Covid levy: Investment property owners to help pay off $31.5 billion debt

Treasurer Tim Pallas has slapped tens of thousands of Victorians with a new levy to pay off the government’s $31.5 billion debt.

The land tax-free threshold will be lowered from $300,000 to $50,000 from January next year.

Victorian taxpayers will be slugged with a new Covid debt levy that will remain in place until June 30, 2033, as the Andrews government tries to pay off the $31.5 billion it spent on the pandemic response.

The levy has two components, a new payroll tax levy on big businesses, plus a land tax hike on Victorian landlords and commercial property owners.

The land tax-free threshold will be lowered from an unimproved land value of $300,000 down to $50,000 from January next year.

Property owners with land valued at:

Between $50,000 and $100,000 will pay a temporary fixed charge of $500.

Between $100,000 and $300,000 will pay a fixed charge of $975.

Above $300,000 will pay a fixed charge of $975, plus 0.1 per cent of the value of the land.

Primary producers are exempt from paying land tax on their own properties, but many investment properties will incur the Covid levy.

Both levies are expected to generate $836 million in 2023-24 and $1.15 billion in land tax.

The government will also use its $8 billion future fund to offset its Covid debt.

But even with the levy in place, Victoria’s net debt is forecast to grow to $116 billion this year, and to $171 billion by the 2027 financial year.

Treasurer Tim Pallas also announced stamp duty on commercial and industrial properties would be phased out over the next decade to be replaced by a new property tax.

From July 1 next year anyone buying a commercial or industrial zoned property can opt to pay the stamp duty upfront or in annual repayments, plus interest, over 10 years.

Farmers have been excluded from the scheme.

The budget also delivers payroll tax savings for smaller companies by increasing the threshold from $700,000 to $900,000 for most businesses from July 2024, and then to $1 million from July 2025.

The government estimates about 6000 businesses, which otherwise would have paid payroll tax, will no longer pay a cent once the threshold reaches $1 million – and more than 26,000 businesses in total will benefit.

Originally published as Covid levy: Investment property owners to help pay off $31.5 billion debt