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Home Health Victoria budget 2021 uses big business levy to help fund $3.8 billion for mental health

Victoria budget 2021 uses big business levy to help fund $3.8 billion for mental health

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Big business will be hit with a levy to help pay for the billions of dollars of funding for mental health services outlined in another big-spending Victorian state budget.

Businesses with more than $10 million in national wages will pay the levy through a payroll tax surcharge for their Victorian employees.

About 9,100 companies operating in Victoria, or about 5 per cent of businesses, will be hit with the surcharge.

The Victorian Budget 2021/22 invests $3.8 billion in the state’s mental health system, which a royal commission found had “catastrophically failed” and needed to be rebuilt.

“Many big businesses have continued to profit through the pandemic — pocketing taxpayer subsidies along the way,” Treasurer Tim Pallas said.

Mr Pallas said the government was asking businesses “to help out their community”.

The Mental Health and Wellbeing Levy will begin on January 1, 2022, and is forecast to raise $843 million each year.

The levy means businesses that pay more than $10 million in national wages will now be hit by a 0.5 per cent increase, but only from their $10 millionth dollar. A further 0.5 per cent levy will also be applied to every dollar in wages spent above $100 million.

The spending includes $264 million for 20 new adult mental health and wellbeing services, $954 million for 22 reformed adult and older adult mental health services and $116 million for Aboriginal mental health.

The levy was one of 65 recommendations made by the royal commission, which the Andrews government has committed to implement in full.

Legislation to ensure the levy only funds mental health services will need to pass Parliament. The Opposition has criticised the idea, saying mental health reform should be funded by existing revenue.

In a third-year budget with COVID-19 still hurting the state’s bottom line, there are fewer big ticket sweeteners than might be expected in next year’s pre-election budget.

The forecasts included in the budget rely on the rollout of COVID-19 vaccines continuing and further outbreaks on a state and national level being contained and only resulting in short, local restrictions.

They also assume the number of migrants, tourists and international students into the state will start increasing from next year.

Mr Pallas said while he did not know what the future looked like, he had confidence in population projections that would see a return to a net migration increase “reasonably quickly”.

An outside shot of then university of Melbourne
Melbourne’s universities axed hundreds of jobs as the pandemic cut off international students.(

ABC News: Patrick Stone

)

Alongside mental health, the big winners are state schools, the health system and public transport.

Unsurprisingly, it includes a $1.3 billion total spend on coronavirus-related programs, including the already announced mRNA vaccine manufacturing facility.

Among the big capital works in the budget is $1.6 billion to build new 13 schools and upgrade 35 metropolitan and 17 regional schools, including in Melbourne’s key growth corridors.

It includes $492 million to build 13 new schools, 12 of which are due to open in 2023 and one in 2024.

A further $340 million will be spent on upgrading facilities in 52 schools, including 17 in regional Victoria.

There will be $759 million spent on the state’s crisis-hit ambulance service and a total of $1.4 billion will be spent on hospitals.

The regional payroll tax has been cut, and the payroll tax-free threshold has been lifted to $700,000 for small businesses, earlier than planned.

Many small businesses will no longer have to pay land tax, with the land tax-free threshold lifted from $300,000 to $600,000.

As a result, payroll tax revenue is forecast to decline by 0.9 per cent to $6.1 billion in 21-22.

Debt likely to hit $156bn by 2025

The Treasurer’s seventh budget comes just six months after last year’s budget, delayed due to the pandemic, unveiled record debt and deficit.

The economic picture is much better this time around, with the final deficit for the 2020–21 budget nearly $6 billion less than forecast, at $17.4 billion.

A sold strip added to a 'house for sale' sign.
The government plans to raise billions of dollars in revenue through premium land tax and increased stamp duty.(

ABC News: Ian Cutmore

)

That is expected to sit at $11.6 billion in 2021-22 and shrink to $3.8 billion the following financial year — but the state is expected to remain in deficit throughout the forward estimates.

The big-spending budget has come at a cost, with net debt expected to reach $102.1 billion by June 2022. That number is expected to grow to $156.3 billion by June 2025, which would be 26.8 per cent of the entire economy.

Tax revenue expected to rise

Tax revenue is forecast to be up by $3 billion to $26.5 billion, up $9 billion over the forward estimates.

That includes a 12.7 per cent increase in stamp duty to $6.7 billion, a 15.2 per cent increase in land tax to $4.2 billion and a 7 per cent rise in motor vehicle taxes to $2.9 billion.

After pubs, clubs and gaming venues were shut for much of the last year, gaming revenue is now up by 50.2 per cent increase to $2.3 billion.

Among the revenue-raising measures in the budget are the premium land tax and stamp duty increases announced on the weekend.

Property transactions above $2 million will attract an $110,000 stamp duty plus 6.5 per cent of dutiable value in excess of $2 million.

The government expects this will bring total stamp duty revenue to $6.7 billion in 2021-22 after a fall of 3.1 per cent this financial year.

The increase to land tax for taxable properties worth more than $1.8 million is expected to raise land tax revenue by 15.2 per cent to $4.2 billion in 2021-22, a number forecast to grow by 9 per cent over the forward estimates.

A new windfall gains tax will apply to properties where the value is boosted through rezoning by more than $100,000, with a 50 per cent tax on windfalls above $500,000.

The government has also delayed action on the base review of the public service, with public sector wages to grow a whopping 9.5 per cent next year.

Mr Pallas admitted it was not sustainable, but said the increase was due to increased services for Victorians during the COVID-19 crisis.

It does project savings of nearly a billion dollars in 2023-24 if government efficiencies are followed through.

As expected, there has been a $3.6 billion blowout on the state’s major infrastructure projects, including the extra $1.37 billion for the Metro Tunnel project confirmed late last year.

And the budget has confirmed a total of $442 has been spent on the state’s hotel quarantine scheme since the program started.



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