Everything you need to know about Victoria’s new Covid debt repayment plan land tax

The state government has started clawing back its huge Covid debt, with a land tax to hit hundreds of thousands of Victorians. This is how it works and who will be stung.

The Victorian government, under Premier Jacinta Allan, has started clawing back debt from it’s “Covid emergency credit card” with a land tax set to hit about 380,000 Victorians.

This is how it works, why it’s been introduced and who will be stung.

What is the tax?

The state government last month said a Covid debt levy would be implemented that resulted in “temporary” changes – at least for the next 10 years – to land tax rates and thresholds for taxable landholdings, from the 2024 land tax year.

Will it affect all Victorians?

No,the family home remains exempt from land tax.

The land tax levy applies primarily to those who own a second property or multiple properties.

About 380,000 newly liable properties are each expected to cough up $878 on average each year.

Family homes remain exempt from land tax. Picture: David Crosling

How much extra will some Victorians pay?

For land worth between $50,000 and $100,000, a $500 flat surcharge applies.

For land worth between $100,000 and $300,000 (or $250,000 for trusts), a $975 flat surcharge applies.

For land worth more than $300,000 (or $250,000 for trusts), a $975 flat surcharge applies, plus an increased rate of land tax by 0.10 percentage points.

Is the extra tax permanent?

At this stage, the tax will last 10 years.

A government spokesman said this year: “The Covid debt levy is temporary, targeted and above all, responsible. It will help to pay off the Covid emergency credit card we used to save lives and protect family budgets while we continue to invest in jobs and the projects that build our state.”

Why are Victorians being hit with it?

Victorian treasurer Tim Pallas has said the state government “had to borrow to pay for the tools we needed to confront the (Covid) emergency.

For things like hospital equipment, protective wear, testing centres, testing payments, vaccination centres and business support”, and “had to borrow $31.5 billion to save jobs and save lives and to get through”.

“We are not the only government in this position. But we’re the only government with a plan to manage it with our Covid Debt Repayment Plan … now is the time to confront this situation squarely to repay the Covid debt that kept Victoria going during the pandemic,” he has said.

“We know some did better out of the pandemic than others – and it is only fair that those that did well contribute to the repayment effort.”

Victorian Treasurer Tim Pallas. Picture: Luis Enrique Ascui

What is the tax trying to claw back?

The extra land tax is a repayment plan for money spent and borrowed by the then Dan Andrews government at the height of Victoria’s Covid pandemic; through lockdowns and restrictions.

Victorian Budget papers state that $40.1bn was spent “to keep Victorians safe from the virus, keep workers in jobs and businesses afloat, and support households”.

There was also rent relief “so Victorians could keep a roof over their heads”, extra mental health services and aid for businesses via direct financial support.

New Premier Jacinta Allan has endorsed the Covid debt repayment plan set up by Mr Pallas in May’s budget, saying it’s a key step in getting the state back on track financially.

Former Victorian Premier Dan Andrews. Picture: Ian Currie

How much did Dan spend on Vic’s pandemic response?

$21.2bn was spent on business, economic and worker support from 2019-20 to 2022-23.

$16.3bn was spent on equipping the health system from 2019-20 to 2022-23.

$2.6bn was spent on household support from 2019-20 to 2022-23.

All up a $40.1bn total spend.

There was $8.7bn in funding received from the federal government.

And $31.5bn borrowed by the Victorian government.