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The Territory’s economy is recovering better than expected, with $738m of GST revenue bumping up the Northern Territory’s coffers. The Territory’s deficit has improved faster than expected – a $934m improvement in the deficit over two years.
Net debt of $9b is expected in the next financial year. While this is $1b better than expected in last year’s budget, total debt is expected to trend upwards and reach $16b over the next decade. We anticipate similar scenarios (but different numbers) for many, if not all, of the States and Territories.
As part of this Budget the government has legislated a ‘hard debt ceiling’ in 2021, with total borrowings set at $15b excluding finance leases to try and move the Budget back into the black. Importantly, the debt ceiling will not be enacted until the next financial year. The debt ceiling essentially means there will be consequences – from warnings to termination – for agency chief executives that breach caps on approved budgets.
It’s not all austerity. The Budget sets out the revenue relief initiatives that were announced and delivered by the Northern Territory Government with the aim of providing support to businesses, households and employers, to assist with the economic recovery from COVID-19. Relevantly, the homeowner assistance schemes have been extended with the aim of assisting Territorians with home ownership.
See below for our comments on the revenue side of the ledger.
The budget gambling tax:
Gambling taxes are also set to rise as a direct result of COVID-19 stimulus measures and an increase in gambling spend by the population.
The Budget includes the following gambling tax initiatives:
The Government recently imposed a ‘property activation levy’ which charges landowners for unoccupied or derelict buildings or vacant land in order to incentivize growth and investment in the Darwin CBD. At the time of introduction, the Government clearly indicated that the introduction of the levy was not designed as a revenue raiser, but as an incentive to improve the quality and amenity of the Darwin CBD. Despite the original intention, the Budget provides for an expected $2m revenue to be raised from the levy in 2020-21, with later projections being $1.7m per annum. Compared to the year’s expected stamp duty revenue of $84m, these are not insignificant amounts.
All states and territories agreed some 15 years ago to abolish stamp duty on business transfers (and other duties) over an agreed timetable. The Northern Territory continues to impose duty on business transfers (as does Queensland and Western Australia). Previous year’s budgets have stipulated that the Budget is not yet in a state where such abolition can be absorbed. It is quite telling that there is no mention of abolition (or deferral of abolition) in the Budget, which seems to suggest that business transfer duty is here to stay for the foreseeable future.
