Earlier today, the Andrews Government handed down its fifth State Budget. Here are the highlights.
The following is a short overview of the key metrics provided in the budget that provide a view of the current and projected health of the Victorian economy, as well as some of the ongoing key areas of investment by the Andrews Government in the next appropriations period and beyond.
This article also provides a summary of the tax changes that will ultimately impact business and investors more generally.
Victoria’s economy, and some key investment priorities (Source: Budget Paper No. 2)
- The Victorian economy is strong, generating new jobs and improving living standards.
- Real gross state product (GSP) increased by 3.5 per cent in 2017 18, the highest of the states and above national real gross domestic product (GDP) growth of 2.8 per cent.
- The Victorian economy grew by almost A$55 billion, or 14.8 per cent, in real terms in the four years to 2017-18.
- Robust economic activity has increased living standards, with real GSP per capita increasing by 4.8 per cent since 2013 14.
- The 2019-20 Budget continues its investment in infrastructure, supporting and growing our economy by delivering new and upgraded roads, removing level crossings and overhauling the public transport network.
- Investing in education, with universal three-year-old kindergarten to expanded free Technical and Further Education (TAFE).
- Further investment in healthcare facilities and services including building new hospitals, recruiting more paramedics, and starting the work to provide all Victorian Government school students with free dental care.
Victorian economic forecasts (Source: Budget Overview)
Victoria’s Gross State Product is forecast to remain steady at 2.75 per cent through to 2022-23 with the unemployment rate forecast to fall to 4.75 per cent in 2019-20, then rising to 5.50 per cent by 2022-23. Population growth is expected to slow from 2.0 per cent in 2019-20 to 1.8 per cent in 2022-23.
Net debt is estimated to grow from A$39 billion in 2019-20 to A$54.9 billion by 2022-23, equating to a net debt-to-GSP ratio increase from 8.3 per cent to 10 per cent.
Business, investment and tax changes (Source: Budget Paper No. 3)
In a move that will ultimately be welcomed by businesses across the State, the government proposes to cut payroll taxes yet again, but not immediately.
- The payroll tax-free threshold will to be increased by A$50,000 to A$700,000 by 2022-23.
- The regional payroll tax rate will also be cut to 25 per cent of the metropolitan rate by 2022-23 – this reduction will be phased in over three years.
Given the recent softening of the property market, the budget also writes down stamp duty revenues by A$5.2 billion over 2018-2019 and 2019-2020. It explains that due to this loss of revenue - and to make the system fairer - it will initiate a number of other tax changes, as follows:
- The foreign purchaser duty surcharge on properties bought in Victoria will be increased from 7 to 8 per cent from 1 July 2019
- The absentee owner surcharge for foreign property owners will be increased from 1.5 to 2 per cent from 1 January 2020.
These changes are expected to impact about 3000 property owners, generate A$330 million in revenue over the next four years, and also and bring Victoria into line with the rates in place in New South Wales.
Other tax changes of note include:
For more information
- A 50 per cent discount on land transfer duty of commercial and industrial properties in regional Victoria, but not until by 2023-24.
- Changes to land tax to discourage land banking by changing the law that currently exempts vacant land attached to a principal place of residence from land tax. Where the land is genuinely part of an owner’s main residence, titles can be consolidated and therefore won’t be affected.
- From 1 January 2020 the Government will also introduce a 2.75 per cent gold royalty, which brings Victoria into line with other states. This measure is expected to generate A$56 million, and smaller miners will be exempt.
- Duty on luxury passenger vehicles worth more than A$100,000 will be introduced from 1 July 2019. It will align the rates for all new and used luxury passenger vehicles. A lower rate will apply to low-emission vehicles, and primary producer passenger vehicles.
- From 1 July 2019 corporate restructure rules will be made more flexible - but at a cost - as the government is replacing the one-off corporate restructure exemption with a 10 per cent duty payable each time.
- From 1 July 2019, a licensed motor car trader (LMCT) will also be entitled to an exemption on service demonstrator vehicles.
- To provide support to regional businesses and encourage businesses to locate in regional areas, a land transfer duty concession will be provided to commercial and industrial property transactions in regional Victoria. A 10 per cent concession will be provided for contracts signed from 1 July 2019, increasing by 10 percentage points each year to provide a full 50 per cent discount from 1 July 2023.
- From 1 July 2019, the payroll tax exemption for wages paid to employees on maternity leave will be extended to all types of parental leave and apply to up to 14 weeks of wages paid to employees taking parental leave.
: 2019-20 State Budget