$1.5 billion in taxes for community funds sits idle in Victoria’s state coffers

The Growth Zones Transit Fund, which collects cash from developers building homes on the city’s fringes, increased from $431.1 million on June 30, 2023 to $637.6 million on June 30, 2025.

“Trust account balances have increased significantly in recent years as funds collected through taxes and other dedicated sources of revenue and revenue have not been spent,” VAGO’s report said.

“Agencies may not immediately spend the funds for their intended purpose, which may leave the community’s expectations unmet.”

Auditor General Andrew Greaves said increased funds added to the state’s balance sheet were risky because they could hide underlying problems with Victoria’s finances.

These unspent trust funds have already reduced the government’s reported net debt and improved the government’s reported operating outcome, which it uses as key indicators of its fiscal management. Allan’s government has been widely criticized for the state’s rising debt levels and this will be a key issue in next year’s state election.

Opposition public transport spokesman Sam Groth said funds from the Growth Area Infrastructure Contributions (GAIC) should be used to meet Victoria’s rapidly growing population.

“Labour is hoarding GAIC funds every year to shore up their budget rather than investing in critical infrastructure for growing communities,” he said.

A government spokesman said Age: “The Victorian economy is strong and we are focusing on what matters most to Victorians – helping with living costs and supporting families, jobs and businesses while opening major projects such as the Metro Tunnel and West Gate Tunnel.

“Due to our strong economic management and fiscal discipline, we are one of three states in Australia forecasting an operating surplus this year.

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“Jess Wilson is presiding over an $11.1 billion black hole in her plans, and that means only one thing: cuts to pay. Cuts to schools. Cuts to hospitals. Cuts to services.”

Age This month he announced the government was looking at changes to infrastructure contributions that would allow money to be spent outside the areas in which they are collected if the money is for infrastructure that “serves the growth area but cannot reasonably be located there”.

The government is also working on a report written in consultation with the real estate industry calling for a new statewide infrastructure charge, which it wants to use to meet demand by encouraging more housing development in developed areas.

Another key issue raised by the Auditor General’s office was how the government reported on its COVID Debt Repayment Plan, which will be valid for 10 years and includes a tax package that will offset $31.5 billion in debt accumulated during the pandemic and $12.7 billion in associated interest expenses.

So far, these new tax measures have raised $4.3 billion since 2023, split between a surtax on the government’s payroll tax and an expansion of land taxes.

Another key part of the plan, the Victoria Future Fund, was set up to act as a giant balancing account and has $9.9 billion; of this, $7.9 billion was raised from the partial privatization of VicRoads and $1.8 billion from land sales and investment returns.

However, none of these figures were detailed until VAGO’s report was published, leading the government to recommend that it publicly report progress on the COVID Debt Repayment Scheme.

VAGO said the government had taken initial steps to resolve financial difficulties but wanted the state to focus more on long-term support.

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Victoria’s net debt It is estimated to reach 194 billion dollars in 2029Gross debt, which covers a wider range of public services and institutions, is estimated to reach $236.6 billion. By this time, interest expenses are estimated to be $9.2 billion per year.

Monday’s report also detailed how the Allan government spent $590 million to rescue the domestic building insurance programme.

This was because the domestic building insurance scheme was run at a loss of $490 million within the Victorian Managed Insurance Authority (VMIA) and responsibility for the scheme was transferred to the new Building and Plumbing Commission.

The bailout was necessary to prevent the commission from having to report a $490 million debt on its balance sheet; the remaining $100 million was used to transfer the remainder of the responsibilities.

Since 2022 and the collapse of homebuilder Porter Davis, domestic building insurance claims have remained high; It peaked at 4,459 claims in 2022-23, up from 680 claims in 2015-16. There were 2703 claims in 2024-25.

Over the past decade, the average claim has increased from $46,000 to $77,500.

VMIA chief executive Andrew Davies told a parliamentary inquiry on Monday there was a 6 to 7 per cent increase in claims in 2024-25, which was “materially substantially greater than we expected”.

VMIA had budgeted $792.5 million but spent $993.3 million, largely due to a boom in domestic building insurance claims.