Victorian homeowners will be hit with the heaviest property tax in Australia from the 2023-2024 financial year onward as the state Labor government carries out its COVID-19 debt repayment plan.
According to a new report by the Victorian Parliamentary Budget Office, Victorians will need to pay an estimated property tax (land transfer duty plus land tax) of $2,000 (US$1,336) per person in the current financial year, followed by New South Wales (NSW) and Queensland residents at around $1,800 and $1,300, respectively.
In addition, Victoria’s property tax per capita is expected to soar to $2,400 by 2026-2027, while other states and territories will only see slight changes.
By 2025-2026, Victoria is forecasted to generate the highest property tax revenue among the jurisdictions at $16,4 billion, of which $8.8 billion will come from land transfer duty and the remaining from land tax.
The report also found that Victoria would continue to be the most dependent on property tax in the coming years, with 17 percent of the state’s total revenue expected to derive from property tax by 2025-2026.
In comparison, NSW will rank second at around 14 percent, while other jurisdictions will be below 10 percent.
“Victoria is expected to rely more heavily on property taxes to generate revenue than any other state,” the report stated.
“This reliance on property taxes partly reflects lower revenue from other sources, such as commonwealth grant revenue and royalties.”
The figures come after the Victorian government introduced a COVID-19 debt repayment plan to pay off the massive debt caused by its pandemic policies in the past few years.
The debt repayment plan resulted in significant changes to the tax-free threshold for general land tax rates, as well as additional charges for homeowners from July 1, 2024.
Victoria’s Massive Public Debt
According to the state’s latest budget, Victoria borrowed $31.5 billion to pay for its pandemic policies, which plunged the capital city of Melbourne into the world’s longest lockdown and devastated local businesses.
The huge debt has forced the Labor government to roll out a repayment plan to address the amount owned in the next decade.
The plan specifically targets large businesses and property owners whom the state government argued had made big profits during the pandemic, resulting in harsh criticisms from the business community.
The state also announced it would axe 3,000-4,000 jobs in the public sector and abolish payroll tax exemption for a number of private schools.
Despite introducing various measures to reduce debt, Victoria is expected to see a sharp rise in government debt in the coming years.
Victoria’s net debt is forecasted to hit $116.9 billion in 2023 before soaring to $171.4 billion in 2027.
However, the Labor government is continuing to pursue expensive infrastructure development despite the state’s bleak financial situation.
The Australian Financial Review reported that the Victorian government set aside a “mysterious” $75 billion spending fund in the state budget to splurge on infrastructure and government agencies without telling taxpayers how it would use the money.
Response from the Victorian Government
Following the report’s release, the state government defended its property taxes, citing Australian Bureau of Statistics data that Victoria remained the second-lowest revenue state in the country.
“The report also notes that these figures cherry-pick one tax type and don’t show the whole picture,” a Victorian government spokesman said in comments obtained by AAP.
“Australian states have structurally different economies and different levels of reliance on revenue sources, and it does not consider revenue sources other than land transfer duty and land tax.”
Meanwhile, Opposition Leader John Pesutto alleged that the state’s high taxes were due to the Andrews government’s waste and mismanagement.
He also noted that each extra dollar in property taxes would cause rents and property prices to go up.
“With Victoria’s rents already rising at the fastest rate in the nation, higher property taxes will only make a bad situation worse and push secure, affordable housing for many Victorians even further out of reach,” Mr. Pesutto said.
Echoing the sentiment, Liberal MP Jess Wilson, who commissioned the report, said higher property taxes would worsen housing affordability in the state.
“It means fewer homes. It means as property owners are slugged with higher land tax bills. Less and less homes are going to come into the rental market, and that’s not going to fix our housing supply shortage in Victoria,” she said.
