The 2024-25 New South Wales State Budget was handed down by the New South Wales (NSW) Treasurer, Daniel Mookhey, on Tuesday 18 June 2024. Much of the focus of this budget was tackling the housing crisis by delivering affordable housing and investing in infrastructure and transport. 

The budget also contains several tax and stamp duty measures that aim to provide cost-of-living relief and to fund the NSW Government’s spending initiatives. These measures were introduced in the Revenue Legislation Amendment Bill 2024 (NSW) (Bill), which, at the date of this article, has not received assent by the Governor of NSW. A summary of these measures is detailed below. 

1.    Payroll tax relief - Bulk Billing Support Initiative 

The principles in recent court decisions, and positions adopted in rulings by some Australian revenue authorities, have made it clear that payments made to contractor general practitioners (GPs) are generally subject to payroll tax unless an exemption applies. This has had significant cost implications for many medical practices, including non-GP practices.

In response to this and to encourage GPs to operate under bulk bill arrangements, the NSW Government will introduce a rebate of payroll tax to medical practices that meet certain bulk-billing thresholds (resulting in a nil liability), and to provide an exemption for certain historical unpaid payroll tax.

Subject to the assent of the Bill, medical practices that bulk bill at least: 

• 80 per cent of their patients in Sydney metropolitan areas; or
• 70 per cent of their patients in all other areas of NSW,

(the Relevant Bulk Bill Proportion) within a financial year, will receive a payroll tax rebate on payments made to contractor GPs on or after 4 September 2024 that would otherwise be subject to payroll tax. Furthermore, payments made by medical practices to contractor GPs, prior to 4 September 2024, will be exempt from payroll tax if no payroll tax had previously been paid on such payments. 

The transitional provisions in the current version of the Bill provide that where the rebate is only to apply to part of a financial year, the Relevant Bulk Bill Proportion should be determined on that part of the year. 

Whilst this initiative will provide much needed relief to GP medical practices, it appears that such relief will not apply to payroll tax imposed on payments made by medical practices to other allied health contractors (such as dentists or physiotherapists) leaving further uncertainty in an already complex area of payroll tax.

2.    Land tax threshold indexation arrangements

The land tax threshold and premium rate threshold are currently indexed based on annual growth in average land values across NSW over the previous three years. 

The land tax threshold for the current land tax year (1 January 2024 to 31 December 2024) was set at $1,075,000 and the premium rate threshold was set at $6,571,000. These thresholds will be fixed from the 2025 land tax year (1 January 2025 to 31 December 2025) and will be reviewed by the NSW Treasurer by 1 June 2027. 

This measure is expected to increase revenue by $1.5 billion over the four years to 2027-28.

3.    Foreign investor surcharges

The foreign owner land tax surcharge, which is currently imposed on foreign persons who own residential property, will increase from 4 per cent to 5 per cent from the 2025 land tax year (1 January 2025 to 31 December 2025).

Furthermore, the foreign purchaser duty surcharge, which is imposed on foreign purchasers who acquire residential property, will increase from 8 per cent to 9 per cent from 1 January 2025. However, transitional provisions in the current version of the Bill provide that the current foreign purchaser duty rate of 8% should generally still be chargeable on:

• transfers of residential property that are made in conformity with a contract for sale executed before 1 January 2025; and 
• an exercise of an option for the sale or purchase of residential property if the option was granted before 18 June 2024.  

These measures are expected to raise an estimated $187.5 million in additional revenue over the four years to 2027-28.

4.    Revenue NSW compliance activity

The NSW Government will invest in opportunities to identify additional revenue by expanding three existing project areas within Revenue NSW. The areas of focus will include improving land tax compliance, reducing written-off tax debts, and increasing prosecutions and enforcement to reduce tax avoidance. In this regard, we expect there to be increased audit activity by Revenue NSW in the immediate future. 

This measure is expected to increase revenue by $51 million in 2024-25 and $61 million in 2025-26.