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The Victorian budget has spared investors from further taxes and levies but offered limited support for beleaguered businesses.
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Victorian budget offers ‘little support’ to struggling businesses: CPA
07 May 2024
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Many Victorian families will receive a welcome cash boost from Treasurer Tim Pallas’ 2024 budget but it will do little to support struggling businesses in the state, according to CPA Australia.
CPA Australia said while cost of living pressures are undoubtedly hurting households, the regulatory environment, weak economy and cost of doing business have created a perfect storm that many businesses are struggling to withstand.
The accounting association said small and medium-sized businesses are feeling overwhelmed by red tape at a time when they need to focus on running their business, not complying with new obligations.
“Federal, state and local governments need to take a holistic view of the regulatory impact they are having on business,” said Gavan Ord, Business Investment and International Lead at CPA Australia.
“New regulation, when considered in isolation, often looks reasonable, but when it’s added to every other regulation and business challenge, it can become overwhelming.”
CPA said it was “disappointing” that this year’s budget did not include any measures to alleviate business costs and ease the regulatory burdens being placed on businesses.
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The association noted, for example, that payroll tax remains a significant bugbear for Victorian businesses.
“While the government will continue with its proposed increases in the payroll tax threshold announced in the last budget, the threshold at which Victorian businesses start to pay payroll tax still remains the lowest in the country,” it said.
“Further, the increase in payroll tax rates for large businesses to pay for COVID debts and the mental health and wellbeing services remains.”
CPA warned that taxpayers may also see a more active State Revenue Office as it receives extra funding to expand its compliance activities.
“The budget did include a small increase in funding to improve toolkits that help build business skills. This may help a little but much more is needed,” it said.
CPA Australia’s Asia-Pacific Small Business Survey found that Australian small businesses lag behind their counterparts across the Asia-Pacific region in technology uptake, innovation, business management and exporting.
“Small programs announced in the budget are nowhere near sufficient to move the needle on small business performance,” said Ord.
“As accountants, we fully understand the financial situation the Victorian Government faces, however the case to further increase public investment into programs that build the skills small businesses need for growth and improved productivity is strong.”
Unlike last year’s budget, investors were not hit with new or increased taxes and levies.
Accounting firm BDO noted that Victorian landowners faced harsh increases to land tax in 2024.
Absentee owners took an even larger hit from the rate increases introduced in last year’s Andrews Government’s 2023-2024 State Budget.
"Whether it is a case of Jacinta Allan attempting to distance herself from her predecessor, or that her Treasurer simply found little headroom left to increase property taxes, Victorian landowners will welcome the absence of any further unfavourable tax reform," said BDO indirect tax partner Michelle Bennett.
"Property owners may not be breathing a sigh of relief, but at least will not be hit with any further changes beyond those which are still pending from the last budget."
The Victorian Government has, however, increased the fire services property levy and waste levy, payable by households.
Many residential landowners are already bracing for the Victorian Government’s extension of the Vacant Residential Land Tax, which will apply to vacant land in all of Victoria from 1 January 2025.
"Taxpayers wishing to rely on the holiday home exemption will be pleased that the government committed to extending it to
include properties held in companies or trusts as of 28 November 2023 (albeit not yet legislated)," said Bennett.
As announced by the Victorian Government in its 2023-2024 State Budget, stamp duty on commercial and industrial property is being replaced by an annual property tax.
Twelve months from this announcement, the Bill has only now passed the Legislative Assembly, with the 1 July 2024 commencement date fast approaching.
"Despite the changes being largely welcomed by Victorian businesses, the Victorian tax landscape is looking to become even more complicated, as we have begun shifting our attention to this new system," said Bennett.
"Last year’s big tax hikes have not been enough to save the 2024/5 budget spending, with major infrastructure projects being wound back or deferred indefinitely in an attempt to reign in the ballooning debt. Victoria’s big build is today looking decidedly smaller."
The Victorian Chamber of Commerce and Industry said while it welcomed the fact there were no new taxes on business announced, allowances for business in the budget were modest.
The Chamber welcomed the increased funding for TAFE and upskilling, careers counselling in schools, business events attraction, innovation and entrepreneurship initiatives, regional services and business enablement and training programs.
“The Victorian Chamber’s number one ask of the Victorian Government in his Budget was no new taxes on business. We are pleased that there is no major hit for business in this Budget,” said chief executive Paul Guerra.
“It is pleasing that the Government has committed to reigning in spending and has a plan to address our State’s ballooning debt and a path to achieve an operating surplus. It is imperative that Government is disciplined and focused on staying this course because the State’s substantial debt remains of concern.”
Tax exemption for land used for social housing
The budget also provided some small wins for housing with the Allan government delivering a standalone tax exemption for land used to provide social housing and $11.5 million for the Victorian Aboriginal Housing and Homelessness Framework.
CHIA Vic chief executive Sarah Toohey said the budget builds upon work the Victorian government has already been doing to improve the housing crisis.
“Securing a land tax exemption for social housing locks in the right system settings to grow the community housing sector and deliver more homes but much more funding for social and affordable housing will be required to build our state out of the crisis,” said Toohey.
“With more than 146,000 Victorian households struggling to afford or secure appropriate housing, the Government must continue to build on its Budget strategies and the progress and legacy it’s made through the Big Housing Build.”
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