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“Appalled” CPA Australia says measures announced as part of its COVID Debt Repayment Plan “threatens to make a bad situation worse”.
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Victoria slugs big business, landlords to pay for lockdown
24 May 2023
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Victoria has become the least attractive state to run a business and will push mum and dad landlords to the brink thanks to budget measures unveiled yesterday as part of its COVID Debt Repayment Plan, says CPA Australia.
Senior tax policy manager at CPA Australia Elinor Kasapidis said the state was rushing to pay back its debt but had made mistakes that would hurt the state rather than help drag it out of debt.
“Victoria is the nation’s least attractive state to run a business or buy an investment property,” said Ms Kasapidis. “Victoria used to be the place to be, now it’s the place not to be.”
Large businesses with national payrolls above $10 million will be hit with an additional payroll tax rate of 0.5 per cent rising a further 0.5 per cent for those with payrolls of above $100 million, raising $3.9 billion over four years.
“Victorian’s are being forced to pay for decisions made by their own government during COVID. By and large, Victorians accepted the need to make these decisions for the benefit of their health and the economy but Victoria is rushing to pay back its debt far too soon and this time it’s Victorians’ financial well-being that’s at risk.”
“The Victorian government has made the wrong decisions on how to manage its finances in this budget. You need to support businesses and investors. This budget threatens to make a bad situation worse.”
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On land tax, the Andrews government will decrease the tax-free threshold from $300,000 to $50,000 on 1 January 2024 to raise $4.7 billion over four years.
The family home would remain exempt but those eligible would attract an additional fixed charge starting at $500 for landholdings between $50,000 and $100,000, and $975 for those above $100,000 with the tax rates to increase by 0.1 per cent for both general and trust taxpayers with holdings above $300,000 and $250,000 respectively.
Ms Kasapidis said the organisation was “appalled by this decision” and encouraged the government to reconsider.
“The Australian tax system encourages people to invest in property. Residential landlords are overwhelmingly mums and dads who have bought investment properties,” said Ms Kasapidis.
“Many landlords will be unable to afford this additional cost, on top of wall to wall rate hikes for nearly a year, this additional cost will push some mum and dad landlords into the red. To foot this bill they will be forced to increase rents at a time when there is a national housing affordability crisis.”
“Make no mistake, renters will end up footing the bill. The government is failing to read the room.”
In some relief for small business, the payroll tax-free threshold goes up to $900,000 from 1 July 2024 with another increase to $1 million from 1 July 2025, saving approximately 26,000 Victorian businesses up to $14,550 per year.
Ms Kasapidis said Victoria faced a difficult future.
“It’s unfortunate the Victorian government is relying too heavily on increased taxes to pay down the so-called COVID debt,” she said. “Tax increases can negatively affect the economy at a critical time of recovery. A low taxing environment is important to encourage business activity.”
Victorian Chamber of Commerce and Industry chief executive Paul Guerra agreed and said the measures would impact local investment.
“Today’s state budget takes Victoria from the most locked down state in Australia to one of the highest taxing, as the government continues to hit business with the bill for the debt incurred throughout the pandemic and cost blowouts in the WorkCover scheme,” said Mr Guerra.
“The government says this is the plan to pay off the ‘COVID credit card debt’ but they’re doing that by using medium to large businesses and property owners as an ATM over the next 10 years.”
“It’s certainly a departure from the ‘all in it together’ approach taken throughout the pandemic and this will directly impact jobs and investment in Victoria.”
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