The NSW State Labor Government has admitted “the 2024-25 Budget projects a deficit of $3.6 billion in 2024-25, down from the $0.5 billion surplus projected in the 2023-24 Half-Yearly Review”.
So, what does the State Budget offer to the NSW business community? From a State Tax revenue exercise, foreigners have been asked to pay more when it comes to acquiring and holding of NSW property. Below we list the more salient business matters affecting the Small to Medium Enterprises of NSW.
1. Land tax thresholds administrative indexation arrangements
The land tax threshold and premium rate threshold are indexed based on annual growth in average land values across NSW over the previous three years.
In the 2024 land tax year (commencing 1 Jan 2024), the land tax threshold was set at $1,075,000 and the premium rate threshold was set at $6,571,000. From 1 January 2025, (2025 land tax year), administrative indexation arrangements will be aligned with most other jurisdictions by fixing the land tax thresholds at their current 2024 land tax year values. This is expected to increase revenue by $1.5 billion over the four years to 2027-28.
2. Increase in foreign investor surcharges
Foreigners will be paying more taxes to acquire and hold NSW land.
From 1 January 2025 (2025 land tax year), the Government will increase the foreign owner land tax surcharge from 4% to 5%.
From 1 January 2025, the Government will also increase the foreign purchaser duty surcharge from 8% to 9%.
3. Revenue-NSW increases compliance activity
The NSW Government will increase its revenue compliance activities.
The NSW Government will increase its diligence in pursuing opportunities to obtain more revenue through increasing compliance with NSW revenue laws.
The areas of focus will include:
a. Land tax compliance: this could include ensuring exemptions from land tax e.g. the rules relating to primary production exemption; principal residence exemptions are strictly complied with.
b. Reduce decision to write-off debt: this could include Revenue-NSW adopting a more ‘intransigence approach’ to collecting outstanding debt; including not backing off from collecting outstanding parking fines, land tax and payroll taxes; and,
c. Increase prosecutions and enforcement to reduce tax avoidance: with the passing of anti-tax avoidance legislation in May 2022, the NSW Government will have an easier task of pursuing those engaged in avoidance of State taxes
4. Bulk-Billing Support Initiative – payroll tax relief
Recent Court decisions and the position adopted by Revenue-NSW meant that payroll tax was applicable to payments made by medical clinics to general practitioners (GPs).
However, in a sign intended to convey support/encouragement for GPs to continue with bulk-billing arrangements; the NSW Government will exempt past, unpaid payroll tax liabilities for payments made (only) to GP contractors up to 4 September 2024.
From 4 September 2024, medical centres that meet requisite bulk-billing thresholds will be eligible for a payroll tax rebate associated with payments to contractor GPs.
This payroll tax rebates should reduce the cost medical centres will incur, reduce the cost to patients and should obviate the need of medical centres and GP to restructure their business relationships in an attempt to not be subject to the payroll tax rules.
Should you require further information, please do not hesitate to contact me.
