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The government’s budget closes loopholes and funds Revenue NSW to improve tax “fairness and integrity”.
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NSW fuels budget turnaround through compliance, tax hikes
20 September 2023
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NSW will report a $844 million budget surplus in 2024-25 bolstered by increased payroll, land tax and transfer duty collections as well as measures that raise coal royalties and landholder duties.
The range of revenue and compliance measures turn around a projected deficit of $7.8 billion this financial year.
Treasurer Daniel Mookhey said he would be taking a “careful and responsible approach” to repair the previous Coalition government’s “decade of damage”.
“This budget sets forth how the Minns government will use the people’s resources to improve our people’s lives,” he said in his budget speech. “And this budget cuts waste, ends pork-barrelling, funds what works, and lowers debt for our children and our grandchildren.”
Ramping up tax compliance activities the budget would pump $111.1 million into Revenue NSW over four years as part of a wider $228.6 million spend across NSW’s integrity agencies, which include the Independent Commission Against Corruption and the Ombudsman.
The compliance measures would increase transfer duty revenue by $87.5 million, land tax revenue by $225 million and payroll tax revenue by $337 million.
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Mr Mookhey said the government would also “close a number of loopholes to existing taxes and duties … to improve the fairness and integrity of our tax system” and collect an additional $958.5 million in revenue.
The Land Tax Management Act would be amended to remove the principal-place-of-residence exemption previously available for those with a 1 per cent property stake. The amendment would mandate a minimum 25 per cent stake to close a loophole used by multiple property owners.
The landholder duty regime would also be amended to scale down the threshold for acquiring a “significant interest” in a private trust from 50 per cent to 20 per cent, discouraging their use for tax minimisation purposes. This would increase land tax revenue by $250 million over the four years to 2026-27.
Tax concessions for large corporations that restructure would be lowered from 100 per cent to 90 per cent while coal royalty rates would increase from next July and generate an extra $2.7 billion in revenue.
“The old system is out of date, the market has moved on, so the government will modernise the state’s coal royalty system so it suits current market conditions,” said Mr Mookhey.
The government said expected tax revenue was $44.9 billion for 2023-24 and had been revised upwards for the four years to 2026-27 by $17.6 billion.
Forecast revenue over the four years to 2026-27 was $14 billion higher than original estimates thanks to the improvements in payroll and land tax collections plus a strong labour and property market.
“Strength in property transactions and prices has increased transfer duty by $9.5 billion. Land tax is also expected to be $4.9 billion higher due to higher land values,” the budget papers said.
“Resilient employment outcomes and strong wages growth has driven payroll tax revenue to be $2.8 billion higher over the four years to 2026-27.”
In addition to increased tax revenue, the government pledged to cut spending on consultants after conducting a “comprehensive expenditure review”.
“Instead of forking out a king’s ransom to hire an army of consultants and labour-hire companies, we will act on solving the staff shortages in the public service – curing the cause to avoid the symptoms, cutting expenses by $530 million,” Mr Mookhey said.
These measures were expected to offset weak household consumption and GST revenue, as well as increased spending on housing, renewable energy and the public sector.
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