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Creation Date: Tue, 08 Jun 2010 GMT

NSW Budget 2010: An Overview

The NSW Budget – An Overview

 Stamp duty cuts form centrepiece of State Budget

 NSW Treasurer Eric Roozendaal MLC handed down the 2010/11 Budget today.

 The centerpiece of the Budget was a package of stamp duty cuts, particularly for new homes, that should help accelerate supply.

 The cuts to stamp duties - particularly the exemption for off-the-plan purchases - are a direct adaption of the proposal advanced by the Property Council of Australia as a centrepiece of our pre-Budget advocacy. (Please click here to access the BIS Shrapnel report we commissioned on off-the-plan purchases.)

 A major disappointment though was confirmation that the Government intends to proceed with the new ‘ad valorem' tax on land and property transfers.

 This runs contrary to the strategic objective of generating new supply, will hit project development hard and ignores the recommendations of the Henry Review.

 Executive Summary

 § Zero stamp duty has been announced for off-the-plan purchases up to $600,000 for two years as well as for people over 65 purchasing new homes worth up to $600,000.

• § 25 per cent reduction in stamp duty for homes under construction or newly-completed worth up to $600,000.
• § The Government confirmed the new ad valorem tax will proceed. Rates are $190 for value less than $500,000, 0.2 percent for value between $500,000 and $1 million, and 0.25% for value over $1 million.
• § The budget reported a surplus of $101 million in 2009-10, with a combined surplus of $3.15 billion forecast over the next four years.
• § No cut to the land tax rate that was announced in the 2008 mini-budget which increased land tax bills by 25%.

 1. Taxes and Revenues

 Taxation revenue for 2010-11 is expected to be $57.7 billion, up by 3.9% from 2009-10.

 Stamp duty

 Several stamp duty concessions have been announced in this Budget which will apply for two years:

• § Zero stamp duty on off-the-plan purchases at pre-construction stage for homes worth up to $600,000.
• § 25 per cent reduction in stamp duty for homes under construction or newly-completed worth up to $600,000.
• § Zero stamp duty for purchases of newly-constructed homes worth up to $600,000 by those over 65 years of age.
• § First homebuyers will also be eligible for the cuts (they were not eligible for last year's 50% cut to stamp duty on new homes).

 Transfer duty revenues have recovered due to the cyclical recovery in the property market over 2009-10. Transfer duty revenue is expected to increase by 12.2 per cent in 2010-11 to $4.049 billion, up from $3.61 billion in 2009-10 - and will rise to $4.96 billion by 2013-14. 

 Land Transfer Charge

 The Land Transfer Charge, a new ad valorem tax, has been introduced by the Government. Introduced as a sliding scale fee, the new tax will add to the following charges to the current $190 flat fee: 

• § 0.2 per cent of transfer value to transfers above $500,000 and up to $1 million
• § $1000 plus 0.25 per cent of transfer value for transfers above $1 million

 Land Tax

 No rollback of the 25% increase to the land tax rates that were announced in the November 2008 mini-budget. Land tax revenue is expected to increase by 2.6 per cent in 2010-11 and an average of 4.6 per cent over the four years to 2013-14. These increases reflect the expected economic recovery over 2010-11 and its impact on land valuations.

 Payroll tax

 Compounding previous commitments to deliver payroll tax cuts, a further cut to 5.5 per cent will apply from 1 July 2010, as well as 5.45 per cent from 1 January 2011. These cuts will include indexation to the payroll tax threshold and harmonisation of definitions and procedures with other states and territories.

 Parking Space Levy (PSL)

 The 110% PSL increases announced in the 2008 mini-budget have not been rolled back. This is estimated to raise $105 million in 2010-11, up from $101 million in 2009-10.

 We did succeed, however, in blocking efforts to extend the PSL to Macquarie Park.

 2. Planning reform

 The stamp duty cuts follow other initiatives announced last week by the State Government to drive supply. These include:

 Strict enforcement of a cap of $20,000 per residential lot for section 94 contributions

 Any justifiable requirement for infrastructure spending above the cap will be converted to an ongoing special rate variation

• Both s94 contribution plans and annual local government rate caps will be removed from ministerial discretion and given to IPART for assessment and approval.

• Funds to accelerate the finalisation of LEPs, improve the ‘spot rezoning' system and give financial incentives to councils that swiftly process DAs

To read the Property Council's media release on development levies reform please click here.

 3. Expenditure

 Total expenses for 2010-11 are estimated to be $56.9 billion, an increase of 2.7 per cent from the 2009-10 estimate.

 4. Infrastructure

 Over the four years to 2013-14, the total NSW infrastructure investment program will be $62.2 billion. In 2010-11, total State infrastructure investment is budgeted at $16.6 billion.

 This investment is supplemented by Federal funding and is expected to support 155,000 jobs over four years. 

 Project snapshot

 Over the next four years, $22.3 billion of the $50.2 billion funding package under the Metropolitan Transport Plan will becomes available for a number of projects including:

• § $1.7 billion for the South West Rail Link, to be completed by 2016.
• § $1 billion for works to commence on the Western Express Rail Service
• § $6.7 billion to continue the heavy Rail Clearways Program and for 626 new rail carriages.
• § $230 million for light rail extensions from Lilyfield to Dulwich Hill, and feasibility study for the Haymarket to Circular Quay extension
• § Over $1.2 billion on bus priority measures and new bus depots
• § $10.6 billion for roads including $3 billion for Pacific Highway upgrades, $750 million for the Hume Highway and $7.3 billion for country roads.

In other measures, land acquisitions for the North West rail corridor to 2014 will amount to $35 million and the Erskine Park Link Road will be built by 2011 at a cost of $12 million. 

 5. Other initiatives

 Other initiatives announced that are relevant for the property sector include:

 § No parking space levy has been introduced for Macquarie Park.

• § Stamp duty for mortgages, non-real property transfers and marketable securities will be abolished from 1 July 2012.
• § New pedestrian tunnel to facilitate Barangaroo

6. Contact

 Glenn Byres, A/ NSW Executive Director, 02 9033 1907 or 0419 695 435

 Kristin Pryce, NSW Senior Policy Advisor, 02 9033 1951

 Inna Kiner, NSW Policy Advisor, 02 9033 1909