2022-23 Victorian State Budget

5 May 2022

George Papadakos, Sarah Malek, Stephanie Chong, Lloyd Bittar

In Brief

The 2022-23 Victorian State Budget was delivered on 3 May 2022 by Treasurer Tim Pallas. 

Similar to last year’s Victorian Budget, the 2022-23 Victorian Budget focuses on recovery from the economic impact of COVID-19 with the view of returning to an operating surplus and stabilising debt levels over the medium term. There is an emphasis on boosting the Victorian economy through investment of $22.2 billion in new output initiatives and $6.7 billion in new asset initiatives.

Following last year’s signs of recovery, the Victorian Government anticipates total revenue for the general government sector for 2021-22 to come in at $81.9 billion, an increase of $3.9 billion from the 2021-22 budget update with revenue growth then expected to average 2.8% a year over the forward and budget estimates, reaching $91.4 billion in 2025-26. In 2021-22, total expenditure is expected to be $99.5 billion before reducing by 9.7% to $89.8 billion in 2022-23, with growth in expenditure expected to remain moderate until reaching $90.8 billion in 2025-26. 

Net debt is projected to be $167.5 billion by June 2026, lower in each year of the forward estimates than was forecast in the 2021-22 budget update. 

Taxation revenue is expected to increase by 1.4% in 2022-23 and grow by an average of 4.7% per year over the forward estimates, showing a slight decrease compared to last year’s estimates.

In line with the previous Budget, healthcare is a key priority, as well as increasing jobs, providing affordable housing and investing in infrastructure in the transport and education sectors. The Budget also focuses on initiatives to improve the Victorian mental health system and build stronger support for children and victims of family violence. 

In Detail

The Victorian Future Fund 

The Victorian Government will set up the Victorian Future Fund to manage the fiscal impact of COVID-19 and support the State’s debt stabilisation strategy. The fund will be established using proceeds from the VicRoads Modernisation Joint Venture, in which the Victorian Government intends to partner with a private organisation to modernise a number of VicRoad’s services. The fund is projected to have a balance of approximately $10 billion in the medium term, and will be supplemented by investment returns, land sales and a proportion of future budget surpluses once net debt stabilises. Both the initial investment and future returns will be used to repay COVID-19 borrowings. 

Pandemic Repair Plan 

The Pandemic Repair Plan includes more than $12 billion to enhance Victoria’s health system. This includes:  

  • $4.2 billion to further support the management of the COVID-19 pandemic;
  • $1.5 billion to provide increased surgery capacity;
  • $1.3 billion for the expansion of Victoria’s current mental health services;
  • $698 million to deliver virtual healthcare in the home;
  • $333 million to increase call-managing and dispatch capacity of Triple Zero services;
  • $218 million to improve mental health beds and better acute care services;
  • $124 million for the recruitment of paramedics and the development of fleet management.
Infrastructure Spend 

Investment in infrastructure is expected to average $21.3 billion a year over the budget and forward estimates and the Victorian Government will continue to focus spending on infrastructure across various sectors, including:

  • $6.7 billion to continue the development of existing infrastructure programs, including $3.5 billion to strengthen current transport networks and $383 million for additional train services. A further $993 million investment is to be made to facilitate improvement across Victoria’s road network;
  • $5.3 billion toward social and affordable housing, with a further $1 billion in low interest loans;
  • $2.9 billion to increase capacity and renew infrastructure across Victoria’s health and mental health systems;
  • $2.6 billion for activities associated with hosting and promoting the 2026 Commonwealth Games, such as building and upgrading sporting venues and accomodation;
  • $1.6 billion for the construction of new schools, with upgrades and continued maintenance for existing schools.
Community Support 

Community support initiatives in targeted areas, including:

  • $940 million for initiatives primarily focused on improving outcomes for women;
  • $504 million further funding for Victoria’s Early Intervention Investment Framework to improve life outcomes for individuals, particularly from disadvantaged backgrounds;
  • $400 million for support services related to the Aboriginal community; 
  • $342 million for the recruitment of more police and protective service officers;
  • $135 million to support Victorians with disabilities ineligible for the NDIS, while providing support services through the health, justice and child protection service systems; 
  • $132 million to supplement family violence support services.
Jobs

The Budget invests in job creation and support for insecure workers by providing $246 million to deliver the Sick Pay Guarantee pilot, targeted toward workers in selected industries who do not otherwise receive entitlements such as sick and carer’s leave. Additionally, the Budget funds $120 million to support onshore manufacturing and small business, further development of supply chains and attracting business investment in Victorian production.

Education 

The Victorian Government detailed their commitment to boost the education sector by providing:

  • $1.8 billion for the construction of new schools and the upgrade to existing schools, along with the continued maintenance of current facilities; 
  • $779 million to facilitate recruitment of approximately 1,900 more teachers; and 
  • $277 million investment to transform the Victorian senior secondary education system, with a focus on the accessibility of vocational training in secondary schools.
Key tax measures announced in the Budget

Gambling taxes 

From 1 July 2023, electronic gaming machines operated by Crown Casino will be subject to the same tax structure as electronic gaming machines operated by venue operators with club entitlements. This will increase the maximum marginal tax rate for machines operated by Crown Casino from 31.57% to 60.67% (plus the 1% Community Benefit Levy). 

Wheelchair Accessible Commercial Passenger Vehicles  

From 1 July 2022, the sale or transfer of wheelchair accessible commercial passenger vehicles that provide unbooked services will be exempt from motor vehicle registration duty.  The exemption will only apply to the sale or transfer of eligible vehicles that are less than two years old.  

The Takeaway

The emphasis on this year’s Budget continues to focus on recovery from the global pandemic and spending in the health (through the Pandemic Repair Plan) and infrastructure sectors.  However, as the Victorian economy recovers from the pandemic, there is also a focus on addressing the State’s net debt over the medium term.  Whilst there was very little by way of revenue initiatives, the State Taxation and Treasury Legislation Amendment Bill is to be tabled into Parliament next week. If recent experience tells us anything, we should expect to see some “tax initiatives” in that Bill. 

Contact us

Barry Diamond

Partner, State Taxes, PwC Australia

Tel: +61 (3) 8603 1118

Rachael Cullen

Partner, Tax, PwC Australia

Tel: +61 409 470 495