NSW Budget: strong focus on job creation and the prospect of some major tax reform
The NSW Government’s budget for 2020-21 projects a deficit of $16 billion to follow a deficit of $6.9 billion for 2019-20, but a return to surplus by 2024-25. There are some sobering figures here, but there is also much to be positive about.
Reform of the stamp duty and land tax regimes is something that KPMG supported in its submission to NSW Treasury’s Review of Federal Financial Relations (“FFR review”) earlier this year. There is a fine balance between transitioning fairly into a new regime and obtaining the benefits of the reform more quickly. The government’s proposed consultation on replacing stamp duty and land tax with a single property tax on an “opt-in” basis for future purchasers is an encouraging starting point. NSW Treasury estimates that this change could inject $11 billion into the NSW economy in the first four years.
The NSW Government’s spending pipeline of over $107 billion for transport, health and educational infrastructure is being supplemented by additional maintenance and construction expenditure, which we are pleased to see includes improvements to social housing. The expectation is that these infrastructure projects will directly create jobs and also indirectly support employment by enhancing the state’s productivity.
The “Out and About” voucher scheme to encourage greater patronage of hospitality and entertainment venues will generate headlines and perhaps generally lift the mood, as well as injecting some extra cash into businesses that have suffered significantly from the pandemic.
Many employers will welcome the permanent increase to the NSW payroll tax threshold from $1 million to $1.2 million and the temporary (2020-22) cut in the rate by 0.6 of a percentage point. In particular, the increase to the threshold is expected to take more than 3,000 employers out of the payroll tax net. The Jobs Plus program, to run between December 2020 and June 2022, proposes to exclude the wages of newly-hired employees from payroll tax, where the employer’s staff numbers increase by 30 or more.
We welcome the targeted grants and assistance packages for women seeking to return to the workforce.
In committing additional funding to mental health programs, the Budget recognises that while NSW has managed the physical health consequences of the pandemic relatively well to date, there may be a long tail of mental health challenges that require management.
In the 12 months since the FFR review commenced, other priorities have grown in importance and that is understandable. In due course, we look forward to the NSW Government’s further consideration of the other reform measures that were canvassed in the FFR review.