The NSW Perrottet Government has handed down its first state budget before the next state election scheduled for 25 March 2023.
Against an economic backdrop of inflationary pressures, rising energy costs and higher interest rates, the NSW Budget 2022-23 has focused on housing affordability, family subsidies and women’s workforce initiatives.
In terms of future economic outlook, the NSW Government is expecting unemployment rates to remain around current historic lows of 4% with an ongoing tight labour market, and strong growth in demand for goods and services.
Overall, the NSW economy is expected to grow over the Government’s forecast to 2025-26, supported by the current strong demand for labour in the nearer term. A budget deficit of $11.3 billion has been reported with a projected return to budget surplus by 2024-25.
Post pandemic, global supply chains and logistics are expected to continue to face challenges with ongoing COVID-19 impacts in addition to global risks and uncertainty in relation to the conflict in Ukraine.
Revenue raising initiatives
The majority of businesses will welcome that there are no proposed new business taxes in NSW.
In terms of new revenue raising measures, the areas of note:
- Aligning online and offline betting taxes to 15%. This reform is expected to raise state revenues by $740m over four years to 2025-26
- Lowering the land tax early payment discount from 1.5% to 0.5% from 1 January 2023. The discount is provided where land tax is paid within 30 days of assessment
- The future Economy Fund will offer grants and payroll tax exemptions to encourage businesses of future industries to establish or expand in NSW
First Home Buyer Choice Scheme
A key plank of the NSW Government’s budget is the “First Home Buyer Choice Scheme” which allows first home buyers the choice to pay an annual property tax (effectively a form of land tax) as opposed to paying upfront stamp duty for cost of properties up to $1.5m.
The annual property tax will be indexed annually and is proposed to be levied at $400 plus 0.3% of the home owner’s land value or at $1,500 plus 1.1% of the land value if the property becomes an investment. If the property is sold, a future purchaser will not be locked into the scheme.
The First Home Buyer Choice Scheme is intended to come into effect in the second half of this year with first home buyers being able to participate in the scheme from 16 January 2023. For certain contracts exchanged before 16 January 2023, a refund of stamp duty to eligible first home buyers may be available, the details of which remain to be seen.
The NSW Government has also noted that first home buyers will continue to be eligible to apply for full stamp duty exemption for properties up to $650,000 and concessions will remain in place for properties between $650,000 and $800,000. This is governed under the state Government’s current First Home Buyer Scheme.
Pilot Shared Equity Scheme
First home buyers who are either single parents, older singles or first home buyers that are nurses, teachers or police may be eligible to participate in a pilot program where the state Government will assist housing purchases by taking an equity stake in the acquisition. This appears to have some similarities with Labor’s shared equity scheme at the Federal level.
Foreign Property Ownership – Land Tax Surcharge to double
Foreign investors are currently subject to 2% foreign land tax surcharge on residential land. Under the new State budget proposals the land tax surcharge is to increase from 2% to 4%.
Other budgetary measures
The NSW Government is proposing a range of other measures which include:
- A $5 billion, 10 year funding program to assist private childcare providers to provide additional childcare places. The funding is to be applied for under a competitive tender process
- Parents may be entitled to receive up to $2,000 in subsidies per child aged four and five in the form of reduced childcare fees. There will also be up to $4,000 a year in fee relief for children aged three to five at community or mobile preschools funded by the NSW Department of Education. Parents with children in primary school or high school may be entitled to a $150 bonus to help fund school supplies
- Women focused initiatives include funding to increase workforce participation, improve safety, support women in small business and also health commitments for affordable fertility treatments and menopause hubs
- From 1 November 2022, drivers using an overseas drivers licence for more than 3 months will need to pass a drivers licence test in NSW
For further information please contact your local Bentleys advisor.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.