The Victorian State Budget released earlier today, shows the Government will attempt to spend its way to economic recovery by investing more than $49 billion over the next 4 years in a multitude of infrastructure projects. The spending will be supported by a record level of debt, which is projected to hit a peak of $155 billion over the forward estimates period.
The Treasurer announced a number of measures that are designed to create jobs for Victorians, with a goal of 400,000 new jobs over the next 5 years. In support of that goal, small and medium businesses will welcome the tax relief measures announced in the Budget, particularly the new payroll tax credit. The property development sector should also receive a well-needed boost in transaction volumes as a result of the new transfer duty discount for properties with a value not exceeding $1 million.
The majority of the tax relief measures announced in the Budget are, however, temporary ones. The Government has not taken the opportunity to re-align the payroll tax position of Victorian businesses with their NSW counterparts, with the threshold at which NSW businesses commence paying payroll tax now sitting at almost twice that of the equivalent threshold in Victoria. That anomaly could act as a roadblock to the Government’s job creation goal, by encouraging new businesses to locate themselves in NSW instead of Victoria.
Although the Government has chosen not to follow the NSW lead concerning the reform of the stamp duty and land tax regimes at this point, with 2 years of its current term still to run, it is likely to keep a close eye on the NSW public consultation process and could use next year’s Budget as the opportunity to announce a similar reform proposal.
Please refer to the detailed analysis of the Victorian State Budget below and its specific impact on individuals and mid-market businesses.