In her first term as Victorian Treasurer, Jaclyn Symes has handed down a Budget which provides targeted cost of living relief, but fails to address the increasing costs of doing business in Victoria or provide any relief from the significant tax burden that is now borne by residents – particularly property owners, investors and developers.
Victoria, a state renowned for its cultural vibrancy and economic potential, is at a crossroads. The Treasurer recently painted a picture of Melbourne growing to match the population of London by 2050. Despite this ambitious forecast, Melbourne struggles to match London’s allure for investors and commercial enterprises. To truly become “London on the Yarra”, Victoria must become more attractive to both interstate and international investors.
Continuing reliance on property taxes
Victoria’s heavy reliance on property taxes appears set to continue for the foreseeable future. The Budget forward estimates indicate that budget recovery hinges on improved revenue from a rebound in property values. However, the failure to address the existing tax environment makes this challenging to fulfil. Tax instability has a detrimental impact on sovereign risk, making the state less appealing to investors.
Victoria’s books contain 33 state-based taxes, levies, and charges, including 18 separate but overlapping imposts on property ownership, investment, and transactions. This operating environment is exceedingly complex and does little to attract new business investment. Many businesses that have persevered during lean years are now struggling to survive, highlighting the need for a more supportive tax system. This includes relief from payroll tax and the increasing cost of land tax. The sharp rise in insolvencies over the last year has been accompanied by a notable drop in business confidence. Despite these challenges, there is little relief in the Budget for the small and medium businesses that continue to do the heavy economic lifting. This further exacerbates the difficulties they face and undermines their ability to grow and employ more Victorians.
Among the various taxes, the Windfall Gains Tax stands out as particularly detrimental. Based on the government’s forward estimates, it will fail to make a significant impact on the Budget and is therefore ineffective for revenue generation. However, it continues to be a significant barrier to investment in property developments in the growth areas of Melbourne – an important part of the housing supply equation. This barrier to increased supply fundamentally outweighs the estimated return from the tax over the next five years and we remain of the view that the tax should be abolished.
More broadly, Victoria continues to have the least competitive property tax landscape on a national level. The significant increases in the Congestion Levy rates and expansion of the levy area from 1 January 2026 will only make the situation worse.
The Government’s continuing addiction to property taxes needs to be curbed with a future-focused lens. The state needs to balance its taxation approach with growth-supportive measures and efficient expenditure. Only then can Victoria hope to become a drawcard for investment.
Housing supply and property development
In the midst of a national housing crisis, and with major residential developments in Arden and Fishermans Bend still uncertain, the allocation of only $407 million to housing in the Budget is strikingly insufficient. This limited investment fails to address the pressing housing needs of the state and neglects the potential for stimulating economic growth through residential development.
As announced prior to the Budget, $61 million has been allocated to continue the stamp duty concession for off-the-plan apartments, units, and townhouses available to all buyers, for a further 12 months until October 2026. While this measure may provide some relief to the property market, it will likely only assist in moving existing property and is unlikely to encourage the commencement of new developments.
On a more positive note for property developers, the Budget provides $10 million to deliver a 10-year plan to unlock industrial land and to give business more certainty on how and when land will be released. The funding aims to deliver key enabling infrastructure that will open up more industrial land across regional Victoria.
Funding is also being provided to speed up Environmental Effects Statement (EES) processes to target an assessment review time of no longer than 18 months. This will be achieved by sharper assessment scopes; better use of Environmental Reports as a quicker alternative to a full EES process; providing extra support to proponents where they are responsible for delays; and speeding up the public engagement process with online engagement and more focused public inquiries and engagement phases.
An ever-expanding debt and interest burden
Victoria’s net debt is particularly concerning, projected to reach $194 billion by 2029. Interest expenses are expected to soar by a whopping $3 billion per annum to $10.56 billion by 2028-29. The rising debt levels indicate a growing fiscal challenge for the state, necessitating careful management and strategic economic planning to avoid long-term financial instability.
Conclusion
Victoria’s 2025-26 Budget presents a mixed bag of economic measures that fail to fully address the state’s pressing fiscal challenges or stimulate significant investment. The absence of structural reforms to key tax areas, limited housing allocation, and the complex property tax environment continue to hinder business growth and investment. With rising insolvencies and dropping business confidence, the state requires a more balanced approach that not only addresses the debt pile but also supports economic growth and reduces inefficient expenditure. Only through comprehensive reform and strategic investment can Victoria hope to attract new business and ensure sustainable economic prosperity.
