NOT YET LEGISLATED
It is important to note that any announcements made by the Government are not guaranteed to become Law. These announcements need to pass Parliament first, and it’s possible that the Government may need to alter their announced changes in order for them to get through Parliament.
Do not make firm decisions until these have passed Parliament and have become Law.
BUDGET POSITION
As anticipated, the Victorian budget contains tax increases, cuts, and job losses. None of this is surprising given the anticipated debt was forecast to rise to $200bn, but it’s a sobering reminder that there are some tough times ahead.
The Victorian Government is forecasting a budget surplus in 2026, and there will be a $12bn investment in the health system as the Premier tries to keep his election promise that you don’t have to choose between health and infrastructure.
Funds from the privatisation of VicRoads will be quarantined in a “future fund” and used to repay debt, money has been set aside to cover infrastructure cost blowouts, new schools will be built, the Commonwealth Games will have more funding, and low-interest loans will be provided for community housing.
The pre-budget warnings of up to 20,000 job losses appear to have been over-exaggerated, with around 4,000 jobs set to be lost in the near future.
THE NITTY-GRITTY
Click on the below headings to expand each one and read more detail.
A new land tax surcharge will be added from 1 January 2024, with the following rates applying:
- $50,000 to $100,000: Flat $500 land tax
- $100,000 to $300,000: Flat $975 land tax
- Above $300,000: $975 plus 0.1% of value
We note that for property held by a trust, the $300,000 threshold is replaced with a $250,000 threshold.
The same general rules apply – your principal place of residence is exempt, primary production land is exempt, the vacant residential land tax still applies, and the “site value” (unimproved value) of the land is taxed.
Absentee owners of property will see their surcharge double from 2% to 4%. The threshold will also reduce from $300,000 to $50,000.
Generally, the absentee owners tax only applies to foreign investors, We note this is different to the vacant residential land tax (which applies to homes in inner and middle Melbourne that are vacant for 6 or more months of a calendar year, at a rate of 1% of the capital improved value of the property). The vacant residential land tax is unchanged in this budget.
A welcome boon for smaller businesses is that the payroll tax threshold will increase from the current $700,00 to $900,000 from 1 July 2024, and then again to $1mil from 1 July 2025.
However, the above tax-free threshold will be phased out for businesses with payroll above $3mil, and totally removed for payroll above $5mil – so essentially any business with payroll below $3mil is a winner, and above $3mil is loser in this scenario.
Businesses with a payroll above $10mil will be hit with an additional payroll tax surcharge of 0.5% of payroll (minimum $50,000 per year). Above $100mil, the surcharge is 1% (minimum $1mil per year).
This is in addition to the normal rates and the mental health surcharge introduced a year to two ago.
An exemption from payroll tax given to private schools will be removed for around 110 of the highest fee-charging schools.
For commercial and industrial property only, from 1 July 2024 stamp duty will be replaced with a new annual property tax of 1% of the land’s unimproved value.
This tax will apply for 10 years which results in an effective tax rate of 10% vs the existing stamp duty rate of approx 6.5%. It’s a win in the sense that there are less up-front costs to buying a commercial or industrial property, but the Government has effectively increased the tax rate by 3.5% in the process (noting that our stamp duty rate of 6.5% was already the highest in the country).
More details will be forthcoming from the Government at the end of 2023.
The stamp duty thresholds for first home buyers, pensioners, and concession card holders will all be alligned at $600,000 (and $750,000 as the upper limit for the phase-out).
Currently the Government charges 10% stamp duty on business insurances. This will be phased out over 10 years, beginning 1 July 2024.
Workcover premiums are set to increase by around 50% next year, in a big hit to businesses of all sizes.
