Australian businesses will be slugged with a new tax to help pay for Victoria’s mental health system overhaul, the state budget has revealed.
The Mental Health and Wellbeing Tax, unveiled in Treasurer Tim Pallas’ seventh budget on Thursday, will hit businesses that pay more than $10 million in national wages with a 0.5 per cent increase, but only from their $10 millionth dollar.
Businesses with national payrolls above $100 million will pay one per cent.
Pallas says the tax will affect less than five per cent of employers.
It will begin on January 1, 2022, and is expected to raise almost $3 billion across four years.
“Many big businesses have continued to profit through the pandemic – pocketing taxpayer subsidies along the way,” he told parliament on Thursday.
“We’re asking those businesses to help deliver a generational reform, after one of the most mentally taxing years of our lives.”
The tax is opposed by the Liberal-Nationals opposition, so it will need the support of the upper house crossbenchers to pass parliament.
Mental health overhaul
It was one of 74 mental health royal commission recommendations, which found the state’s system operates in crisis mode, fails patients and requires a complete rebuild.
The mental health funding includes $1.5 billion to set up 20 local mental health hubs and $954 million to replace 22 existing services.
More than 100 mental health beds will be created and the state’s Thomas Embling Hospital, which treats those found not guilty of crimes on the grounds of mental impairment, will get 82 new beds.
It is also expected to create 3000 jobs in the sector.
‘They are our children, parents, partners and friends. They are us.’
Pallas says half of all Victorians will experience a mental illness during their lives.
“They are our children, parents, partners and friends. They are us,” he said.
The funding outstrips the federal government’s $2.3 billion for mental health services in its budget earlier this month.
Victoria’s big-spending budget also delivers $7.1 billion to hospitals and healthcare, $3.5 billion for education and $3.2 billion for public transport.
Among the revenue-raising measures is a new windfalls gain tax and increased land tax and stamp duty on high-end properties.
The treasurer flagged future cuts to the public service, noting the 9.5 per cent increase in employee expenses wasn’t sustainable.
Pallas said the state’s COVID recovery was going better than initially expected, with an $11.6 billion deficit in 2021/22 – down from a projected $13.1 billion.
A $3.8 billion deficit is forecast in 2022/23 and $2.1 billion in 2023/24, though the treasurer predicts Victoria can achieve an operating cash surplus of $1.1 billion in 2022/23, rising to $3 billion by 2024/25.
Net debt will hit $102.1 billion this year before growing to $156.3 billion in the 2024/25 financial year, about a quarter of gross state product.
The state’s big build program has blown out by four per cent since 2019/20 – costing $3.8 billion – and more than a quarter of the 117 projects will take longer to complete.
Opposition Leader Michael O’Brien said the government should have cut the public sector and reigned in “multi-billion dollar blowouts on projects” to fund mental health reform.
“Instead it’s decided to put a new tax on jobs,” he said.
“Business cannot continue to be taxed to fund project cost blowouts,” Victorian Chamber of Commerce and Industry boss Paul Guerra said.
Victorian Budget 2021/22 Snapshot
- Deficit: $11.6 billion
- Revenue: $74.6 billion
- Net debt: $102.1 billion
- GST Revenue: $6.4 billion
- Total tax revenue: $26.6 billion
- Land tax revenue: $4.2 billion
- Payroll tax revenue: $6.1 billion
- Unemployment: 5.75 per cent
- Total expenditure: $86.2 billion
- Employee expenses: $31.7 billion
- COVID-19 response: $1.3 billion
- GSP: 6.5 per cent
Source: Victorian 2021/22 budget papers