New South Wales delivers a recovery and reform budget

Job creation is front and centre as COVID-19 restrictions have led to significant reductions in State revenue, with the State’s largest economic support package ever of $29b.

NSW experienced a difficult start to the year with bushfires, drought and a pandemic. Aside from Victoria, NSW was one of the most impacted by COVID-19. Support measures for bushfire recovery and COVID-19 have hit the NSW Government’s bottom line with a projected state budget deficit of $16b in the 2020-21 financial year, the largest deficit ever recorded in the State's history. As a result, this Budget is focused squarely on creating jobs through tax cuts, stimulus and a boost to the State’s record infrastructure pipeline in an effort to reverse skyrocketing levels of unemployment.

Infrastructure

The State Government is slated to spend a record $107.1b on its infrastructure pipeline, estimating that it will generate 145,000 jobs annually. The Infrastructure Pipeline will include $3b for a Jobs and Infrastructure Acceleration Fund, which will support 20,000 jobs and deliver new and fast-tracked projects across the State. Key projects for the fund include the St George Hospital Integrated Ambulatory Care Precinct in Kogarah, Sydney Children’s Hospital Network redevelopment in Randwick, new public schools and upgrading school facilities throughout regional NSW.

The budget commits spending for shovel ready projects, including $812m for social and Indigenous housing across NSW, $256m for upgrades and maintenance works across National Parks, the Royal Botanic Gardens, Centennial Park, Sydney Olympic Park and the Crown Land portfolio.

The infrastructure pipeline will also deliver vital Health, Education and Transport projects. Key to the pipeline is a $21.8b investment in infrastructure projects, $10.7b in Health projects over the next four years, and $7.7b invested in Education and Skills infrastructure.

Business support

The State Government has invested in a variety of business support initiatives, to make running a business easier. The initiatives include:

• $472m to provide small and medium size businesses that do not pay payroll tax, a $1,500 digital voucher for the cost of government fees and charges.
• $500m investment in the Out and About program to stimulate spending in the local economy. As part of this, adult residents of New South Wales will be able to claim up to $100 in digital vouchers to spend on eating out and entertainment.
• A $15m Revitalisation Fund in partnership with City of Sydney to help get businesses back on their feet.
• Extending $39.3m of funding for the Business Connect program, providing advice to businesses navigating the challenges of COVID-19.
• $318.6m over two years in the Skilling for Recovery training package — to help job seekers retrain or upskill, and support school leavers entering the workforce for the first time. This also includes an increase to the apprenticeship intake in Transport for NSW, and $80m in support for apprenticeships and cadetships in the community housing and construction sectors.
• $57.4 million over four years to create a landmark Trades Skills Pathways Centre to address skills shortages in the NSW economy and support employment for women.
• Grants of up to $5,000 for training and support to help women return to the workforce.
• $17m to upskill, mentor and job match people working in the care economy, and an additional 20,000 training places to skill people in aged care.

Attracting investment into New South Wales

With the COVID-19 pandemic as a catalyst, the Budget includes measures to encourage domestic and international business into NSW. This includes:

• $100m in grants to the Regional Jobs Growth Fund to incentivise businesses in regional NSW to invest, expand their operations, get new customers through the door and create new jobs.
• A $250m Jobs Plus Program, to encourage business investment into NSW. The program will support companies who relocate their head office to NSW or expand their jobs footprint in the State, and includes payroll tax relief for every new job created where a business has created at least 30 net new jobs.
• $179.8m commitment to grow the trade and investment network and build NSW’s presence in key markets. This commitment also includes the creation of six hubs throughout UK, Tokyo, New York, Mumbai, Singapore and Shanghai.
• Taking its lead from the Federal Budget, NSW will support the growth of the State’s manufacturing sector, and align with the Federal Government’s six priority industries (namely, resources and critical minerals, food and beverages, medical products, recycling and clean energy, and defence and space).
• $175m in funding for investment in new film and TV projects in the State.

Property tax reform

The Budget also confirmed the NSW Government’s proposal to replace stamp duty with a broad based property tax.  If implemented, it will comprise the biggest shift in state taxes since World War 2. We outline this proposal in further detail in our insight here.

Payroll tax cuts

In May 2020, the NSW Government brought forward by one year the increase in payroll tax threshold to $1m. The NSW Government has announced a further permanent increase in the payroll tax-free threshold from $1m to $1.2m. Resulting in 3,500 NSW businesses no longer having to pay payroll tax.

The NSW Government will also cut the payroll tax rate from 5.45% to 4.85% from 1 July 2020 for two years. These tax cuts will provide a saving to businesses of around $2.4b for this fiscal year with the intention that can be spent on employing more people and growing the NSW economy.

State tax relief

The budget also includes some already announced relief measures:

• Over $6b in waived or deferred taxes, fees and levies, including payroll tax and licencing and registration fees to support businesses due to tax-relief measures in 2019-20.
• First Home Buyers Assistance Scheme (announced 26 July 2020): The NSW Government increased first home buyer concessions, ending on 31 July 2021. A first home buyer pays no transfer duty when they purchase a new home valued up to $800,000, and a concessional rate of duty when purchasing a new home valued between $800,000 and $1m.  Transfer duty is also reduced for first home buyers of vacant land, with exemptions applying for land valued up to $400,000, and concessions applying for land valued up to $500,000.
• Bushfire duty relief scheme (announced 10 March 2020): The NSW Government announced up to $55,000 in transfer duty relief for people who lost their home in the 2019/20 NSW bushfires and who choose to buy elsewhere in NSW, which will end on 2 March 2022.
• Land tax (announced 20 October 2020): Commercial or residential landlords who have reduced tenants’ rent due to COVID-19 may be eligible for land tax relief. Eligible landlords may reduce up to 50% of 2020 land tax liability, which is now extended to up to 25% of the 2021 land tax year for retail tenants.
• Build-to-Rent property development concessions (announced 29 July 2020) and previously commented on here. We anticipate the Commissioner of State Revenue will issue a Commissioner’s Practice Note with full eligibility criteria and apportionment mechanisms in the coming weeks.