NSW Budget 2020-21
With a strong focus on job creation, major tax reform and a plunge into a projected deficit of $16 billion, the NSW Budget for 2020-21 has received mixed reviews. While a projected deficit and investments in contentious areas of the economy have left many people disillusioned and doubtful about the effectiveness of the budget, others have seen positivity in a move away from stamp duty and towards land tax regimes. Additionally, spending on infrastructure and the permanent increase to the NSW payroll tax threshold is welcomed by many business owners across the state.
The Government presented a budget that has both short and long term measures aimed at boosting the state’s economy and weathering the impact of the restrictions imposed by the Government to combat the spread of COVID-19.
The Out and About voucher scheme, while of short-term value, can also assist businesses and the economy in the long-term with an injection of profit generated from sales which can be used to increase staff and reduce unemployment in the state.
The Business Connect Program has received extended funding of $39.3 million to help businesses seek advice and navigate the challenges associated with the COVID-19 pandemic.
The Government has also supplemented their transport, health and educational infrastructure with additional maintenance and construction expenditure. This directly creates jobs and supports the state’s economic productivity. Indirectly, the support for infrastructure in the state raises the value of land and properties, positively impacting the property development sector by making more areas attractive and accessible.
Payroll tax relief
The Treasurer also announced that the tax rate will fall from 5.45% to 4.85% in the next two years while the threshold of the payroll tax will be permanently lifted from $1 million to $1.2 million. NSW businesses that create 30 new roles in NSW will also be eligible for payroll tax relief under the Government’s Job Plus Program. All reforms give residents of NSW more disposable income to boost NSW’s businesses and the overall economy.
Property tax reform
The NSW Government will replace transfer duty and land tax (stamp duty tax) with a single property tax. Homebuyers will have a choice between either paying a one-off transfer duty and land tax or an annual property tax. If the buyer chooses the latter, then subsequent owners will have to adhere as well. While this is a gradual transition, it is still projected to bring $11 billion into the NSW economy in the first four years. This approach also reduces the unpredictability of revenue from property taxes caused by volatility in the property market.
Home ownership is now incentivised with lower rates for owner-occupiers when compared to residential investment and commercial properties. This does not only make it easier for people to become homeowners, but it also makes them more inclined to that direction. This, of course, positively impacts the property development sector, as more people become confident in their ability to purchase and own a home.
While the budget contains sobering figures, it is also promising in a year that has been challenging for the world. We are hopeful at the investment in the state’s jobs and businesses and look forward to a gradual but steady recovery of NSW’s economy.