On Tuesday 19 September 2023, NSW Treasurer Daniel Mookhey delivered the 2023-24 NSW State Budget. We’ve highlighted a number of the key proposed measures and how they might affect you and your business, now and into the future.
2023-24 NSW State Budget Overview
In an effort to increase revenue and turn around a projected deficit of around $7.8 billion for the current financial year, the 2023-24 NSW State Budget has a strong focus on tightening tax compliance, as well as changes to a number of exemptions and duties. It is reported that the measures are expected to deliver a surplus of around $844 million to the state budget in 2024-25.
What Tax/Duty Areas Are Affected? What Is Changing?
The key areas identified to bolster state budget revenue in the coming years include:
- Tax compliance – payroll tax, land tax, transfer duty
- Changes to Land Tax Management Act in regards to principal place of residence exemption
- Changes to landholder duty regime regarding threshold for acquiring a “significant interest” in a private trust
- Increase in fixed and nominal duty amounts
- Removal of duty exemption for certain zero and low emission vehicles and introduction of a road user charge
Funding Revenue NSW to Target Tax Compliance
The 2023-24 NSW State Budget has allocated $111.1 million over 4 years to Revenue NSW to support an increase in their tax compliance activities.
This will likely result in increased audit activity as well as tightened expectations when it comes to collection and compliance across areas such as payroll tax, land tax and transfer duty.
These heightened compliance measures are expected to increase payroll tax revenue by $337 million, land tax revenue by $225 million and transfer duty revenue by $87.5 million.
For anyone with existing state tax or duty liabilities, or you are likely to incur such liabilities in the coming years, you can expect little leniency or concession, and higher levels of scrutiny when it comes to meeting your reporting and payment obligations.
Seeking professional advice is important when it comes to dealing with state-based taxes and duties. Contact The Quinn Group by completing an online enquiry form or call 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange a meeting or teleconference.
Land Tax – Closing the loophole for Principal Place of Residence Exemption
Currently, land may be exempt from land tax when one of multiple owners occupies the property as a principal place of residence, even when their ownership percentage is a little as 1%.
The Budget proposes a change in the minimum ownership interest to now be such that the person occupying the property must have at least 25% ownership in order to be eligible for the land tax exemption.
These changes will subsequently close a loophole that is currently being leveraged by multiple property owners. It will reduce the amount of properties eligible for the exemption, and thereby increase land tax revenue in the coming years.
It is important to note that the transitional provision provides that those who already claim the principal place of residence exemption from land tax but own less than a 25% interest in the land may continue to claim the exemption for the 2024 and 2025 land tax years. The minimum 25% ownership requirement will then apply to those owners from the 2026 land tax year.
Landholder Duty – changes to threshold for acquiring a “significant interest” in a private trust
Landholder duty is currently charged on acquisitions of a significant interest (being 50% or more) in private companies and unit trusts that directly or indirectly hold NSW land with an unencumbered value of $2 million or more.
As announced last night, changes to the current regime mean that amended thresholds will apply for holdings in private unit trusts that are landholders.
Once the changes are enacted, a revised “significant interest” threshold of 20% will apply to most private unit trusts. The 50% threshold will be retained for acquisitions in wholesale unit trusts or imminent wholesale unit trusts that are registered with Revenue NSW. The 50% acquisition threshold for private companies and the 90% threshold for public landholders remain unchanged.
The threshold for the tracing of property through ‘linked entities’ of a landholder will also be amended from 50% to 20%. The changes to the landholder duty provisions will apply to acquisitions that are completed on or after 1 February 2024 unless they arose from an agreement or arrangement entered before the amending legislation was introduced to Parliament.
It is intended that these changes will discourage the use of private trusts for tax minimisation purposes while increasing land tax revenue by an expected $250 million over the four years to 2026-27.
Fixed and Nominal Duty Amounts Increased
Fixed or nominal duty is currently charged in respect of various transactions throughout the Duties Act. These charges have been unchanged since 1 January 2009. From 1 February 2024, duty of:
- $10 is increasing to $20;
- $50 is increasing to $100 (except where relating to Managed Investment Schemes, which is increased to $500); and
- $500 is increasing to $750.
Changes to Exemptions & Charges for Certain Zero & Low Emission Vehicles
Under the proposed 2023-24 NSW State Budget measures, the exemption from motor vehicle registration duty will cease to be available to zero and low emission vehicles from 1 January 2024. The transitional provisions allow battery electric vehicles and hydrogen fuel cell electric vehicles purchased (or for which a deposit was paid) before 1 January 2024 but that had not yet been registered by that date to continue to access the exemption.
In addition to the removal of the exemption, the will also be the introduction of road user charge to be applied to certain zero or low emissions vehicles from 1 January 2024.
When will the Changes from the 2023-24 NSW State Budget Take Effect?
The measures announced in the 2023-24 NSW State Budget are outlined in the Treasury and Revenue Legislation Amendment Bill 2023 and expected to be implemented from 1 February 2024, once the Bill has passed through parliament. With exceptions being where specific dates are mentioned above.
Expert NSW State Tax & Duties Advisors
As tax accountants and tax lawyers based in Sydney, NSW, the team at The Quinn Group are extremely knowledgeable and experienced in dealing with all facets of Revenue NSW and the various state based taxes, duties and obligations. From payroll tax reporting, to transfer duty and audits, we can help you navigate the often complex and overwhelming maze of state based taxes.
Whether you are seeking to understand how the recent 2023-24 NSW State budget announcements may affect you, or for expert advice regard any state-based taxes and duties, contact us by completing an online enquiry form or call 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange a meeting or teleconference.