No Payroll Tax Relief for 2022-2023: Victorian Government

Victorian Treasurer Tim Pallas speaks to the media during a press conference in Melbourne, Australia, on May 30, 2021. (Daniel Pockett/Getty Images)

The Victoria’s state government will not provide payroll tax relief for businesses in the next financial year as it prioritises health spending and a budget surplus.

The latest state budget released on May 3 predicted that land and payroll tax revenue for the state would rise by $4.8 billion (US$3.48 billion) and $6.8 billion, respectively, in the 2022-2023 financial year.

During a post-budget Victorian Chamber of Commerce and Industry lunch on May 4, Victorian Treasurer Tim Pallas rejected the idea of relieving the state’s businesses of paying rising payroll taxes after two years of devastating lockdowns.

“No, not in this budget,” he said.

“You might have noticed I’m running a $17 billion deficit, and as a consequence, we’ve got to make choices to get this repair underway. Now’s not a time for it.”

The state forecasted that it would gradually decrease deficits in the next few years and eventually hit a modest surplus of $650 million by 2025-2026.

At the same time, the Victorian government predicted the state’s net debt to leap to $167.5 billion or 26.5 percent of gross state product by mid-2026, after accounting for the $44 billion spending on health and business support during the pandemic.

To reduce the amount of public borrowing, the state government is establishing a future fund with funding coming from partially commercialising VicRoads’ registration, licensing and custom plate services.

The treasurer acknowledged that some people might not like parts of the budget, but he said at least the state government showed how it was going to repair the fiscal position.

People dine in a café in Melbourne's central business district in Melbourne, Australia, on May 11, 2021. (William West/AFP via Getty Images)

While making no apology for not providing payroll tax relief, Premier Daniel Andrews said the extra tax revenue would go toward the government’s $12 billion spending package to boost the number of nurses, paramedics and emergency call-takers.

“No one likes to pay any tax,” he said near the site of the proposed Melton Hospital.

“But payroll tax and land tax and stamp duty, they all pay for nurses ... and the more than 7000 extra health staff that are going to join us in public hospitals right across our state over the next four years.”

The timeline to build the Melton Hospital has become a topic of debate after it was confirmed in the budget papers that planning and detailed design would not finish before 2024-2025, plus another four years for the construction phase.

Back in the 2018 re-election campaign, the Andrews Labor government promised to make a business case for the hospital.

Opposition Leader Matthew Guy said the Labor party was misleading Melton residents with the proposal.

“The government’s had four years to come good on their pledge to build this hospital, to even start it. Four years later, it’s an empty field,” he said.

The Opposition also alleged that the state government disregarded small businesses as it cut off tax relief and pandemic support.

Meanwhile, the real estate sector was somewhat disappointed as no changes were made to the state’s land transfer duty, with the Real Estate Institute of Victoria (REIV) saying the government had missed an opportunity.

“Stamp duty is a tired tax that the Victorian government continues to prioritise,” REIV chief executive Quentin Kilian said in a statement.

“The state needs a review of its old property tax regime so that all participants – first homebuyers, owner-occupiers, investors and renters – can move forward with confidence.”

The Victorian government expected the stamp duty revenue to reach $10.2 billion by the end of June, a $3.5 billion increase from the last budget forecast.

It is predicted to drop to 8.2 billion in the 2022-2023 financial year before bouncing back in the forward estimates.