Premier Daniel Andrews’ latest budget, released on Tuesday, revealed that businesses and property investors would be slugged with $8.6 billion in “temporary” levies in a bid to contain Victoria’s soaring debt levels.
The Covid-19 debt levy will secure $3.9 billion from businesses with payrolls over $10 million and $4.7 billion from property investors over the next four years.
The levy will be in place for the next 10 years, and will rake in more than $20 billion in total.
Around 860,000 Victorian landowners will be impacted, along with almost 4000 businesses.
Those who own more than one home will pay at least $5000 over the next 10 years, with a new $500 annual tax for investment properties with a land value between $50,000 and $100,000.
The payment will increase to $975 for homes valued between $100,000 and $300,000, while an extra 0.1 per cent of the land value will be applied to properties worth more than $300,000.
Meanwhile, businesses with a national payroll of more than $10 million will also be forced to pay extra payroll tax of 0.5 per cent, or 1 per cent if their national payroll is more than $100 million, impacting around 5 per cent of businesses in the state.
However, attention is now turning to the true losers of the new tax, with experts claiming the hike will likely be passed on to renters already struggling under skyrocketing rents amid the nation’s housing crisis.
Victorian Council of Social Service (VCOSS) CEO Emma King is among those concerned that the tax increase could lead to higher rents.
“In terms of any tax increase for landlords, under no circumstances should that be passed on to tenants, and to be candid if that happens, people should be screaming it out hard and loud because we’d want to know about it, and pretty much we should be naming and shaming,” she said.
3AW radio host Tom Elliott said Mr Andrews’ attempt to blame the Reserve Bank and the pandemic for the state’s debt woes was “utter rubbish” and said Victorians will be forced to pay for the “mistakes” the state government made managing Covid.
He also slammed a “lie” being sold about the impact the levy would have on the rental market.
“The government has said this will not impact rents – well of course it will,” he said.
“If you’re a landlord who rents out your property and the government is now going to slug you say an extra two or three grand a year on this, you know, Covid debt land tax surcharge, well of course you’re going to try and recover it from your tenants.
“Big companies like Coles and Woolies will be paying the extra payroll tax to help bail out the state government – they will try and pass on the cost of that tax to customers, which is all of us.”
Mr Elliott insisted the measures would ultimately mean that “renters will pay more rent”.
“So for the state government to say that this will not impact the average hardworking Australian or Victorian family is wrong, it is a lie, it is an untruth,” he said.
“We’ve already got a rental crisis, this will make it worse.
“Big companies with market power like Coles and Woolworths who are being slugged with an extra payroll tax will pass that on to customers so it will hurt everybody else.”
Under Victorian law, in most cases, rent cannot be increased more than once every 12 months, however, the only way to challenge an excessive rent hike is by requesting Consumer Affairs Victoria to investigate the increase.
The Victorian executive director of the Property Council of Australia, Cath Evans, also hit out at the land tax, claiming it could lead to investors fleeing the state – and rent hikes for tenants.
“Lowering the tax threshold will of course cause increased stress and pressure for those land holders to maintain those properties,” she said, according to the ABC.
“And it does become a risk that those costs get passed onto renters, and of course adding to what is already a significant challenge in our rental market here.”
Tuesday’s tax announcement came just hours after PropTrack’s latest Market Insight Report revealed the share of total properties listed for rent on realestate.com.au for less than $400 per week nationally fell to just 16.2 per cent in April 2023, the lowest on record, with the share of total rental listings under $400 per week halving in most capital cities, including Melbourne.
However, while Shadow Treasurer Brad Roswell slammed the levy as a “tax on renters” who can “least afford it”, Mr Pallas told ABC Radio he didn’t believe the tax would play “any substantial role” in raising rents.