2024-25 NSW State Budget – the Good, the Bad and the Ugly for State Taxes

A version of this article was published in the Thomson Reuters’ Weekly Tax Bulletin on 21 June 2023.

The NSW Government handed down their 2024-25 Budget on 18 June 2024 which saw a few key changes for state taxes in NSW. The bill to implement these budget measures has already passed both houses of NSW parliament and is awaiting assent.

So what are the good, the bad and the ugly for NSW State taxes?

The Good

Payroll Tax relief to bulk-billing GPs - Not an amnesty. Not a moratorium. A full rebate for NSW GPs payroll tax - or is it?

One of the Budget’s major drawcards is the $188.8 million Bulk-Billing Support Initiative which aims to “protect the cost of seeing a GP and reduce the strain on our emergency departments”.

The NSW government will waive historical payroll tax liabilities for contractor general practitioners (GPs) up to 4 September 2024. The Treasurer announced, “no GP clinic will have to pay any back taxes they might owe on a contractor GP's wage”. Controversially, the waiver only applies to unpaid payroll tax liabilities - which seems to unfairly disadvantage historically compliant taxpayers.

From 4 September 2024, an ongoing payroll tax rebate will be available on wages paid to contractor GPs for practices that bulk bill:

·       at least 80% of services – for metropolitan Sydney;

·       at least 70% of services – for the rest of the State.

This follows on from the 12-month pause on payroll tax audits (which is soon to expire) on medical practices who engage GPs, which commenced on 4 September 2023 (see our previous article on last year’s NSW Budget here).

By incentivising NSW clinics to bulk bill more patients, the NSW government aims to ease the cost-of-living pressures faced by families and households. This is a welcome change for GPs, allowing them to “spend more time with their patients than with their accountants.” However, there remains no payroll tax relief for other medical and healthcare providers (such as dental clinics, pathology and radiology centres), unless they are already eligible for an exemption.

The Bad and the Ugly

Freeze on land tax thresholds

Generally, land tax is an annual tax levied on land held by individuals and certain entities that is above the land tax threshold (subject to some exceptions). Historically, in NSW the land tax threshold has been updated annually. The Budget announced that, from the 2025 land tax year, the land tax thresholds will remain at their 2024 values:

·       $1,075,000 for the general land tax threshold; and

·       $6,571,000 for the premium rate threshold.

As land prices continue to surge, investors holding multiple properties will likely feel the land tax sting (and many for the first time). These measures bring NSW in line with most other states and territories around Australia. The Treasurer must review the land tax thresholds by 1 June 2027.

NSW surcharges increase

The rates of foreign surcharges in NSW will increase as follows:

1. from 1 January 2025, foreign surcharge purchaser duty will increase from 8% to 9% on the acquisition of residential land by foreign persons; and

2. from the 2025 land tax year, foreign owner land tax surcharge will increase from 4% to 5% for residential land owned by a foreign person at midnight on 31 December the previous year.

These rates will be the highest foreign surcharge rates in the country, expecting to generate an additional $187.5 million over the next four years. See our previous articles on foreign surcharges:

Two cases and a Bill - NSW duty and land tax surcharges impacting foreign buyers and landowners

Homeowners beware – Revenue NSW cracks down on foreign person surcharges

For more information, please contact the authors.

Authors: Lisa To & Hayley Constantine