Victorian budget: Payroll tax threshold to lift to $900,000 on July 1

The Victorian government has re-announced upcoming changes to payroll tax for the state’s businesses, with the first of two increases to the payroll tax-free threshold due to take effect on July 1 this year.

In May 2023, Treasurer Tim Pallas announced the state’s payroll tax threshold would increase from $700,000 to $900,000 from July 1, 2024, and again to $1 million in 2025, which will see some 6,000 businesses no longer needed to pay payroll tax.

Including the measure again in the 2024-25 state budget on Tuesday, the government reiterated that an extra 22,000 businesses will see their payroll tax bills reduced, and the payroll tax-free threshold will be phased out for larger businesses to ensure the reforms are well-targeted.

Victorian businesses currently pay a payroll tax rate of 4.85% if their annual payrolls exceed $700,000. For eligible regional businesses, the rate is set at 1.2125%.

The government also referenced its plans to gradually abolish business insurance duty over the coming 10 years in the budget papers.

This gradual reduction will begin on July 1, 2024, with the government estimating it will save Victorian businesses more than $516 million in the first four years.

This will happen alongside a decision to gradually eliminate stamp duty on commercial and industrial properties, which was also previously announced.

The state budget papers also allocate $2.3 million for Victorians who run small businesses, or want to start one, via the Small Business Toolkits program.

This program offers advisory and “capability building” services, as well as virtual mentoring.

The government said it also plans to continue running its Small Business Bus, which travels to regional areas to provide advice and support to small business operators.

Meanwhile, Treasurer Tim Pallas’ 10th budget was a mixed bag for the state’s startups.

The budget papers contain an additional $40 million for the state’s startup agency LaunchVic, which directly invests in startups through funds like the Alice Anderson Fund and the Hugh Victor McKay Fund.

However, Breakthrough Victoria — the investment fund helmed by former Premier John Brumby — will see its funding reduced by $90 million a year over the coming four years.

While Breakthrough Victoria also directly invests in local startups, including the likes of RayGen Resources and Zena Sport, it has also provided funding to international firms, including $37 million in US-founded stratospheric exploration startup World View, announced this week.

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