Date posted: 25/05/2023

Victorian State Budget 2023-2024 Overview

The state budget presents a vision for economic recovery with focus on fiscal strength and business and tax reforms

In brief

  • Tax reforms drive economic growth & sustainability
  • Commitment to renewable energy & environmental transition
  • Infrastructure projects face delays, cost of living relief measures introduced

The recently unveiled 2023 state budget brings both significant tax changes and noteworthy allocations across various sectors. Outlined below are the key announcements: 

  • Budget Forecast and Debt Projection: The budget forecasts a deficit of $4 billion for the 2023-24 fiscal year, with an estimated return surplus of $1 billion by 2025-26. However, net debt continues to rise and is expected to reach $171.4 billion by 2026-27.  
  • Tax Reform Initiatives: Significant tax changes include an economic reform package and a new 10-year COVID Debt Levy. 
    • Economic reform package: One of the major highlights of the budget is an economic reform package aimed at transforming Victoria's tax landscape. Commercial and industrial properties will undergo a transition from stamp duty to an annual property tax, effective from July 1, 2024. Business insurance duties will be phased out over a ten-year period, by reducing the rate of insurance duty by 1 percentage point each year, starting from July 1, 2024. Furthermore, the payroll tax-free threshold will see an increase from $700,000 to $900,000 from July 1, 2024, with a subsequent rise to $1 million from July 1, 2025. 
    • 10-year Covid debt levy: The introduction of a 10-year COVID Debt Levy is another significant tax measure. The levy comprises two components, with large businesses having national payrolls exceeding $10 million annually subjected to an additional payroll tax of 0.5 percent from July 1, 2023, until June 30, 2033. Businesses with national payrolls surpassing $100 million will face an additional 0.5 percent levy during the same period. From January 1, 2024, the tax-free threshold for general land tax rates will decrease from $300,000 to $50,000, accompanied by adjustments to fixed charges and land tax rates. The COVID Debt Levy is expected to conclude on June 30, 2033. 
  • Foreign ownership: Foreign investors will experience an increase in fees, with the absentee owner surcharge rate rising from 2 percent to 4 percent starting January 1, 2024. It is important to note that existing land tax exemptions will remain in effect. 
  • Educational Reforms: To better target support where it is most needed, the payroll tax exemption will be removed for the top 15 percent of non-government schools based on fee levels, commencing from July 1, 2024. The budget also indicates a phased elimination of the payroll tax-free threshold for larger businesses. 
  • WorkCover Reforms: the average premium rate for 2023-24 will increase from 1.27 percent to 1.8 percent of remuneration, effective from July 1, 2023. 
  • Renewable Energy Commitment: The Victorian Government plans to invest $1 billion in reestablishing the State Electricity Commission (SEC) and transitioning to 95 percent renewable energy by 2035.  
  • Flood Recovery Measures: an allocation of $677 million has been designated for ongoing flood recovery efforts, supplementing the $1.8 billion promised in the previous year. 
  • Infrastructure Projects: Projects such as the Melbourne to Geelong Fast Rail, the M80 Ring Road Upgrade, the Airport Rail Link, and the North East Link have encountered setbacks and are experiencing delays. 
  • Cost of Living Relief: To provide cost of living relief, the budget allocates $400 million for a fourth round of the $250 Power Saving Bonus. Furthermore, $90 million has been set aside to cap regional public transport fares at the metro rate. Other noteworthy initiatives include the introduction of the Victorian Veterans Card and free car registration for apprentices. 
  • Business Acceleration Fund: Recognizing the vital role of businesses in driving economic growth, the budget includes a $30 million investment in the Business Acceleration Fund.