Victoria Ranked Least Business-Friendly State in Australia: Report

Small states have shone in the business-friendliness rankings with South Australia leading the pack.

A general view of the Melbourne CBD from the south bank of the Yarra River in Australia on Aug. 24, 2015. Darrian Traynor/Getty Images

Victoria is the least business-friendly jurisdiction in Australia, according to the Business Council of Australia’s (BCA) Regulation Rumble 2024 report, released on Dec. 3.

The report assessed states and territories on several criteria important for the growth of small business, an important source of employment for Australians.

Overall, South Australia emerged as the most business-friendly state for the second year running, with other low population jurisdictions like Tasmania, the Australian Capital Territory, and Northern Territory also receiving high marks.

Victoria Uncompetitive on Several Fronts

BCA Chief Executive Bran Black said cumbersome regulations and taxes were stifling Victorian businesses.

“Victoria has some of the least competitive property tax settings, payroll taxes, and business licensing requirements in the country. These issues are putting a handbrake on the state’s economy,” he said.

The Victorian Chamber of Commerce and Industry echoed these concerns, noting that nearly 40 percent of Victorian businesses consider “time” a greater expense than money due to the inefficiencies it can cause.

Despite an increase in the payroll tax-free threshold from $700,000 to $900,000, it remains the lowest in the country, with a planned increase to $1 million in 2025 still leaving it at the bottom of the ladder. Payroll tax is paid on top of the wages and salaries a company pays out.

Additionally, rising land taxes, such as the temporary land tax surcharge (part of the COVID-19 Debt Recovery Plan), and the new Commercial and Industrial Property Tax, add to the cost of doing business.

Victoria also has the most complex business licensing system, with stringent requirements for sectors like cafés and childcare services, creating administrative burdens and delaying business operations.

A couple enjoys breakfast at a busy Lygon Street cafe in Melbourne on Oct. 22, 2021. William West/AFP via Getty Images

These factors contribute to a less favourable environment for business growth.

Reacting to the report, Shadow Minister for Economic Reform Jess Wilson said the findings were “no surprise.”

“With the highest debt, the highest unemployment and most red tape–it should be no surprise that under Labor, Victoria is the worst place in the nation to do business.

“After a decade of financial mismanagement, Labor’s ever-increasing taxes are pushing businesses, investment and economic opportunity interstate.”

South Australia Leading With Best Payroll Tax Settings

South Australia retained its top spot for metrics like having the lowest payroll tax rate for large employers, and joint second-highest threshold alongside the Northern Territory.

“With its low payroll tax rate and its progressive rate and deduction system, South Australia also leads the way for the lowest payroll tax rates for small expanding businesses,” the report said (pdf).

“One area where South Australia can improve however, is in its alignment of revenue rulings.”

A general view of Rundle Mall in Adelaide, Australia on Sept. 29, 2016. Daniel Kalisz/Getty Images

ACT and NT Kicking Ahead With Flexible Trading Hours

The Australian Capital Territory and Northern Territory also maintain top spot for having the most flexible trading hours with no legislated trading restrictions for either regular or public holidays.

In contrast, South Australia, Queensland, and Western Australia were accused of maintaining more “antiquated operating environments.”

“These states impose varying restrictions based on geographic areas, with regional areas often having fewer trading hours compared to capital city regions,” the report said.

Separate Report Also Finds Victoria Struggling

In turn, a report by the Institute of Public Affairs, released in August 2024, named Western Australia as the country’s most business-friendly jurisdiction. The state excelled in its competitive construction costs, job vacancies, rental costs, fuel costs, and development applications, ranking first in all five metrics.

Even this report deemed Victoria the least business-friendly state, ranking last in payroll tax, land tax, land transfer duty, and job vacancies. The state also placed second-last in development applications, regulatory requirements, and restrictions.

The BCA stressed the need for a National Reform Fund to support states with productivity, building on the treasurer’s new National Productivity Fund.

“Efficient, consistent, and certain planning systems reduce risk for developers, facilitating faster project approvals and boosting housing supply,” Black added.

Government’s Response

In response to surveys on the state’s business struggles, Victoria’s Labor government last month launched the Victorian Business Growth Fund.

The $250 million Fund aims to help small and medium enterprises (SMEs) access funding and help individuals find employment.

In response to the BCA’s report, Premier Jacinta Allan said she would wait and see what the state’s Economic Growth Statement had to say.

“I said I was a builder, not a blocker. It’s why the Statement will focus on cutting the red tape holding too many businesses back, while outlining our priority sectors including manufacturing,” she told the Herald Sun.

“I want to build the workforces we need for the future, drive growth in wages and ensure no Victorian is left behind. It’s what industry has told me they need, and it’s what I’ll deliver.”

In response, Shadow Treasurer Brad Rowswell condemned the government’s performance, citing that Victoria has experienced the largest drop in business registrations in Australia.

“Victorian businesses are battling the highest taxes in the country with 53 new or increased taxes from Labor since 2014,” he said.

“These tax hikes on Victorians come at a time when they can least afford it, with soaring costs to energy prices, property, and everyday goods and services.”