The 2017-18 Victorian Budget highlights strong revenue growth in payroll tax, land transfer duty (stamp duty) and the Goods and Services Tax (GST). The strong revenue growth is projected to continue over four years and exceed expenditure growth yielding surpluses over the next four budgets.
The strong growth in revenue has allowed the Victorian government to cut payroll tax and stamp duty for first home buyers and still see increases in revenue from these sources.
However, reliance on stamp duty for revenue growth depends on the continuation of a strong property market. Any significant downturn in the property market would substantially reduce receipts from stamp duty. This could result in budgets going into deficit.
The projected growth in GST revenue may be affected by the review of the distribution of GST recently announced by the Federal Treasurer.
Payroll tax cuts brought forward
The budget announced that the threshold for payroll tax will increase to $625,000 in 2017-18, from $575,000 in 2016-17. This was scheduled to occur in 2018-19 and will reduce revenue from payroll tax.
Cost: $24m in 2017-18 and $24m in 2018-19
Regional payroll tax cuts
The budget announced a cut in the payroll tax rate for regional businesses to 3.65%. This applies to business with 85 per cent of their workers (based on payroll) employed in regional Victoria.
Cost: $41 m in 2017-18 ($173m over four years)
Stamp duty cuts for first home buyers
Stamp duty for first home buyers will be lowered, including no stamp duty for houses under $600,000 and a concession rate for houses between $600,000 and $750,000.
Cost: $151m in 2017-18 ($851m over four years)
Vacant property tax
The Victorian Government will introduce a vacant residential property tax of 1.0%.
Revenue: $10m in 2017-18 ($80m over four years)
Retarget the off-the-plan stamp duty concession
This concession reduces stamp duty for people who buy property off the plan. The retargeting will restrict the concession to those purchasing their principal place of residence.
Revenue: $$51m in 2017-18 ($841 over four years)
Future policy directions
Review state taxation to reduce volatility and increase fairness
The government should review the state taxation system to make is more sustainable, efficient, equitable and simple.