New South Wales State Budget 2026-27 | Policy levers for residential supply, foreign investment and revenue
The 2026-27 New South Wales State Budget has been handed down by Treasurer Daniel Mookhey, outlining the Government’s fiscal strategy amid ongoing economic uncertainty, moderated revenue growth and sustained cost‑of‑living pressures.
The Budget focuses on cost-of-living relief and investment rather than changes to tax measures or reforms, with a strong emphasis on housing supply, investment facilitation and revenue resilience. Payroll tax, land tax and transfer duties remain the cornerstone of the State’s revenue base, with policy adjustments focused on sector‑specific outcomes rather than structural change.
From a fiscal perspective, the Budget is delivered against a backdrop of annual revenue of approximately $130 billion and a projected deficit of around $2.3 billion, highlighting continued pressure on the State’s balance sheet and the importance of maintaining stable revenue streams and constraining expense growth.
Foreign Surcharge Duty – Settings aligned to housing supply objectives
The 2026-27 Budget announced reform to the foreign investor surcharge regime, waiving the nine per cent foreign purchaser surcharge duty for eligible large-scale build-to-rent and retirement village projects from 1 July 2026. This targeted measure is designed to improve project feasibility and attract offshore capital into key living sectors, recognising the critical role these developments play in addressing housing supply constraints and supporting our ageing population.
These settings operate alongside broader policy objectives that encourage investment into new housing supply and development activity, rather than established residential stock.
BDO comment
By removing a key tax barrier for projects, the reforms position New South Wales as a more competitive destination for global investment while accelerating the delivery of stable rental housing and seniors’ living options. However, the interaction between foreign surcharges, exemptions and development structures can introduce complexity, particularly for cross‑border investors.
Transfer duty and Land tax – Stability maintained, targeted concessions retained
The Budget does not introduce broad‑based transfer duty or land tax reform, with both transfer duties and land tax continuing to represent a significant revenue stream for the State.
Existing concessions for first home buyers remain in place, including:
- Full exemptions for eligible properties up to $800,000
- Concessional rates up to $1 million.
These settings continue to provide targeted support for first home buyers, while maintaining duty as a key contributor to State revenue.
Existing concessions for land tax remain in place, particularly in the build‑to‑rent (BtR) sector.
These include:
- The 50 per cent land tax concession for eligible BtR developments
- Interaction with foreign investor surcharge settings in certain circumstances to support large‑scale residential investment.
These settings are intended to improve the feasibility of large‑scale residential and BtR developments, particularly by lowering the ongoing holding costs associated with land. In doing so, they support participation from both domestic and offshore institutional investors, while reinforcing land tax as a key policy lever for driving housing supply outcomes.
BDO comment
Transaction costs will remain a key consideration for investors, developers and businesses, particularly given the ongoing reliance on transfer duty as a revenue stream for NSW.
The Government’s approach to land tax continues to reflect a shift toward using concessions as a targeted stimulus mechanism. While positive for institutional investors, the rules remain complex, particularly where projects interact with foreign investor surcharges and eligibility requirements.
Payroll tax – Settings unchanged, compliance focus continues
The 2026-27 Budget does not introduce changes to payroll tax rates or thresholds, which remain at:
- 45 per cent tax rate
- $1.2 million tax‑free threshold.
Payroll tax continues to represent a stable and significant source of revenue for the State, with payroll tax being a source of revenue expected to grow over the forward estimates. While no tax reform changes have been announced, the administration of payroll tax remains an area of focus, particularly in relation to grouping provisions and the treatment of contractor arrangements.
BDO comment
With no changes to rates or thresholds, businesses will not see any cost relief. Payroll tax continues to remain an area of heightened compliance risk. Businesses should proactively review their payroll tax compliance obligations, in particular grouping structures, contractor arrangements and relevant contractor exemptions, as Revenue NSW continues to refine data‑matching and enforcement activity.
Continuing tax integrity measures
The Government announced in the Budget that it is maintaining investments in the operations of Revenue NSW’s compliance programs. This investment is expected to result in an estimated $696m of tax owed being collected over the four years until 2029-30.
BDO Comment
BDO welcomes the increase in compliance expenditures to ensure taxpayers are correctly complying with the relevant laws and understand how certain laws apply to their business. Taxpayers need to be more vigilant to ensure they are up to date with any changes to their tax obligations, given that Revenue NSW is likely to be more proactive and step up review activity.
Overall outlook – Incremental reform with a clear policy focus
The 2026-27 New South Wales State Budget reflects:
- Continued use of targeted tax settings to support housing supply and investment
- Stability across major tax bases, including payroll tax and transfer duties
- Ongoing emphasis on revenue sustainability and compliance.
While not a reform‑focused Budget, it reinforces the Government’s strategy of using targeted policy levers to support economic and social priorities while maintaining the State’s fiscal position.
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