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. Key points The Mental Health and Wellbeing Levy is forecast to raise $843 million from big businesses each year The levy is opposed by the Coalition, who say mental health reform should be funded with existing revenue The government is forecasting population growth will remain sluggish for years due to the pandemic 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”. “We might think the cost of fixing this system is too great ” but the cost of not fixing it is far greater,” he said. The Mental Health and Wellbeing Levy will begin on January 1, 2022, and is forecast to raise $843 million each financial 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. It will help fund $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. If you or anyone you know needs help Lifeline on 13 11 14 Kids Helpline on 1800 551 800 DirectLine Victoria drug/alcohol counselling on 1800 888 236 MensLine Australia on 1300 789 978 Suicide Call Back Service on 1300 659 467 Beyond Blue on 1300 224 636 Headspace on 1800 650 890 ReachOut at au.reachout.com Care Leavers Australasia Network CLAN on 1800 008 774 HeadtoHelp on 1800 595 212 The Treasurer said the funds would be “ringfenced” to ensure they were only spent on mental health. That will require crossbench support to pass legislation through the parliament. Opposition Leader Michael O’Brien said it was a moral issue that his party would fight. “Mental health should be core business for the state government, the same way state schools are, the same way the police are,” he said. “We don’t have a police levy, we don’t have a schools levy, so why on Earth does Labor want to have a mental health levy.” The Victorian Chamber of Commerce and Industry’s Paul Guerra said the budget provided welcome investment in job creation and he supported the mental health reforms, despite the increased tax on big business. But he said he was concerned businesses were being treated as “a fund of last resort” to prop up other project cost blowouts. 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. Missing numbers in Victorian budget There are some big numbers missing in the Victorian budget and some heroic assumptions about what might happen, writes Daniel Ziffer. The Business Council of Australia’s chief executive Jennifer Westacott voiced stronger opposition to the mental health levy, arguing it set a “very dangerous precedent of fiscal repair which ultimately harms growth”. “While we welcome mental health reform which is much needed to deal with systemic issues and the devastating impact of a long and disproportionate lockdown, an approach that pits some Victorians against others by taxing jobs makes everyone a loser,” she said. “It doesn’t make sense to target employers with a payroll tax hike which will hamstring their ability to create jobs and drive the recovery.” Mental health advocate and former Australian of the Year, Patrick McGorry, said it was a vindication of the royal commission. “I never thought I’d live to see the day when mental health, mental illness treatment, would be at the heart of a state budget,” he said. “We’re seeing history being made, I think we’re seeing the royal commission being vindicated.” International students forecast to return from early next year 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. Melbourne’s universities axed hundreds of jobs as the pandemic cut off international students. Patrick Stone International students are forecast to begin returning first in “early 2022”, while tourist numbers are expected to pick up throughout the year as safe travel zones emerge and international borders reopen. But population growth is still forecast to only reach 1.7 per cent by 2023-24, below the average annual growth rate of 2.3 per cent over the five years before the pandemic struck. 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”. Schools and health big winners 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. But alongside mental health, the big winners are state schools, the health system and public transport. How the Victorian budget has gone down Victorian Chamber of Commerce and Industry Welcomes the funds for job creation but less impressed with the mental health levy’s treatment of business and the hike on stamp duty Victorian Council of Social Service Welcomes mental health funding, warned against the associated levy becoming a “political football” Environment Victoria Is pleased with clean energy spending, wanted to see explicit funding support for the Latrobe Valley Authority to support economic transition away from coal-fired power stations Victorian branch of the Australian Education Union  Finds a lack of emphasis on TAFE funding “extremely disappointing” Business Council of Australia  Warns hitting up big business to pay for mental health funding sets a “very dangerous precedent”, accusing the government of pitting members of the community against one another Mental Health Victoria Welcomes the “historic commitment” to mental health services and calls for the federal government and other states to follow suit Property Council of Australia  Says the state cannot continue to rely on property taxes to “fund our future” and questions whether with wage growth stagnant this is the right time for new taxes Victorian Farmers Federation  Is disappointed the budget “fails to invest in regional freight routes”, but is happy about agriculture investment No to Violence Welcomes funding for perpetrator interventions but is concerned about funding dropping in the forward estimates Unsurprisingly, it includes a $1.3 billion total spend on coronavirus-related programs, including the already announced mRNA vaccine manufacturing facility. And it confirms a total of $442 million has been spent on the state’s hotel quarantine scheme since the program started. 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. There is $18.7 million allocated for safe injecting rooms in the next financial year, and $21.4 million in 2022-23. 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. Want more local news? We offer tailored front pages for local audiences in each state and territory. Find out how to opt in for more Victorian news. 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. 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 on back of stamp duty, land tax Among the revenue-raising measures in the budget are the premium land tax and stamp duty increases announced on the weekend . The government expects the stamp duty increase on property transactions above $2 million 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 plans to raise billions of dollars in revenue through premium land tax and increased stamp duty. Ian Cutmore 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. 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.