projected to rise from $35.3 billion next financial year to $38.3 billion for the 2026/27 financial year due to increasing wage costs.
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Victoria spent $10.7 billion on health and $11 billion on business support through the pandemic. Mr Pallas said the consequent debt-busting measures were temporary and targeted.
“This has been the most difficult budget that I’ve had to frame,” he said.
“This is the start of a new era, the post-COVID era for the state and its finances.
“We’re ensuring that 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.”
However, the state opposition was quick to criticised Tuesday’s budget.
“The Andrews Labor government’s budget of rising debt, higher taxes and fewer jobs will make life even harder for every single Victorian,” Opposition Leader John Pesutto tweeted.
Shadow treasurer Brad Rowswell said instead of cutting vital programs, “which will only hurt some of Victoria’s most vulnerable”, the government should cut waste and its “addiction to taxes”.
“Labor say time and time again they’re about fairness,” he tweeted.
“But how is it fair that Victorians are paying more tax per person than other any state but they are getting less for it?
“Victorians don’t like being ripped off.”
The Business Council of Australia was also critical.
“Victoria’s budget will make it even harder for Victorians to get ahead as businesses are penalised with higher taxes just when they are needed to do the hard work of economic growth,” chief executive Jennifer Westacott said.
“It is very disappointing that the companies that did the heavy lifting during COVID by keeping supplies coming into households and keeping people employed are now being penalised.
“Victoria is already the highest taxing state in the country and the new COVID debt levy announced today means it will be even harder to invest in the state, let alone create new jobs or grow the economy.”
The 2023/24 budget forecasts Victoria will post a $1 billion surplus in two years – $100 million more than predicted before the November state election – and another of $1.2 billion for 2026/27.
Net debt is expected to hit $135.4 billion at the end of the next financial year before rising to $171.4 billion by mid-2027, equating to 24.5 per cent of gross state product.
Stamp duty will be scrapped for commercial and industrial properties from mid-2024 and be replaced with an annual property tax of 1 per cent of the property’s unimproved land value.
Annual interest repayments are tipped to grow to nearly $8 billion over the forward estimates and tax revenue is projected to rise more than 20 per cent to 40.4 billion.
Commercial and industrial properties will transition to the new system once sold and the property tax will be paid yearly from 10 years after the transaction.
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 high-fee private schools are among other new measures.
The latter will mean about 110 schools lose their tax-free exemption.
As well, the absentee owner surcharge rate will rise from 2 per cent to 4 per cent and Victoria’s wagering and betting tax rate will increase from 10 per cent to 15 per cent from mid-2024, almost doubling revenue for the state’s racing industry.
-with AAP
