The Victorian COVID Debt Recovery Plan “levy”

By Warren Strybosch

The COVID-19 pandemic has brought about unprecedented economic challenges globally, with governments around the world implementing various measures to mitigate its impact. One such measure that has been proposed in some countries is the COVID Debt Recovery Plan "levy." This levy is intended to help recover the significant debts accumulated during the pandemic and support economic recovery in the aftermath.

The COVID Debt Recovery Plan levy is a financial mechanism whereby a specific percentage or amount is imposed on certain individuals, households, or businesses to contribute towards repaying the debts incurred due to the pandemic. The idea behind this levy is to distribute the burden of debt repayment more equitably and ensure that those who have the means to contribute bear a fair share of the recovery costs.

With the increasing Victorian debt, the Labor government, in a bid to find ways to raise further revenue, have decided to source additional revenue via their so called, Covid Debt Recovery Plan, by taxing large businesses and those with additional land as follows:

• From 1 July 2023, large businesses with national payrolls above $10m a year will temporarily pay additional payroll tax. A rate of 0.5% will apply for businesses with national payrolls above $10m, and businesses with national payrolls above $100m will pay an additional 0.5%. The additional rates will be paid on the Victorian share of wages above the relevant threshold and are estimated to raise $3.9 billion to repay COVID Debt over four years.

• From 1 January 2024, the tax-free threshold for general land tax rates will temporarily decrease from $300,000 to $50,000. The family home will remain exempt from land tax. Those who pay land tax will attract a temporary additional fixed charge starting at $500 for landholdings between $50,000 and $100,000.

There will be a $975 fixed charge for landholdings above $100,000 and the tax rates will temporarily increase by 0.1 per cent for both general and trust taxpayers with holdings above $300,000 and $250,000 respectively.

These changes are estimated to raise $4.7 billion to repay COVID debt over four years.

Proponents of the COVID Debt Recovery Plan levy argue that it promotes fiscal responsibility and helps avoid longterm economic instability. By sharing the burden of debt recovery across the population, it reduces the strain on government finances and prevents excessive borrowing, which could lead to inflation or increased taxes in the future.

Additionally, it ensures that those who have profited or remained financially stable during the pandemic contribute their fair share towards rebuilding the economy.

However, critics of the levy express concerns about its potential negative impact on already struggling individuals and businesses.

They argue that imposing additional financial obligations could hinder economic recovery by reducing consumer spending and stifling business growth.

Let’s face it. The Victorian government is nearly at a crisis point regarding their current debt levels. They know they must find more ways to increase revenue and so it makes sense to them to introduce a ‘levy’ and target big business and those more fortunate than us to cover the bill.

Accountant

By Warren Strybosch

The ATO is likely to issue fewer refunds as they tighten on expense claims related to rental properties, work claims and capital gains tax (CGT).

The Australian Taxation Office (ATO) has outlined its focus areas for the 2023-24 financial year, with particular attention being given to rental properties, work claims, and capital gains tax. These areas have been identified as priorities due to their potential for noncompliance and revenue leakage.

The ATO Assistant Commissioner, Tim Loh, has stated, “Within these areas we have identified common mistakes and are particularly focused on addressing these and supporting taxpayers and registered tax agents to get their claims right this year.”

Rental properties have long been a key area of interest for the ATO. With the rise of the sharing economy and the increasing popularity of platforms such as Airbnb, the ATO is keen to ensure that taxpayers accurately report their rental income and claim only legitimate deductions. The ATO will be scrutinizing claims related to rental income, expenses, and depreciation to identify any instances of overstatement or fraudulent reporting. Taxpayers will need to maintain accurate records and ensure they understand the rules and limitations around rental property deductions to avoid potential audits or penalties.

“We expect fewer people will receive a refund or may receive smaller refunds than they were expecting, and more may have tax debts to manage.”

Mr Loh said nine out of 10 rental property owners were getting their returns wrong with errors such as omitting rental income, overclaiming expenses or claiming for improvements to private properties.

With 87 per cent of landlords using tax agents to prepare their returns, the ATO said its analytics systems could now highlight residential property loans along with other rental data.

“We encourage rental property owners and their registered tax agents to take extra care this tax time and review their records before lodging their return,” Mr Loh said.