The tax rate will be set at 2.75 per cent of the net market value of gold production - Victoria is the only state without a gold mining royalty, however it will kick in on January 1 2020.

It's expected to raise $27.8 million each year.

Ballarat Gold Mine's general manager Stephen Jeffers said he was extremely disappointed with the government's decision.

"I'm pretty disappointed with the government for doing this," he said.

"It'll cost us around an extra $2 million a year... all it does is add to our cost base, it doesn't do anything positive at all.

"We're not opposed to all taxes and royalties, however they need to be done correctly."

These sentiments were echoed by Minerals Council of Australia Victorian executive director James Sorahan, who told The Courier the tax could lead to mines closing prematurely.

"(The tax) ignores the fact that in Victoria there is a lot of ongoing exploration spending to keep a mine open," he said.

"That kind of spending would likely be the first thing to go from mines should this tax come into play.

"The issue with cutting exploration would be that it could lead to a mine closing prematurely... gold in Victoria is quite hard to find so it takes time."

Mr Sorahan added his doubts the tax would be fair within an industry that fluctuates as frequently as the gold price.

"This royalty doesn't work for a gold industry that is constantly going up and down in price. It makes life very difficult for gold mines because they would pay the royalty whether they are successful or not."

Victorian treasurer Tim Pallas' department said the tax would only affect five companies across Victoria, which account for 99.8 per cent of the state's gold production.

Castlemaine Goldfields, which the Ballarat Gold Mine is a part of, was among the five companies listed.

Minister Pallas added this tax was something Victorians needed.

"We're seeing an extraordinary gold resurgence - acting now is essential for Victorians to secure a fair return from the resources dug from our soil," he said.