The Australian Retailers Association (ARA) CEO Paul Zahra has labeled the newly released Victorian State Budget for 2023-24 as a “mixed bag”, with concerns raised for medium to large enterprises (MLE).
While the ARA welcomed measures to support small businesses in the state budget, it warned the new COVID Debt Levy will have economic consequences, adding Victoria is now a very expensive place to do business.
According to budget papers, the COVID Debt Levy will apply to big businesses, investors and those who pay land tax in a bid to repay an estimated $31.5 billion in expenditure incurred and revenue foregone by the state.
Businesses with national payrolls over $10 million per year will pay an additional 5% payroll tax for the next decade. Businesses over $100 million per year will pay a further 0.5% - a total of 1.0% increase for $100 million+ businesses.
For smaller businesses, the payroll tax-free threshold has been increased from $700,000 to $900,000 in the next financial year, up to $1 million in 2025, with the threshold being phased out for larger businesses.
ARA CEO Paul Zahra praised sensible concessions for small businesses but warned that increased taxes on large retailers may lead to job cuts or costs being passed onto consumers.
“Today’s Budget contains some positives for small business, but the wider economic implications are concerning,” Zahra said.
“While we understand the Government’s desire to repay debts accrued during the protracted pandemic lockdowns, we’re very concerned about the ramifications of payroll tax hikes on businesses. In effect, payroll tax is a tax on jobs.”
Zahra said the cost of doing business is at a crisis point for many retailers, particularly across supply chains, wages, rents, and retail crime.
“These new and increased taxes are likely to manifest in job losses and increased prices for customers which further contributes to the cost of living crisis,” he said.
“Last week, the Government announced increases to WorkCover premiums and today significant increases to payroll tax – Victoria is one of the most expensive Australian states to do business.”
However, Zahra welcomed the Government’s decision to raise the payroll tax-free threshold for small businesses, up to $1 million by 2025.
“Wage growth has remained strong over recent years, so it’s great that the payroll tax-free threshold will reflect this,” Zahra said.
“This is especially valuable for new small businesses, to have a wider net of tax relief while they’re first getting off the ground.”
Meanwhile, the Victorian Chamber of Commerce and Industry (VCCI) reported that the state budget’s negative changes outweigh the positive initiatives for businesses, raising particular concern for MLEs.
It claimed the increased taxes and levies will hit MLEs and directly impact jobs and investment in Victoria.
Though the Budget provided funding for five of the Victorian Chamber’s top 10 recommendations in its Budget Submission, the VCCI argued additional taxes on medium to large businesses in particular will be difficult to absorb given they are already operating in a tough economic climate with increased costs in energy and supply chain.
Victorian Chamber CEO Paul Guerra said the budget takes Victoria from the most locked-down state in Australia to one of the highest taxing, which also includes the 42% increase on WorkCover premiums.
“The Government says this is the plan to pay off the ‘COVID credit card debt’ but they’re doing that by using medium to large businesses and property owners as an ATM over the next 10 years,” Guerra said.
“It’s certainly a departure from the ‘all in it together’ approach taken throughout the pandemic and this will directly impact jobs and investment in Victoria.”
Elsewhere in the budget, the ARA welcomed funding to support the delivery of an expanded state nomination visa program – streamlining access to skilled labour and praised the Government’s plan to abolish business insurance duties – reducing 1% each year from 2024.
It added that an investment of $30 million in the Business Acceleration Fund will support regulators to make it easier for small businesses to innovate and grow.
Zahra said he looks forward to engaging with the state’s first Economic Growth Commissioner who is expected to investigate productivity opportunities and make recommendations on growth impediments that need to be addressed.
“Victoria represents a quarter of the Australian retail economy so it's critical that we see policies that help rather than constrain growth,” he said.