Victorian Treasurer Tim Pallas has handed down the 2024-25 Victorian State Budget. While a strong focus was once again placed on combatting inflation and workforce shortages, unlike the 2023/24 which sought to generate revenue through new tax measures, this year’s budget contains minimal tax reform and seeks to control spending through the deferment of major infrastructure and healthcare projects. 

The Government did announce increases to the waste and fire services levies and the introduction of a standalone tax exemption for land used to provide social and emergency housing.

This year's Budget acts as a 'report card' on the performance of the tax measures introduced in the 2023-2024 Budget which centred around stemming Government debt and generating revenue through the introduction of several new business-focussed taxes and levies.

Landowners and property owners won’t incur another hit

Victorian landowners faced harsh increases to land tax in 2024, although absentee owners took the largest hit, from the rate increases introduced in last year’s Andrews Government’s 2023-2024 State Budget. With no new increases in property taxes, Victorian landowners will welcome the absence of any further unfavourable tax reform. Property owners, though, still have the pending changes from the last budget to contend with, and the Victorian Government has 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 were 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). 

Update on the annual property tax

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. 

2024-2025 payroll taxes increase costs for employers

The 2024-2025 Budget included a slated increase in the tax-free threshold from $700,000 to $900,000 from 1 July 2024, with a further increase to $1 million from 1 July 2025. In addition, from 1 July 2024, the tax-free threshold will phase out for each dollar of wages a business pays over $3 million, with wages over $5 million not benefiting from the threshold.   Furthermore, an additional prior year measure that takes effect from 1 July 2024, is the removal of the payroll tax exemption for certain high-fee paying non-government schools.  So while there are no surprises from a payroll tax perspective included in this year’s Budget, we can expect to see many employers feeling the impact of past measures from 1 July 2024, putting increased pressure on the cost of employing in Victoria.

The result

The report card is in. Last year’s big tax hikes have not been enough to save the 2024- 2025 Budget spending, with major infrastructure projects being wound back or deferred indefinitely in an attempt to reign in the ballooning debt. Touted as a Budget focused on helping families, several sectors have taken a hit and Victoria’s ‘big build’ Budget is looking decidedly smaller. 

How BDO can help

If you’d like to discuss the changes outlined in this article and what they might mean for you, contact BDO’s team of specialists in Melbourne.

If are you interested in expert commentary around the Federal Budget and how the tax changes announced will affect you, particularly any that may arise in the employment tax space, read our 2024 Federal Budget analysis.