NSW State Budget

New South Wales State Budget 2024-25 – Property taxes on the rise while state spending on social housing also climbs

New South Wales Treasurer Daniel Mookhey has handed down the 2024-25 New South Wales State Budget. Emphasis was placed on the provision of affordable housing for essential workers, social housing, and transport investment.

This year’s budget contained tax measures in the areas of property taxes and payroll tax and it is clear that the property-related tax changes are intended to fund a sizable part of the cost-of-living initiatives promoted.

One of the most significant of the tax-related announcements was the move to provide a rebate of payroll tax to medical practices that meet certain bulk-billing thresholds and to provide a waiver for certain historical unpaid payroll tax on General Practitioners (GP) payments.

In the area of property taxes, foreign purchaser duty was increased, foreign surcharge land tax was increased, and land tax threshold indexation was frozen. Further funding was also given to the Revenue Office for increased compliance activities in areas such as land tax.

Bulk Billing support for general practitioners

From 4 September 2024, GP practices who bulk bill at least 80 per cent of their patients in Sydney metropolitan areas and at least 70 per cent of patients in regional areas will receive a payroll tax rebate for the payroll tax they would have otherwise had to pay for contractor GP services. Further, GP contractor payments paid or payable prior to 4 September 2024 will be exempt unless payroll tax has already been paid on those payments. The Bulk Billing Support Initiative will be legislated to provide:

  • A new ongoing payroll tax rebate for contractor GPs at medical practices that meet certain bulk-billing thresholds from 4 September 2024 and
  • A waiver for past unpaid payroll tax liabilities for contractor GP payments up to 4 September 2024.

BDO Comment

BDO welcomes the certainty on historical liabilities and the much-needed relief provided by the payroll tax rebate, which should help keep patient medical costs at a minimum. However, this certainty appears to come at a disadvantage to those practices which have previously complied with their obligations. While this policy change provides guidance going forward around payroll tax for GPs, it would be good to see this rebate extended to practitioners in all medical and allied health services and see the exemption extended to all practices not just those that have unpaid tax debts. Medical centres should take the opportunity to consider the availability of the exemption and the rebate moving forward.

Foreign investor surcharges

From 1 January 2025, the foreign purchaser surcharge duty rate will increase from eight per cent to nine per cent and the surcharge land tax rate will also increase from four per cent to five per cent.

BDO Comment

New South Wales currently has the highest rate of foreign purchaser surcharge duty and surcharge land tax in Australia, which will make it less attractive to foreign investors. So, while this measure will increase revenue generation in the short term, policymakers need to be mindful of the longer-term impacts on the housing supply by making it less attractive for foreign investors.

Indexation of land tax

The Budget included the freezing of annual indexation of the land tax thresholds. This change fixes the land tax threshold at $1,075,000 and the premium rate threshold at $6,571,000. This measure is expected to raise an additional $1.5 billion over four years.

BDO Comment

The fixing of the thresholds, along with the expected increase in land values in New South Wales, will result in increased land tax payable by existing taxpayers and more landowners becoming liable to pay land tax in the future. Investors will likely seek to pass on their increased land tax burden to renters, further compounding cost-of-living pressures.

Compliance crackdown on land tax

The Government will provide additional funding to Revenue NSW. This additional funding is intended to be used to increase land tax compliance revenue, reduce the write-off of tax debts, and increase prosecutions and enforcement to reduce tax avoidance. This measure is expected to increase revenue by $51 million in 2024-25 and $61 million in 2025-26.

BDO Comment

BDO supports the additional funding to ensure greater state tax compliance across all taxpayers. Taxpayers should review their state tax affairs as we expect an increased focus on compliance activities, revenue collection and enforcement.

How BDO can help

If are you interested in expert commentary around tax changes, subscribe to receive our expert insights or contact BDO’s team of specialists in New South Wales to discuss our tax services.