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Revenue and savings
The Victorian Government predicts modest revenue growth of 2.2 per cent, to reach $71 billion in 2019/20.
A surplus of $1.1 billion is expected in 2019/20, with surpluses continuing over the next four years. Ongoing surpluses mean the Victorian Government can invest in the services Victoria needs.
Ongoing surpluses mean the Victorian Government can invest in the services Victoria needs.
The significant downturn in property prices and sales have hit Victoria’s budget hard. Land transfer duty (stamp duty) revenue has been downgraded by $5.2 billion (13.6 per cent) since the 2018/19 budget. The 2019/20 budget assumes land transfer duty and land tax will continue to decline, then will start to increase from 2020/21. This big hole in the budget is expected to be balanced out by increases in GST receipts, payroll tax, motor vehicle tax and insurance tax. This budget predicts a small downturn in revenue from electronic gambling machines.
The budget is estimating $822 million in fines to be dished out in 2019/20. This includes $163 million in police on-the-spot fines and $123 million in toll road fines. Both of these types of fines can have a devastating impact on the lives of Victorians who are already facing financial disadvantage.
The major risks to Victoria’s revenue in 2019/20 include the ongoing decline in the residential property market, and uncertain federal funding arrangements for the National Disability Insurance Scheme, schools, early childhood education and the National Health Agreement.
Key revenue initiatives in this budget include changes to payroll tax, foreign-owned property surcharges, motor vehicle duties and land tax. Some of these measures will not commence until 2020/21.
The Victorian Government is also planning whole-of-government efficiency measures that will save $251.3 million in 2019/20 ($1.97 billion over four years).
Payroll tax exemption for all types of parental leave
The payroll tax exemption for wages paid to employees on maternity leave will be extended to all people taking parental leave, to encourage employers to support their staff to spend more time with their children.
Cost: $1.7m in 2019/20 ($7.2m/4 years)
Removal of land tax exemption for contiguous land in metropolitan areas
From 2020, land adjoining to someone’s principal place of residence, but on separate title and without a separate residence, will no longer be exempt from land tax. This will discourage land banking, which can stifle the timely development of affordable housing in outer-Melbourne.
Revenue: $10.9m in 2019/20 ($43.6m/4 years)
Harmonisation of foreigner property surcharges
The Victorian Government will increase the absentee landowner surcharge on land tax from 1.5 per cent to 2 per cent, and increase the land transfer duty surcharge from 7 per cent to 8 per cent for foreign property owners. This will align Victoria with the equivalent measures in NSW.
Revenue: $68.9m in 2019/20 ($328m/4 years)
Further reduction to regional payroll tax
The regional payroll tax rate will be reduced to 1.2125 per cent, or 25 per cent of the metropolitan payroll tax rate, phased in from 2020-21 to 2022-23.
Cost: $0m in 2019/20 ($173.2m/3 years)
Increase the payroll tax free threshold
From 2020/21, the current payroll tax-free threshold of $650,000 will gradually increase to $700,000 by 2022-23. This will reduce the number of Victorian businesses paying payroll tax by 700 in both 2021-22 and 2022-23.
Cost: $0m in 2019/20 ($86.7m/2 years)
Motor vehicle duty: Luxury vehicles
The Government will make changes to luxury vehicle tax, including an increased rate for used luxury vehicles and a decreased rate for green cars and primary producers’ cars, resulting in an overall net increase in revenue.
Revenue: $57.6m in 2019/20 ($246.2m/4 years)
The Victorian Government is projecting significant budget savings through whole-of-government efficiencies.
Savings: $251.3m in 2019/20 ($1.97b/4 years)
Review state taxation to reduce volatility and increase fairness
In particular, a broad-based, progressive land tax would protect Victoria’s revenue from deep downturns in the residential property market.
Continued support for Victoria’s community sector
Whole-of-government efficiency measures should not affect the Government’s funding of the important frontline services delivered every day by the community sector across Victoria.