The 2016 Victorian Budget projects substantial surpluses over the next four years. This is driven by revenue rising faster than expenditure over the four years.
Revenue is expected to grow by an average of 3.4 per cent per annum over the next four years while expenditure is projected to grow by 3.3 per cent per annum.
There are expected to be significant increases in state taxation revenue especially revenue from land tax and payroll tax. Revenue from payroll tax is expected to grow strongly over the next four years despite a phased increase in the threshold which will narrow the payroll tax base.
The revenue from the Goods and Services Tax (GST) is also expected to grow strongly over the next four years as total GST revenue across Australia increases and the proportion of that revenue coming to Victoria increases in line population growth.
Revenue from land transfer duty (stamp duty) is expected to decline in 2016-17 as turnover in the property market slows. It is expected to rise from 2017-18 onwards.
Initiatives at a glance
- The threshold for payroll tax will increase from $550,000 to $650,000 over four years ($25,000 per annum)
Future policy directions
- Consideration needs to be given on how to stabilise the revenue base. The reliance on land transfer duty (stamp duty) leads to cyclical fluctuations in revenue. It is also a distortionary tax and is a barrier to entry into the property market.
- Payroll taxes should be harmonised across state and territory jurisdictions to maximise the use of this efficient tax and reduce competition between jurisdictions.
Thumbnail image: “Rivers of Gold” by Staphanie Anderson (Twitter).