When the Federal Government introduced the Goods and Services Tax (GST) in 2000, it came with a promise: the new consumption tax would replace a raft of inefficient state taxes, creating a more streamlined taxation system across Australia. The GST was meant to provide states with a stable revenue source while allowing them to eliminate numerous burdensome taxes that hampered economic growth and created compliance headaches.
Yet, 25 years later, Victoria maintains 33 separate taxes, levies, and duties – a complex web of financial obligations that businesses and residents must navigate. According to a recent Parliamentary Budget Office report, these 33 taxes are choking economic growth and blocking Victoria’s path out of debt.
The Growing Tax Burden
The State Revenue Office (SRO), a division of the Department of Treasury and Finance, administers 26 of these taxes, while four other departments collect the remaining seven. This taxation regime generated over $39 billion in the current financial year, with property taxes alone accounting for $18.2 billion – approximately 6% of Victoria’s gross state product, higher than any other state.
Property owners bear the heaviest burden, with 18 separate but overlapping imposts on property ownership, investment, and transactions. These include land tax, vacant residential land tax, land transfer duties, foreign purchaser additional duty, and the recently introduced commercial and industrial property tax.
Recent Additions to the Tax Burden
Rather than reducing taxes as envisioned during the GST’s introduction, Victoria has continued to add new ones. Recent additions include:
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COVID Debt Levies: Introduced in the 2023-24 Budget as temporary measures until 2033, these include a levy on landholdings (reducing the taxable threshold from $300,000 to $50,000) and a payroll tax surcharge for businesses with national payrolls above $10 million.
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Commercial and Industrial Property Tax (CIPT): Introduced in 2024, this annual 1% tax on site value applies to qualifying properties, on top of existing land tax obligations.
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Short Stay Levy: From January 2025, a 7.5% levy applies to short-term rental bookings under 28 days.
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Mental Health and Wellbeing Levy: Introduced in 2022, this adds 0.5% to 1% to payroll tax for businesses with national payrolls above certain thresholds.
The GST’s Unfulfilled Promise
The introduction of the GST was meant to herald a new era of taxation efficiency. States agreed to abolish various taxes, including bed taxes, financial institutions duty, and debits tax. However, many promised tax eliminations never materialised, particularly in the property sector.
Instead of the streamlined system promised, Victorians now face a more complex tax regime than before the GST. According to Charter Keck Cramer researcher Richard Temlett, since first elected, the Victorian government has imposed 29 new or increased taxes on the property sector alone, making it Australia’s most heavily taxed property market.
The Economic Impact
The cumulative effect of these taxes is significant. For businesses like Catten Industries, a sheet metal manufacturer, land tax increases of nearly 230% (from $13,500 in 2023 to $31,000 in 2024) affect their ability to invest in equipment, people, and skills.
Shopping centers like Victoria Gardens in Richmond face millions in additional costs from new levies, potentially leading to higher parking fees and operational costs that ultimately affect consumers. Vicinity Centres, which manages Victoria Gardens, informed tenants that the proposed changes would add $4.5 million to the annual running costs of the centre.
Business groups have voiced concerns about the compounding effect of these taxes. Honi Walker, chief executive of the South East Melbourne Manufacturers Alliance, noted that land tax increases announced as part of the government’s debt repayment plan have hit manufacturing businesses particularly hard, affecting their competitiveness against overseas suppliers.
The Path Forward
Shadow Treasurer James Newbury, who commissioned the PBO study, argues that Victoria’s punitive tax regime is “choking” parts of the economy. “Victorians think we are paying too much tax, and we pay more tax than anywhere else,” he noted, adding that the government’s need for more revenue is “cannibalising economic outcomes.”
As Victoria grapples with a debt forecast to top $155 billion by July, the tension between revenue needs and economic growth remains acute. The original vision of the GST – to simplify taxation and reduce state taxes – seems increasingly distant for Victorians facing this growing tax burden.
The question remains: can Victoria find a path back to the tax reform principles that underpinned the GST’s introduction, or will residents continue to shoulder an ever-expanding array of taxes, levies, and duties?