2020 has been full of surprises and the NSW State Budget delivered yesterday was no different. The NSW Government announced a range of measures designed to stimulate the NSW economy – with the biggest proposal being major property reform.
Not unanticipated, was the expected Budget deficit, with NSW Treasurer Dominic Perrottet, stating it will reach $16 billion next year.
The debt and deficit scenario has propelled the Government to deliver a Budget that includes a number of measures that support businesses and create jobs. Those drawing the most interest are: Property Tax Reform, Payroll Tax changes, Infrastructure projects and vouchers to boost spending at entertainment venues and restaurants in the Sydney CBD. In this update, we highlight the standout budgetary steps with insights from BDO’s experts.
NSW Treasurer Dominic Perrottet announced plans to transition from stamp duty to a property tax with purchasers having the option to pay either stamp duty up front or the property tax each year. If property tax is chosen, this will be locked in for future owners of the property. This is big news and the full impact will need to be considered.
Fady Abi Abdallah, Partner, Tax, says stamp duty has long been considered an inefficient tax that adds considerable costs to buying a property – with next steps to see this announcement come into fruition including a consultation process.
“The Government will commence a consultation process seeking feedback from stakeholders on the abolition of stamp duty (and land tax) in favour for an annual property tax. While it is still early stages, the NSW Government aims to create a more modernised tax system that boosts home ownership, home mobility, the economy and jobs in NSW,” Says Fady.
This measure, along with the recent RBA interest rate cut, will likely have a flow-on effect for the property market in NSW such that once it is fully effective, a property boom in NSW will likely follow,” Fady says.
Other property changes included a social housing package, with Indigenous housing stocks to receive over $800 million on new homes or upgrades.
The government announced a number of changes to payroll tax, with the Government hoping the savings will be used by employers to invest in new staff and business growth.
James Trainor Partner, Tax at BDO, says:
"both small and large businesses should welcome relief announced in NSW budget, with a reduction in the payroll rate resulting in NSW moving from one of the higher payroll tax rates in the country, to one of the lower."
“The changes include a payroll tax rate which will be will be cut from 5.45% to 4.85% for 2 years, backdated to start from 1 July 2020. Furthermore, the payroll tax threshold will be permanently increased from $1 million to $1.2 million, says James.
James says the Government estimates 3,500 NSW business will no longer have to pay payroll tax and estimates this will result in $2.4 billion savings to business for this fiscal year, and the next.
“This means that for a company with annual NSW wages of $10 million, they will save $60,000 per annum,” says James.
The Government has also announced a payroll tax exemption for any additional JobKeeper payments to employees above the usual wages they would have received for the work performed.
There was also good news for smaller businesses who don’t incur payroll tax.
“On top of this announcement, SMEs who don’t pay payroll tax will be eligible for a $1,500 digital voucher to cover the cost of government fees and charges, aimed at reducing the burden for businesses,” says James.
Historical investment in NSW infrastructure was announced of up to $107.1 billion over the next four years. Treasurer Dominic Perrottet says this will stimulate the economy and support the community in one of the most challenging periods of their time.
New funding has been allocated to projects of all sizes and to all across regions included much needed projects for public services and natural disaster resilience.
In the next 12 months $30 billion has been allocated including $18.2 billion on transport, $2.1 billion on health and $1.2 billion on education. Highlight projects include Sydney Metro West, Princess Hwy upgrades, Shoalhaven Hospital redevelopment, new and upgraded schools infrastructure funding, digital programs and justice.
Grant Morris, Partner Infrastructure Advisory says, “The government's funding commitment to critical infrastructure in Metropolitan Sydney and Regional NSW is welcomed. Maintaining a strong infrastructure pipeline will be important to our economic recovery - supporting jobs and growth, improving connectivity, providing essential services and strengthening supply chains.”
Hospitality and Entertainment
With the hospitality and leisure sector facing the most negative impact due to COVID-19, the NSW government announced incentives to boost spending on hospitality and entertainment venues.
As part of the plan, every adult in NSW will receive $100 in vouchers to spend at hospitality and entertainment venues. These vouchers will be divided into four $25 vouchers – with two for nominated hospitality venues and the remaining two for entertainment venues such as galleries, cinemas, amusement parks and theatres.
National Leader for Tourism, Leisure and Hospitality Clayton Eveleigh says, “This is a pleasing move by the NSW Government to stimulate one of the hardest hit sectors, following a lack of support in the most recent Federal Budget. The CBD hospitality and entertainment businesses are the most at risk of recovering from lingering restrictions and changed behaviours so it is positive to see a measure that’s clearly directed at supporting those venues.’
If you would like more information on the changes outlined in this article, contact Fady Abi Abdallah, James Trainor, Grant Morris or Clayton Eveleigh. For all other enquiries, contact your local Partner.