South Australia State Budget 2023-24 - a win for first home buyers

South Australia's Treasurer Stephen Mullighan has handed down a budget focussed on health and housing, with funding provided to specific sectors and recipients.

Public hospital workers, the indigenous community, and the local space industry are set to benefit from significant investment. First home buyers will also benefit from the removal of stamp duty when purchasing a new home, apartment or land up to the value of $650,000.

The Treasurer projected a $233 million surplus in the last year’s budget for the 2022-23 year. However, following a decrease in GST revenue, extra money spent on the River Murray Flood Recovery Fund and public health, it is now projected to be a $249 million deficit. This is despite increases to tax revenue through stamp duty, land tax and payroll tax which reflects an economy that has been performing well to date. The Treasurer has also acknowledged that it is an economy in transition with expectations of a slowing economy in the short to medium term.

Tax reform has not been high on the agenda of the Malinauskas government. The 2023-24 budget is consistent with the Premier’s election promise not to increase taxes. This follows the large-scale land tax reforms implemented by the previous Liberal Marshall government that has divided opinion.

While healthcare has been a major focus of this budget, Revenue SA and Treasury have been silent on the application of payroll tax to medical centres.

Stamp Duty Relief for first home buyers and tax relief for properties affected by floods

Today’s budget announced the abolition of stamp duty on contracts for the purchase of a new home or vacant land to build a new home on or after 15 June 2023 where a first home owner:

  • Purchases a new house valued up to $650,000, and progressively phased out up to $700,000 and
  • Purchases of new land upon which a new home will be built up to $400,000 and progressively phased out up to $450,000.

To be eligible the new home must be occupied as the acquirer’s primary place of residence.

In addition, purchases of houses and motor vehicles affected by flooding will also be exempt from stamp duty, and there will be land tax relief for business properties and long-term rentals substantially damaged by floods.

The abolition of stamp duty for first home buyers is aimed to encourage young South Australians to access the housing market while encouraging new supply designed to control rising house prices. An eligible first home buyer who enters into a contract to purchase a new home valued at $650,000 on or after 15 June 2023, could receive relief of up to $44,580.

BDO Comment

BDO welcomes these measures that enable access to housing to first home owners. While these measures are economically sound, we would recommend that purchasers ensure that they meet eligibility criteria when more guidance is released.

Stamp duty refunds on student accommodation

Treasurer Mullighan has budgeted for $40 million plus interest of stamp duty refunds following a landmark Supreme Court decision regarding the application of stamp duty to buildings used for student accommodation.

The Valuer General argued that the land at the Atira Waymouth was being used for longer term accommodation and therefore ineligible for the commercial stamp duty exemption. This was challenged by the owners of the property, and the government lost on appeal in November of last year. 

The Supreme Court decision has triggered other student housing providers to request a refund for stamp duty paid. Treasurer Mullighan has vowed to amend the Stamp Duties Act to make it clear that commercial student accommodation buildings are exempt from stamp duty. We are currently awaiting these amendments.

BDO Comment

BDO welcomes this announcement. The previous State Labor Government abolished stamp duty in relation to commercial property and Mullgihan’s 2023-24 budget is consistent with this policy.

With the prospective merger of the University of Adelaide and University of South Australia, this policy should incentivise investment in student accommodation and provide certainty for accommodation providers. Attracting international students is very competitive in a post-Covid world, therefore this policy is critical to the state’s economy in the short to medium term.

Application of payroll tax to general practitioners working for medical centres

Medical, dental and allied health practices with service facility arrangements are at risk of exposure to payroll tax in respect to payments made under these agreements. This follows topical cases in Victoria, New South Wales and a recent ruling (but subsequent amnesty) issued by Queensland Revenue Office. To date, there has not been any guidance released by the South Australia Government or Revenue SA on the issue.

When questioned about the issue, SA Treasury have stated that they will be working with industry to ensure that transitional arrangements are put in place so that medical centres can get up to speed with their payroll tax compliance obligations in this area.

BDO Comment

BDO calls on SA Treasury to release guidance to assist in providing certainty for medical practitioners. We recommend that all current service agreements of Medical Centres are reviewed by a payroll tax specialist to assess any payroll risk and determine whether the Medical Centres and associated practitioners are eligible for any payroll tax exemptions.

Government grant funding and support for small business

Treasurer Mullighan has included the following in the 2023-24 budget papers:

  • $20 million over four years in relation to the Research and Innovation Fund, which is aimed at assisting start-up ventures with commercialisation of a product or service
  • $9 million over three years for equipment and capital grants to support TAFE SA, not-for-profit and industry-based providers to invest in contemporary infrastructure, equipment and technology aligned with areas of skill demand and economic priorities
  • Grants for skill shortages in the following priority areas:
    • Defence
    • Commercial Cookery
    • Brick and Block
    • Concreting and Saw Technology
    • Grants to encourage more women to take up trades
  • Extension of the Video Game Development Rebate. The Video Game Development Rebate is equivalent to 10 per cent of eligible expenditure on video game development work undertaken in South Australia.

BDO Comment

Businesses should consider whether they are eligible for the grants listed above. Applications require specific detail and access to funds is very competitive. We would recommend that you seek assistance from one of our grant specialists when applications open. The extension of the Video Game Development Rebate is warmly welcomed as it is a fast-growing industry in South Australia.

Build-to-rent land tax concession announced

The 2023-24 State Budget introduces a land tax reduction for eligible build-to-rent properties on South Australian land, where construction commences on or after 1 July 2023.

This will apply as a 50 per cent reduction in the land value of relevant parcels of land, where the land is being used as an eligible build-to-rent project.

The land tax reduction will be available from the 2023-24 financial year up to, and including, the 2039-40 financial year. There is an expression of interest application available on SA Treasury’s website.

BDO Comment

BDO welcomes the introduction of these measures noting that they are a promising start for the build-to-rent product within the South Australian property industry. However, there has not been a lot of detail provided to date. We look forward to reviewing the detail. In line with other states, we are expecting that there will be multiple strict requirements that must be met to obtain the land tax reduction. Of key interest will be whether an affordable housing component will be necessary for eligibility and whether landowners will be able to access the reduction within the construction phase or whether the reduction will be limited to completed and operational build-to-rent developments.

If you’d like to discuss the changes outlined in this article and what they might mean for your situation, please contact BDO’s team of specialists in Adelaide.