A View on the 2025/2026 Victorian Budget

Introduction

Victorian (VIC) Treasurer Jaclyn Symes has handed down her first Allan Labor Government Budget for VIC (the Budget).

The 2025-26 Budget is focused on managing the financial challenges posed by the COVID-19 pandemic and global inflationary pressures, while continuing to invest in critical services and infrastructure. The Budget focused on providing cost-of-living help to families, investing in frontline services and aims to restore the state’s financial position through a five-step fiscal strategy, which includes reducing non-priority spending.^[1]

VIC’s total revenue is expected to be $108.3 billion in 2025-26 with a projected growth of an average of 2.6% per year, reaching $116.9 billion in 2028-29. Of this, the total tax revenue for 2025-26 is estimated to be $41.7 billion, with a projected average growth of 4.7% per year over the forward estimates. Against this backdrop, net debt is expected to be $155.5 billion at June 2025, increasing to $185.2 billion by June 2028.^[2]

No major tax measures were announced in this Budget. However, previously announced measures to replace the Fire Services Property Levy (FSPL) with the Emergency Services and Volunteers Fund (ESVF) was passed by Legislative Council on 16 May 2025.

Budget key tax updates

Compliance programs

An estimated total expenditure of c$15.4 million has been identified for State Revenue Office compliance programs in 2025-26, with a remaining total expenditure of $12.3 million remaining.^[3]

Stamp duty

Duty transfer concession for off-the plan residential

The Government has announced extending the temporary land transfer duty concession for off-the‑plan apartments, townhouses, and units for 12 months so that it applies to contracts signed on or after 21 October 2024 and before 21 October 2026.^[4]

Insurance duty

Duty is payable on general insurance premiums, excluding life insurance, at rates up to 10%. From 1 July 2024, business insurance duties for certain classes of business are being progressively abolished. From 1 July 2025, the rate will be 8%, with this rate being reduced by 1 percentage point each year and full abolition of business insurance duty for certain classes of business by 2033.^[5]

Land tax

Land valuations

In VIC, land tax is assessed annually at a general rate of up to 2.65% and foreign / absentee surcharge rate of 4% on the unimproved value of land (site value). Certain categories of land, such as principal places of residences, primary production land or land used by certain charities may be exempt from land tax.

The unimproved value of land for 2025-26 is expected to decrease, following a decline in Victorian dwelling prices across 2024. Commercial land values are also expected to decrease, due to high but stabilising vacancy rates in office spaces in inner Melbourne. Industrial land value growth is expected to ease but remain high in the near term due to ongoing demand for logistic services.^[6]

Payroll Tax

Tax-free threshold increase

Currently, payroll tax in VIC is imposed at a rate of 4.85% (for metropolitan employers) or 1.2125% (for regional employers) on taxable wages in excess of $900,000.

From 1 July 2025, the tax-free threshold will increase from $900,000 to $1 million.^[7]

As previously introduced, from 1 July 2024 the deduction is subject to a degree of phasing out. Currently, the phase out rate is 45%. From 1 July 2025 and each subsequent financial year, the phase out rate is 50%.  This means that there will be no relief available for employers with taxable wages above $5 million.^[8]
 

Payroll tax and the medical industry

While not formally included in the 2025-26 Budget, the State Taxation Further Amendment Act 2024 (Vic) (Amendment Act), which received Royal Assent on 3 December 2024, introduces a payroll tax exemption for wages paid or payable to contractor and employee general practitioners (GPs) in respect of fully funded consultations, including bulk-billed services, from 1 July 2025.

This follows the Victorian Government’s announcement on 22 May 2024, aimed at alleviating the payroll tax burden on GPs for services funded entirely through public health mechanisms.

Currently, medical practices may be liable for payroll tax where they engage GPs under a ‘relevant contract’ (as defined in the Payroll Tax Act 2007 (Vic)), unless a specific exemption applies.

The Amendment Act introduces a payroll tax exemption that applies to the extent that wages paid to a GP (referred to as a ‘relevant person’) relate to fully funded consultations (includes Medicare benefits, incentive payments, statutory entitlements and consumables used in the administration of vaccinations. A formula is to be used to calculate the eligibility of the exemption.

Fire services levy

The Fire Services Property Amendment (Emergency Services and Volunteers Fund) Bill 2025 was passed on 16 May 2025^[9], replacing the FSPL with the ESVF, which in most cases will double the variable rate of the levy from 1 July 2025.

Changes under the ESVF

From 1 July 2025:

• The vacant land category will be abolished, with vacant land allocated to its corresponding land use classification (e.g. vacant industrial land will be reclassified as industrial land).
• Variable rates will increase to raise additional revenue to fund the services being covered by the ESVF (see Table 1).

From 1 July 2026:

• A new category will be created for residential PPR.
• Non-PPR residential properties will incur the non-residential fixed charge.

The ESVF will be collected by councils and will appear on rates notices.

ESVF rates

Variable rates will be higher under the ESVF than the FSPL. Fixed rates will continue to be set in alignment with CPI.

A comparison of current FSPL rates and ESVF rates for 2025-26 is outlined below in Table 1. The Treasurer will set ESVF rates each year (in a similar process to the existing FSPL).

Table 1: Comparison of 2024-25 FSPL and 2025-26 ESVF variable rates (cents per $1,000 CIV)