24/05/2023 - Vic State Budget key takeaways for SMEs
Following the Victorian State Budget 2023-24 release, below is a list of the key takeaways and the impacts for SMEs
- The Victorian state budget is forecast to be in deficit $4bn in 2023-24, up $400m since November 2022’s budget update. The ‘Big Build’ program and extraordinary measures through the pandemic are the key spending areas resulting in the projected deficit.
- A path to a surplus in 2025/26 of $1bn has been outlined. The government expects to achieve this through cuts to the public sector (Between 3000 and 4000 non-essential public sector roles cut and reduced consultant expenditure/labour hire), the temporary COVID Debt Levy, and leveraging the investment returns of the Victorian Future Fund.
- While projected to reach a transactional surplus, the size of government net debt relative to the state’s economy will continue expanding, increasing from 20.6% ($116.7bn) in 2022/23 to 24.5% ($171.4bn) by 2026/27. For context, this projection is approximately double that of NSW (13.8%), and triple that of QLD (7.4%) in their respective 2022-23 budget projections for 2025-26.
- COVID Debt Levy puts the burden of the government's pandemic spending on medium-large businesses and investment/holiday property holders in Victoria. Investment property holders will pay on average $1300 more annually in land tax, and businesses with a payroll above $10m (approximately 10-15 headcount) will see payroll tax increase by 0.5%. If payroll exceeds $100m this increase will be 1.0%. The levy is temporary, scheduled to end after 10 years in 2033.
So what does this mean for SMEs?
- Stamp duty is to be abolished and replaced by land tax for commercial and industrial properties from 1 July 2024. The removal of the lump sum tax will lower the barrier to investment for businesses. The change will not affect current owners of commercial and industrial properties and further details are expected to be revealed by the end of 2023.
- Business insurance duty will be abolished over a 10-year period. Over this period businesses are likely to save on average $320 annually on professional indemnity insurance and $240 annually on fire and other special risk insurance. Businesses are projected to save $275 million over the first three years.
- The payroll tax-free threshold will rise from $700k to $900k from 1 July 2024, and to $1m from 1 July 2025. This is projected to benefit 26,200 Victorian businesses.
- COVID Debt Levy – An extra land tax fee, dependent on land value The tax-free threshold for land tax has been reduced from $300,000 to $50,000 For those with landholdings valued between $50k and $100k, an increase of $500 annually For those with landholdings valued between $100k and $300k, an increase of $975 annually For those with landholdings valued above $300k (or $250k for trust holdings), an increase of $975 + 0.1% of the land value holdings annually
- COVID Debt Levy – Payroll tax Businesses with national payrolls above $10 million will pay an additional 0.5% payroll tax Businesses with national payrolls above $100 million will pay an additional 1.0% payroll tax