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2020

NSW Budget reveals the cracks in Australia’s long-term tax reform plan

SYDNEY, 23 June 2021: NSW Treasurer, the Hon. Dominic Perrottet, MP announced his State Budget yesterday, including a welcome stance on positive tax reform. Budget measures included abolishing motor vehicle duty on electric vehicles and continuing payroll tax cuts for the 2021-22 year.

The Tax Institute, which continues to champion the cause of tax reform on behalf of the tax profession, welcomes the announcement, but recognises the putting in place policy and measures for tax reform is a long road.

“NSW Treasurer Dominic Perrottet has come out with a strong position favouring bold tax reform. We applaud that leadership and look forward to working with Treasury on options for tax policy reform in the years to come,” said The Tax Institute’s Director, Tax Policy and Technical, Andrew Mills, CTA (Life).

“Tax reform is not a quick and easy job. It takes considerable technical and legal knowledge, it takes a lot of time and analysis of interweaving impacts and it takes brave political leadership. It’s not something tax professionals can bring about wholly on their own, so it is heartening to see government recognise tax reform’s vital role in bolstering our economic growth and strength.”

States working at odds on tax reform

In his speech, the Treasurer said, “…while other states resort to lower wages and higher taxes, we will do the opposite” a claim that Andrew says highlights the rift in tax reform thinking between states.

Andrew said that while the NSW Budget made promising steps forward on tax reform, the Queensland State Budget, released on 15 June 2021, had little mention of tax policy, while the earlier Victorian State Budget, delivered on 20 May 2021, while increasing the payroll tax threshold, announced a controversial new stamp duty ‘premium’, increases to land tax and a new 50% "windfall gains tax" for rezoned land. Similarly, the South Australian Budget included some tax concessions but little in the way of structural reform.

“What these very different approaches show is that there is no unified plan or thinking around our tax system. Everyone is working not only independently, but on some topics, at complete odds with each other. It’s a recipe for disaster,” Andrew said.

Key tax measures announced in recent State Budgets

NSW BudgetVictoria BudgetQueensland BudgetSouth Australia Budget
  • Continued consideration of the proposed property tax reform to replace transfer duty with an annual property tax.
  • Electric vehicles under $78,000 will be exempt from motor vehicle stamp duty from 1 September 2021.
  • Temporary reduction in the payroll tax rate from 5.45% to 4.85% has been extended in 2021-22.
  • Payroll tax‑free threshold increased to $1.2 million. 
  • Brought forward tax cuts for businesses to 1 July 2021.
  • Stamp duty ‘premium’ on property transactions with a dutiable value over $2 million.
  • Land tax rates will increase by 0.25 percentage points for taxable landholdings over $1.8 million, and 0.3 percentage points for taxable landholdings over $3 million.
  • New mental health and wellbeing surcharge from 1 January 2022, payable by employers with total annual Australian wages of $10 million or more.
  • Payroll tax‑free threshold increased to $700,000
  • 12-month extension of the 50% Apprentice and Trainee Payroll Tax Rebate.
  • 12-month extension of payroll tax exemption for wages paid for eligible new trainees and apprentices.
  • New 50% land tax discount for eligible new build-to-rent housing projects.
  • A further $10.7m in land tax relief in 2021-22 through the land tax transition fund for those taxpayers negatively impacted by changes to land tax aggregation rules in 2021-22.

ENDS