The industry body has warned that the Victorian government’s plans to narrow its state budget may come at a significant cost to local investors.
Attempts to narrow Victorian budget deficit come ‘premature’: CPA
In handing down Victoria’s state budget on Thursday, Treasurer Tim Pallas made it clear that the Andrews government’s primary objective was to narrow its budget deficit by leaning heavily into revenue raising.
But in doing so, the state risks driving developers and landowners away to other states at a time when investment is key to the state’s recovery, according to Elinor Kasapidis, senior manager of tax policy at CPA Australia.
“It doesn’t make sense to impose new costs on businesses and investors now. People and money are mobile,” Ms Kasapidis said. “New taxes will undermine confidence and may drive them away.
“The Victorian government is experiencing its own property tax windfall due to rising housing prices. To increase their take when many businesses are still doing it tough is extremely disappointing.”
Victorian state Treasurer Tim Pallas on Saturday announced that the Victorian government will move to introduce a suite of targeted revenue-raising measures in Victoria that will target luxury property investors and buyers, landlords and gender-exclusive private clubs.
The first of the new measures is an increase to stamp duty. Mr Pallas said his government will move to increase payable stamp duty for property transactions worth more than $2 million to $110,000 plus 6.5 per cent of the dutiable value in excess of $2 million.
Victoria’s land tax is set for an increase, too, in a bid to raise $380 million a year from 1 January 2022. The tax rate will rise by 0.25 of a percentage point for landholdings worth more than $1.8 million, and 0.30 of a percentage point for those worth more than $3 million.
The announcement also unveiled a new windfall gains tax, introduced in a bid to raise an estimated $40 million a year. It will see some developers planning to rezone land pay a tax of up to 50 per cent.
For windfalls over $500,000, taxpayers will pay 50 per cent, with the tax phasing in from $100,000. Meanwhile, land that fits the Growth Areas Infrastructure Contribution criteria won’t be affected.
“It’s only fair that those making large profits return a reasonable proportion to the community — this means more Victorians can have the schools, hospitals and support they need and deserve,” Mr Pallas said.
Ms Kasapidis said that the Andrews government may have moved to collect from big business too soon, as a substantial portion of the state’s business community continues to reel from the economic impacts imposed by pandemic-induced lockdowns, development cessations and slowed metropolitan foot traffic.
“Victoria faces several recovery challenges. Many sectors and regions are still hurting. It’s too soon to focus on budget repair,” Ms Kasapidis said.
“Eventually, Victoria will have to pay off its pandemic debt. But by seeking to raise tax revenues at this stage of the economic cycle, the Victorian government risks damaging the state’s recovery.”
Ms Kasapidis did, however, commend the government’s move to inject $107 million into the revitalisation of Melbourne’s CBD, of which $7.4 million has been committed to a voucher scheme — similar to NSW’s Dine & Discover program — to encourage residents to visit cafés and restaurants which have been hit hard by working-from-home arrangements.
Victoria’s suite of measures targeted at kick-starting Melbourne’s economy also include a stamp duty concession of up to 100 per cent for new builds worth up to $1 million in the local Melbourne government area.
The state government will offer an increase to the eligibility thresholds for off-the-plan purchases, too, as well as an extension to the vacant residential land tax exemption for new developments.
However, the measures could prove counterintuitive, Ms Kasapidis said, as the businesses which will benefit from the measures are likely to face higher taxes.
“We support targeted spending in heavily impacted geographies and sectors,” Ms Kasapidis said. “However, many of the businesses that stand to gain from initiatives like the CBD revitalisation may end up paying higher state taxes.”