The NSW Government released the 2023-2024 State Budget on 19 September 2023, the first NSW Labor budget in over a decade. The Budget has a generally positive economic outlook, supported by strong revenue collections primarily from transfer duties, land tax and payroll tax.
Significant funding has been directed to essential services and pay increases for teachers and healthcare workers, with NSW teachers set to be the highest paid in Australia. State government spending has been restrained focusing on affordable housing, family support and support for public sector wages. There have also been major cuts to the previous government’s projects.
For Bentleys’ clients no new significant tax measures were noted but there are several smaller tax changes including the removal and tightening of certain concessions that may impact corporate groups, landowners and property trusts. These are detailed below.
1. Corporate reconstruction relief – the “concessional duty”
The transfer duty exemption in respect of transferring assets during corporate restructures will be removed and replaced with a “concessional duty” charge. The concessional duty will be levied at 10% of the duty that would otherwise by payable had the current duty exemption not applied.
This new duty is intended to apply to corporate restructures that occur on or after 1 February 2024.
As a transitional measure, the current corporate reconstruction relief exemption will continue to be available for acquisitions occurring after 1 February 2024 where the arrangement was entered into before 19 September 2023 and an exemption application is lodged on or before 1 April 2024.
2. Acquisition of interests in land rich unit trusts – Landholder duty
Broadly, landholder duty is levied on acquisitions of significant interests (50% or more) in private companies and unit trusts that hold property (directly or indirectly) in NSW with an unencumbered land value of $2m or more.
The 50% significant threshold will now be lowered to 20% for private unit trusts with an exception for wholesale unit trusts registered with Revenue NSW. The change will apply for acquisitions that are completed on or after 1 February 2024 unless they arose from an agreement or arrangement entered before 19 September 2023.
The current 50% acquisition threshold for private companies will remain unchanged.
3. Principal place of residence land tax exemption – new 25% rule
Under current land tax rules, land held by multiple owners may be exempt from land tax where at least one of the owners treats the property as their principal place of residence regardless of their ownership percentage interest.
The State Government now proposes to limit the land tax exemption to a person occupying the property as their principal place of residence if they own at least 25% of the property.
As a transitional measure, the current land tax exemption rules for principal place of residence will continue to apply for the 2024 and 2025 land tax years. The new measures will then operate from the 2026 land tax year.
4. Expansion of the First Home Buyers Assistance scheme
First homeowners purchasing a new or existing home can receive a stamp duty exemption for purchases up to $800,000, and reduced duty for purchases between $800,000 and $1 million. These rules apply from 1 July 2023.
The previous government’s First Home Buyer Choice, where eligible first home buyers could elect to pay an annual property tax instead of stamp duty, ceased from 1 July 2023.
The Labor government has confirmed that anyone who elected to pay the annual property tax under the First Home Buyer Choice will continue to pay this amount until they sell their property.
5. Other measures
Other measures of note to be introduced include:
- Electric Vehicles – removal of the motor vehicle registration duty exemption from 1 January 2024 and applying the road user charge to electric vehicles.
- Nominal duty increases – Increases in the various fixed and nominal duty amounts. For example, the $10 nominal duty charge is to be increased to $20 and the $50 nominal charge to be increased to $100
- Coal royalty rates – Increase in coal royalty rates by 2.6%, effective from 1 July 2024. Broken down by mining type, the rate for open cut will increase from 8.2% to 10.8%, for underground from 7.2% to 9.8% and for deep underground 6.2% to 8.8%.
- Additional compliance for payroll tax, land tax and transfer duty – The government is making additional investments in the compliance systems of Revenue NSW, and they project this will raise additional revenue.
- Corrections to the land tax threshold – Effective from the 2024 land tax year, the calculation of the land tax threshold will be corrected; the government has found an error in their indexation calculations for the land tax threshold which have been too high and will correct this moving forward
For more information and or advice contact your Bentleys Advisor.
The NSW Budget papers and state tax changes can be found here:
2023-24 NSW Budget papers
2023-24 NSW State Budget – Revenue NSW
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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.