NSW State Budget | Changes that may affect you
20 July 2017
The 2017-18 NSW state budget was released on 20 June 2017 and has passed through both houses of the NSW parliament and received royal ascent on 27 June 2017 making it law. The NSW Treasurer announced it as a ‘budget for the people of our great state’ with a focus on health, education, roads and transport, support for families and generating the right conditions for businesses to grow. The budget announcement stated that the state’s economy is the strongest in the nation and the outlook is positive.
The budget reported an expected surplus of $4.5 billion this year, and a forecast average surplus of $2.0 billion from 2017-18 to 2020-21. There is $72.7 billion budgeted for infrastructure investment over four years including the West Connect and Sydney metro projects. Health infrastructure received $7.7 billion over four years and schools received an additional $2.2 billion. Below is a summary of some key areas of the budget most likely to affect you. Find a copy of the budget papers here.
Funding for Regional Australia
There was a significant commitment to regional NSW a total of $9.1 billion. The budged included funding for expanding and improving sustainability within regional NSW. Included in this packge was a number of funding commitments made to the agriculture sector such as funding for the following: Local Land Services, Sustaining the Basin Programme, Farm Innovation Fund, Gains Research and Development Corporation, to combat red imported fire ants, AgSkills strategy and the Youth Farmer Programme. The funding is generally to support the continuation of established programs and partnerships. If you wish to know more about any of these programmes, please refer to the budget papers or contact your local Boyce accountant.
Insurance Duty Exemptions
The budget included an announcement of insurance duty exemptions for small business and crop and livestock insurance.
Small Business Exemptions
From 1 January 2018, small businesses with aggregated turnover of less than $2 million will be exempt from insurance duty on their premiums for:
- Commercial vehicle insurance
- Professional indemnity insurance, and
- Product and public liability insurance.
A small business is an entity within the meaning of section 152-10 (1AA) of the Income Tax Assessment Act 1997 for the income year in which the insurance is effected or renewed. At present, you are a small business entity if you are an individual, partnership, company or trust that:
- is carrying on a business, and
- has an aggregated turnover of less than $2 million.
An insurer will require the insured to provide a small business declaration. This is a declaration by the insured, in writing, to the effect that the person is a small business at the time that the contract of insurance is effected or renewed.
There are penalties of up to $11,000 for making false declarations.
Combined, these measures are forecast to reduce revenue by $318.0 million over the four years to 2020-21. These tax cuts are designed to encourage small businesses to take up more appropriate levels of insurance by removing the disincentive caused by higher insurance premiums. They will complement other Government measures designed to support the small business sector, which plays a key role in the growth of the New South Wales economy, and job creation.
Crop and livestock insurance
Insurance duty on crop and livestock insurance will be abolished from 1 January 2018. This measure is designed to help farmers with everyday expenses by reducing their insurance costs and to encourage them to the take up insurance. This is forecast to save farmers $12.0 million over the four years to 2020-21.
The budget included measures to assist Australian’s access to affordable housing including a reboot of the first home buyer’s scheme and increased surcharges for foreign purchases of residential real-estate.
Housing grants and stamp duty
To help first home buyers enter the property market, the first home buyer’s grants and concessions will be restructured to reduce the burden of transfer duty. The First Home–New Home scheme has been replaced by the First Home Buyers Assistance Scheme from 1 July 2017. The restructure includes:
- From 1 July 2017, first home buyers will be exempt from transfer duty for both new and existing properties valued up to $650,000, with discounts up to $800,000.
- First home purchasers buying a vacant block of residential land to build their home will pay no duty on vacant land valued up to $350,000, and will receive concessions on duty for vacant land valued between $350,000 and $450,000.
- The First Home Owner Grant of $10,000 will be retained for buyers of new homes worth up to $600,000.
- A First Home Builder Grant of $10,000 for those building their first home on vacant land where the value of the land and building does not exceed $750,000 will be introduced.
- Insurance duty on lenders mortgage insurance will be abolished all together.
First home buyer assistance measures will also be available to purchasers under shared equity arrangements with Community Housing Providers. Changes to transfer duty concessions for first home buyers are forecast to save first home buyers $1.1 billion over the four years to 2020-21.
Foreign and investor purchases of residential real-estate
The NSW Budget introduced a number of measures impacting foreign and investor purchases of residential property:
- The introduction of a Foreign Developer Surcharge Rebate. Foreign purchaser developers of residential property will be granted a refund of Foreign Purchase Surcharges provided the developed property or properties are sold within 5 years. This rebate is to be back-dated to apply from the commencement of the Foreign Person Surcharge, (21 June 2016)
- Increase on Foreign Person Surcharges, an increase from 4% to 8% for the surcharge on transfer duty for acquisition of residential properties from 1 July 2017.
- An increase from 0.75 % to 2% for the surcharge on land tax in relation to foreign owned residential properties from the 2018 land tax year
- Removal of the off-the plan transfer duty concession (defers payment of stamp duty off-the-plan purchases for up to 12 months) will be removed for all investor purchasers of residential land from 1 July 2017 (already removed for foreign purchasers of residential land).
- From the 2018 tax year, commercial residential property will be exempt from surcharge land tax
Reducing the Cost of Living
The state government announced measures aimed at helping families manage the rising cost of living.
Helping kids get active
To help with the cost of sport registration and lesson fees the government has committed $207 million over four years to the Active Kids Rebate. Families in NSW will be eligible to receive up to $100 per child in school each year to help meet the cost of getting kids involved in community sport.
Families with young children
To assist families meet the cost of childhood education the government has committed $217.3 million over four years to continue the Start Strong Programme. The programme helps to provide every child with access to 600 hours of early childhood education in the year before they start school and assist disadvantaged three year olds.
To reduce the cost of vehicles for families a reform of the Green Slip scheme will begin from December 2017. This reform aims to reduce the average price of a Green Slip by more than $100 and reduce the time taken to resolve claims.
Overall the budget was fairly subdued. Funding has been recommitted to a number of established programmes and projects. The state has supported the federal government’s commitment to small business via the insurance duty exemptions. Housing affordability was a major focus due to the continued real-estate boom, support for first home buyers and builders has been sustained. Actions to assist families with the cost of living were also introduced or continued.