Victorian State Budget
The 2016-17 Victorian State Budget was delivered on 27 April 2016. The Victorian Treasurer announced that the Budget for 2016-17 is expected to produce an operating surplus of $2.9 billion, with accumulated surpluses of $9.3 billion over the Budget and forward estimates period. Victoria is expected to collect $60.4 billion in total revenue in 2016-17, with revenue growth averaging 3.4 per cent over the budget and forward estimates. Victorian economic growth is expected to be 3 per cent in 2016-2017, on trend with 2015-16.
Major contributions to growth in the Budget year include land tax and payroll tax revenue, and an allowance for prepaid port licence fees, partially offset by an anticipated moderation in land transfer duty revenue.
The key taxation measures and/or incentives announced in the Budget are as follows.
Stamp duty surcharge for ‘foreign purchasers’
The Victorian Government last year introduced legislation to impose a 3 per cent stamp duty surcharge rate on direct and indirect acquisitions of residential property in Victoria by ‘foreign purchasers’ from 1 July 2015, in addition to the general rate of stamp duty of up to 5.5 per cent.
As part of the 2016-17 Budget, the Treasurer has announced that the stamp duty surcharge rate will increase to 7 per cent for contracts entered into on or after 1 July 2016, resulting in a stamp duty rate of up to 12.5 per cent for purchases of Victorian residential property by ‘foreign purchasers’.
Land tax surcharge for ‘absentee owners’
As part of the 2015-16 Budget, the Victorian Government introduced an annual 0.5 per cent land tax surcharge rate applying to ‘absentee owners’ of all taxable land in Victoria from the 2016 land tax year onwards, in addition to the general rate of land tax of up to 2.25 per cent.
The Treasurer has announced that the ‘absentee owner’ surcharge rate will rise to 1.5 per cent for the 2017 land tax year onwards, resulting in annual land tax rates of up to 3.75 per cent on the taxable value of all taxable land in Victoria held by an absentee owner.
Further, the State Revenue Office will receive additional funding to establish and expand compliance programs to ensure property taxes are correctly paid.
Payroll tax-free threshold and payroll tax incentive
The Government has announced that the payroll tax-free threshold will progressively increase from $550,000 to $650,000 over the next four years (in $25,000 increments), starting with an increase to $575,000 from 1 July 2016.
Further, a payroll tax exemption will be introduced for the wages paid or payable by an employer to a displaced apprentice or trainee from 1 July 2016.
Freeze of heavy motor vehicle nominal registration revenue
The Transport and Infrastructure Committee (comprising State, Territory and Commonwealth transport, infrastructure and planning Ministers) has decided to freeze nominal registration revenue for heavy motor vehicles at 2015-16 levels for two years.
Land tax exemption for primary production land in urban zone
The Treasurer announced that to receive the land tax exemption within ‘urban zones’, certain ownership requirements must be fulfilled. The exemption for primary production land in an urban zone will be extended to land owned by certain family superannuation trusts.
The Government has announced that infrastructure investment will average $7.4 billion per year over the next four years, with funding for key projects in urban and regional transport, health and education.
The key infrastructure initiatives announced include:
- Melbourne Metro Tunnel - The Government has confirmed its commitment to the Melbourne Metro Tunnel Project and announced an allocation of $2.86 billion over the forward estimates in addition to the guaranteed $10.9billion funding to fully fund the project.
- Western Distributor project - The Government has announced that it intends to improve travel on local streets by removing trucks from traffic. The 2016-17 Budget commits $5.5 billion to the project, including up to $400 million in funding for the Monash Freeway Upgrade.
- Regional rail services and infrastructure upgrades - the Government has indicated that it will commit $1.3 billion for regional rail services and infrastructure upgrades designed to better connect people and businesses in regional Victoria and $1.9 billion to expand and upgrade the metropolitan rail network.
- Meeting the demands of a growing population - capital funding will be provided to expand government school and hospital capacity and to invest in public transport rolling stock.
Western Australian State Budget
The 2016-17 Western Australian (WA) State Budget was delivered on 12 May 2016. The Budget came in the context of significant challenges to State finances, owing largely to a rapid decline in State revenue. This will result in an estimated deficit of $3.9 billion for 2016-2017, culminating in a net State debt of $33.8 billion.
WA remains committed to various sales of major State assets, which are estimated to raise around $16 billion, and to bring debt ‘to a manageable level’. State asset sales will also assist in funding some major infrastructure projects across the State, many of which are required owing to a significant increase in the WA population during the ‘mining boom’.
