Victorian State Budget summary 2024-25
No new taxes - interest costs soar
- The payroll tax-free threshold will rise from 1 July 2024
- Duty on business insurance to be phased out
- Funding for Victorian start-ups through LaunchVic
- Breakthrough Victoria venture capital fund will receive less money
On the revenue side, from 1 July 2025, Victoria's waste levy will increase to $170 per tonne from $129 and the fire levy will also increase by an estimated average of $35. There were no announcements of new or increased taxes for small businesses, new significant revenue sources or asset sales.
The Budget announced additional extra funding for students totalling $287 million and for affordable housing totalling $807 million amid a stream of new spending measures.
To keep the debt increase to $19.3 billion, the Budget relies on delays in the further billions to be spent on the Melbourne Airport rail link and on various hospital, school, child care and mental health centre infrastructure projects.
Treasurer Tim Pallas has forecast an operating surplus of $1.5 billion by 2025-26. That turnaround is dependent on significant interest rate cuts. The Budget is reliant on the consequential reduction in Victorian debt interest as well as an upturn in the Victorian residential property market with the ensuing significant rise in transfer duty revenue.
There are two incentives to business. Firstly, duty on business insurance premiums will be phased out over 10 years. Secondly, the payroll tax-free threshold will rise from $700,000 to $900,000 on 1 July 2024 and to $1 million on 1 July 2025. Metropolitan based small business employers who are currently paying payroll tax may save up to $14,550 per annum after the second rise. In historical terms, that is quite generous. However, most small businesses registered for payroll tax will have experienced increases in labour costs in excess of those savings within the past 2 years.
The Budget includes a payroll tax sting. It foreshadows the phasing out of the payroll tax free threshold for larger businesses. Currently, the threshold saves a maximum of $33,950 per annum. It can be expected that the larger businesses affected will be those currently paying the Mental Health Levy and COVID-19 surcharge. At the time of publication, the Bill for these changes has not been made public hence the detail of these measures remains unknown.
For business incentives, the Budget provides $40 million for LaunchVic to continue fostering the capabilities and confidence of future innovators, creators and entrepreneurs. However, Breakthrough Victoria’s work in commercialising research will lose $90 million of funding per year.
The Victorian 2024-25 Budget is dependent on interest rate cuts arriving shortly. This seems problematic at a time when even the US Federal Reserve is admitting that inflation is barely falling and rate cuts in USA are looking further away.
In his previous 2023-24 Budget, the Victorian Treasurer announced significant long term revenue increases by way of permanent and also temporary taxes. Except for large employers, the 2024-25 Victorian Budget has no tax increases. That is good news but the substantial growth in Victoria’s debt is concerning.
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Author: Stephen Baxter
Published: 9/05/2024
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