The Victorian Automotive Chamber of Commerce (VACC) says businesses have been dealt a cruel hand in the new 2023-2024 state budget, as the Victorian government focuses on the state’s mounting debt burden after $31.5 billion was borrowed for COVID-19 recovery.
The VACC says it welcomes the raising of the payroll tax threshold, which it lobbied for extensively over a long period. However, the introduction of a COVID debt levy had the potential to adversely affect many businesses that employ apprentices, including group training companies. The Chamber believes this may lead to fewer apprentices being employed, undermining many of the gains made recently across the industry.
“At a time of unprecedented skill shortages, imposing extra taxes on business is not something we want to see,” said Geoff Gwilym, CEO of the VACC.
According to the Chamber, there are also increased risks to Victoria’s economic outlook over the short to medium term that may destabilise government forecasts.
“While there are some positive elements in the budget, such as the raising of the payroll tax-free threshold to $900,000 from 1 July next year – which is good news for small business – and the gradual removal of stamp duty on commercial insurance, overall Victorian businesses have been unfairly penalised,” said Gwilym.
According to Gwilym, the COVID-19 debt levy will saddle many Victorian businesses with high costs for the next 10 years, while significant increases to land tax and WorkSafe premiums may result in decreased investment or cause many businesses to move interstate.
A summary of key measures contained in the 2023-2024 Victorian state budget include:
There are no new taxes on motor vehicles in the budget. Increased revenue from motor vehicle registration fees is based on indexation of registration fees, while revenue from the motor vehicle duty is supported by growth in new car prices.
Growth in taxation revenue will be primarily driven by growth in:
- A new COVID debt levy on payrolls above $10 million and on landholdings
- Land tax
- Land transfer duty
COVID debt levy: From 1 July 2024, the payroll tax free threshold will be lifted from $700,000 to $900,000, and will be lifted again to $1 million from July 2025. The payroll tax exemption will be removed for high-fee non-government schools.
From 1 July 2023, businesses with national payrolls above $10 million per year will pay additional payroll tax – 0.5 per cent for businesses with national payrolls above $10 million, and one per cent for businesses with national payrolls above $100 million. The additional rates will be paid on the Victorian share of wages above the relevant threshold. The levy will apply until 30 June 2033.
From 1 January 2024, the tax-free threshold for general land tax rates will decrease from $300,000 to $50,000. For general taxpayers, a temporary fixed charge of $500 will be levied on taxpayers with landholdings between $50,000 and $100,000, while a temporary fixed charge of $975 will be levied on taxpayers with landholdings between $100,000 and $300,000. For general taxpayers with property holdings above $300,000 (and trust taxpayers with property holdings above $250,000), land tax rates will temporarily increase by $975 plus 0.1 percentage point of the value of their landholdings above $300,000. All current land tax exemptions will continue to apply, including the principal place of residence exemption.
Land Tax: From 1 January 2024, the absentee owner surcharge rate will increase from two per cent to four per cent, and the tax-free threshold for non-trust absentee owners will decrease from $300,000 to $50,000.
Insurance taxes: The government will abolish business insurance duties (which apply to public and product liability, professional indemnity, employers’ liability, fire and industrial special risks, and marine and aviation insurance). Abolition will be achieved by 2033, with the rate of duty, currently 10 per cent, being reduced by one percentage point each year from 1 July 2024. The government believes a business is likely to save around $3200 on professional indemnity insurance or $2400 on fire and other special risk insurance cumulatively over that time.
Land Transfer Duty: There will be a transitioning from land transfer duty to an annual property tax for commercial and industrial properties. This has not been reflected in the budget estimates, pending consultation and design.
WorkCover Premiums: Businesses will pay an average of 1.8 per cent of remuneration under the WorkCover scheme from 1 July, up from 1.27 per cent.
Clean energy and tech: $116 million will be invested to build and operate six new tech schools across the state and establish the Clean Energy Equipment Fund.
Training: $186 million will be used to expand the eligibility criteria for free TAFE and other subsidised training courses, along with $90 million to meet the expected demand for training.
Latrobe Valley Authority: $7.2 million will be provided for the Latrobe Valley Authority’s operations, supporting the management of economic transition in the region.
Apprentices: $4 million will be utilised to develop and deliver an apprentice mental health training programme, and $1.5 million will support the establishment of an Apprenticeships Taskforce with employee, union, and industry representatives. Additionally, $10 million is being provided to expand the motor vehicle registration discount for eligible trade apprentices from 50 per cent to 100 per cent.
Victoria’s Gross State Product (GSP) is forecast to grow by 1.5 per cent in 2023-2024, down from 2.75 per cent in 2022-2023. Net debt is expected to be $116.7 billion by June 2023 and $171.4 billion by June 2027. As a proportion of GSP, net debt is projected to be 20.6 per cent by June 2023 and 24.5 per cent by June 2027.