The only change to State taxes which the WA Treasurer announced was an increase in the tax-free threshold for payroll tax from $800,000 to $850,000, effective from 1 July 2016. No other tax cuts have been introduced (although there is a rebate for the three years beginning 2015-16 of up to 50 per cent for magnetite royalties paid during the period).
Further details about the Budget announcements are as follows.
- The Government will continue with its plan to sell mature assets to pay down debt and fund capital works going forward. Progress on recent major asset sales in WA includes:
- $135.5 million sale of the Perth Market Authority
- $142.6 million sale of Land to date
- Pilbara Port Assets (Disposal) Bill 2015 (WA) introduced to Parliament
- Fremantle Port due diligence on the proposed lease undertaken, and
- Consultation with the racing industry on the sale of TAB.
- The Government also proposes the sale of Western Power and Horizon Power’s transmission and distribution assets in the Pilbara.
- The current and proposed asset sales programmes are estimated to result in proceeds of around $16 billion (8.4 per cent of the State’s $190 billion asset base).
- The proceeds will be used to retire up $11 billion of State debt (30 per cent reduction in net debt) and create a $5 billion Infrastructure Fund.
Asset Investment Program (AIP) 2016-17
- In 2016-17, the AIP will invest $5.9 billion into State infrastructure projects, distributed as follows:
Click here to view table
- Major transport infrastructure projects over the next four years include:
- $2 billion for the Forrestfield-Airport Link project
- $1.5 billion towards the $1.9billion Perth Freight Link
- $1 billion for the NorthLink WA project, and
- $427 million for the $1.9billion MAX Light Rail project.
- Major electricity utilities infrastructure projects over the next four years include:
- $1.7 billion to ensure Western Power’s network is safe and reliable
- $763 million provision for Western Power’s customer-driven works
- $347 million for Horizon Power to maintain adequate regional electricity supplies, and
- $141 million to maintain Synergy’s generation assets across the South West Interconnected System.
- Other major State infrastructure projects include:
- $782 million upgrade to the Water Corporation’s wastewater treatment plants and country water sources and distribution
- $428.3 million towards construction of the New Perth Museum
- $206.9 million towards construction of the Karratha Health Campus Site, and
- $91.8 million further spending on the Perth Children’s Hospital.
- A particular focus of the WA Budget was WA’s share of goods and services tax (GST) revenue. Currently, WA contributes $2,497 per capita ($6.7 billion in total) towards the Commonwealth’s total GST receipts, but receives only $760 per capita ($2 billion in total) back from the Commonwealth; the remainder being distributed to other Australian jurisdictions. This $4.7 billion ‘discrepancy’ between per capita GST expenditure and per capita receipts was emphasised by the WA Treasurer, to contextualise the $4 billion revenue deficit.
Northern Territory Budget
The 2016-17 Northern Territory Budget was delivered on 24 May 2016. The main change which was announced in the Budget was a discount of up to 50 per cent (capped at $10,000) on the stamp duty otherwise payable when first home buyers
purchase an established home from 24 May 2016 to 20 June 2017.
Further details about this measure and/or incentive is provided below.
First home owners discount
First home buyers purchasing an established home will be eligible for the First Home Owner Discount. The new initiative provides a discount of up to 50 per cent, with a maximum discount of $10,000, on the stamp duty otherwise payable when first home buyers purchase an established home. The Budget states that this initiative is intended to provide short-term stimulus to a slowing residential property market and assist home buyers seeking to enter the housing market for the first time by reducing the barrier of upfront transaction costs. For example, on a home valued at $450,000, the effect of the discount is to reduce the stamp duty payable from about $20,000 to $10,000.
The discount applies from 24 May 2016 to 30 June 2017 and is expected to provide $5.5 million in extra assistance to Territory home buyers. The initiative will complement the existing First Home Owners Grant available to purchasers of new homes.
Tasmanian State Budget
The 2016-17 Tasmanian Budget was delivered on 26 May 2016. The main change which was announced in the Budget was the introduction of a corporate reconstruction/consolidation duty exemption for corporate group reorganisations.
At this stage, the form (including if any pre or post association tests will be legislated, amongst other possible requirements) has not been announced. The introduction of the exemption for corporate group reorganisations will bring Tasmania in line with the other Australian States and Territories.