Victorian budget 2018: bush reaps benefits of property tax surge

Regional businesses get fresh payroll tax relief as Treasurer Tim Pallas declares Victoria the national economy’s ‘engine room’.

Victorian Treasurer Tim Pallas. Picture: AAP

Payroll tax for regional businesses will be cut to the lowest rate in Australia and young farmers will receive stamp-duty relief in budget measures the Andrews government predicts will generate thousands of jobs outside suburban Melbourne.

The regional payroll tax rate will be cut to 2.425 per cent, half the metropolitan rate, for about 4000 businesses that pay at least 85 per cent of their payroll to ­regional employees.

Those under 35 buying their first farm will receive a full stamp-duty exemption on purchases up to $600,000, up from the current stamp-duty free threshold of $300,000. “For the third year in a row we’re reducing the tax burden in regional Victoria, sharing our economic success with every corner of the state,’’ Treasurer Tim Pallas said.

The Australian Industry Group hit out at the government for not delivering broader payroll tax ­relief to business.

“It remains a significant frustration for businesses that the broader national tax reform agenda remains unaddressed,’’ it said. “We are also disappointed the government has not acted to deal with Victoria’s ongoing waste recycling issues by using the hundreds of millions of dollars currently held in the sustainability levy.”

The government benefited from another year of surging property taxes, with stamp-duty revenue coming in more than $600 million above forecasts at $6.8 billion this financial year. Stamp-duty receipts will jump by more than $900m to $7.77bn over the forward estimates.

The budget surplus this financial year is tipped to be $2bn, up from $1.2bn forecast in last year’s budget. But the surplus is predicted to fall to $1.4bn in 2018-19.

Declaring Victoria the “engine room” of the national economy, Mr Pallas seized on figures showing the state economy grew by 3.3 per cent last financial year. “We’re essentially miles in front of the rest of the nation when it comes to GSP (gross state product) growth,’’ he said

Employment growth is forecast to be above previous estimates, rising 2.75 per cent this financial year and 2 per cent in the following year.

Unemployment is forecast to be 5.75 per cent in 2018-19, up from 5.5 forecast in last year’s budget. Predicted wage growth is flatter than previously forecast, with the budget predicting wages will rise by 2.5 per cent next financial year and 2.75 per cent in 2019-20.

Net debt is predicted to come in at $19.6bn this year, down from the previously forecast $23.8bn, but it will rise to $24.3bn next financial year and to almost $30bn by 2021.

Annual motor vehicle taxes will jump by 30 per cent over forward estimates to $3bn.