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NSW State Budget 2023-24

The 2023-24 NSW State Budget has a strong focus on tightening tax compliance, as well as changes to a number of exemptions and duties:

  • Funding Revenue NSW to Target Tax Compliance
  • Land Tax – Closing the loophole for Principal Place of Residence Exemption
  • Landholder Duty – changes to threshold for acquiring a “significant interest” in a private trust
  • Fixed and nominal duty amounts increased

This year’s NSW State Budget does not explicitly mention specific measures targeted at small businesses. However, it does mention some broader economic and infrastructure initiatives that could indirectly benefit small businesses. These include:

  1. Toll Reform: Introducing a two-year toll cap and streamlining motorway pricing
  2. Infrastructure and Transport: Investments in infrastructure projects, including road upgrades and improved public transportation
  3. Energy Relief and Reform: Addressing high energy costs through rebates and energy market reforms
  4. Disaster Relief: Funds allocated for natural disaster support and recovery programs.

Measures for First Home Buyers

The State Budget includes an expansion to the First Home Buyers (FHBs) Assistance Scheme to support FHBs with a stamp duty exemption for purchases up to $800,000 and a concession for purchases between $800,000 and $1 million.

Five out of every six first home buyers will pay no stamp duty, or a concessional rate after the Government expanded stamp duty exemptions and concessions from 1 July 2023. According to preliminary figures, more than 1,000 FHBs purchasing in the $650,000 to $800,000 range have availed themselves of the full exemption from stamp duty in July under the scheme.

The measures announced in the 2023-24 NSW State Budget can have implications for the business environment in New South Wales, including those for small businesses and are outlined in the Treasury and Revenue Legislation Amendment Bill 2023 expected to be implemented from 1 February 2024, once the Bill has been passed by Parliament.

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NSW land tax changes 2023 year

NSW First Home Buyer Choice

The NSW Government now provides first home buyers purchasing properties for up to $1.5 million the ability to choose to pay an annual property tax instead of stamp duty.

Key points

Changes to the NSW property tax system give first home buyers a choice:

  • Stamp duty for first home buyers in NSW can be paid upfront, or
  • Pay property tax every year until the property is sold.

Summary of the main changes for the 2023 year include:

  • Land tax threshold increases to $969,000
Tax yearGeneral thresholdPremium threshold
2023$969,000$5,925,000
2022$822,000$5,026,000
  • Foreign Owner surcharge increases to 4%. From the 2023 land tax year, the surcharge land tax payable on residential land owned by foreign persons increases from 2% to 4% of the taxable value of the residential land owned at midnight on 31 December 2022
  • Early payment discount reduced. From the 2023 land tax year, the discount for early payment of land tax reduces from 1.3% to 0.5%.

The property tax will only be payable by first home buyers who choose it, and will not apply to subsequent purchasers of a property.

The savings required to meet the up-front costs of a home purchase are an important barrier for many would-be purchasers. Removing the obligation to pay stamp duty is intended to lower these up-front costs and cut up to two years off the time needed by many first home buyers to save for a home. This initiative is designed to lower the up-front costs of home purchases and help to boost the rate of home ownership in NSW.

Existing stamp duty concessions for first home buyers are available for purchases of up to $800,000, and these concessions will continue. The property tax option will be available for properties for up to $1.5 million, helping a broader group to become first home buyers.

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First Home Super Saver Scheme banner

First Home Super Saver scheme – how does it work?

From 1 July 2022, if you’re a first home buyer you can release up to $50,000 (up from $30,000) from your voluntary super contributions to help you buy your first home.

Under the scheme, voluntary concessional and non-concessional contributions made on or after 1 July 2017 may be released from super to help you purchase your first home. 

Currently, you can release up to $15,000 of voluntary contributions from any one financial year, up to a total of $30,000 in contributions across all financial years, plus earnings on those voluntary contributions. Under the new rules, from 1 July 2022, you will be able to release up to $15,000 of voluntary contributions from any one financial year, up to a total of $50,000 contributions across all financial years, plus earnings.

To be eligible to participate in the FHSS scheme an individual must:

  • be 18 or over
  • have never owned property in Australia
  • not previously requested a release of super money under the FHSS scheme.

The FHSS scheme can only be used to buy a residential home in Australia however it cannot be used to buy a mobile home. If vacant land is purchased, a contract to build a home on it must be signed within 12 months although a 12-month automatic extension will be granted. You must also intend to live in the home, the scheme can’t be used to buy a residential investment property.

There are certain details around the withdrawal amount, associated earnings, tax on withdrawal and the release of the funds. To discuss your options, speak to a financial adviser.

CONTACT ALLAN HALL FINANCIAL PLANNING

General Advice Warning

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Mark O’Connell, Robin Bell and Allan Hall Financial Planning Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.

Parliament House

Federal Budget 2022-2023

Tax and Superannuation Overview

The Federal Treasurer, Mr Josh Frydenberg, handed down the 2022–23 Federal Budget at 7:30pm (AEDT) on 29 March 2022.

In an economy emerging from the pandemic, the Treasurer has confirmed an unemployment rate of 4% and an expected budget deficit of $78 billion for 2022–23.

As international uncertainties add pressure to the cost of living, key measures provide cost of living relief in the form of an increased Low and Middle Income Tax Offset, a one-off $250 payment for welfare recipients and pensioners and a 6-month fuel excise relief.

Other measures seek to promote innovation, with expanded “patent box” tax concessions proposed, and provide tax incentives for small business to invest in the skills of their employees. A lower GDP uplift rate for PAYG and GST instalments has also been proposed to support cash flows of small and medium businesses.

To read our comprehensive Budget report outlining the changes to taxation and accounting, please click below:

The highlights are set out below:

Business

  • Additional state and territory COVID-19 business support grant programs will be eligible for tax treatment as non-assessable non-exempt income until 30 June 2022.
  • Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.
  • Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.
  • The Boosting Apprenticeship Commencements wage subsidy will be extended by 3 months.
  • Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units and biodiversity certificates.
  • Access to employee share schemes in unlisted companies will be expanded.
  • The PAYG instalment system is set for a structural overhaul with a set GDP uplift of 2% to apply for the 2022–23 income year.
  • Additional funding will be provided to further reform insolvency arrangements, including the insolvent trading “safe harbour”.
  • Business registry fees will be streamlined over 3 years from 2023–24.
  • Wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians will be exempt from corporate income tax.

Increased deduction for small business external training expenditure

Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.

The additional deduction will apply for businesses with aggregated turnover of less than $50 million. The external training course must be delivered by an Australian entity and provided to employees in Australia or online. In-house or on-the-job training and expenditure for persons other than employees will be excluded.

The measure will apply for eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2024. Where eligible expenditure is incurred before 1 July 2022, the additional deduction will be claimed in the tax return for the following income year.

Increased deductions for digital adoption by small businesses

Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.

The additional deduction will apply for businesses with aggregated turnover of less than $50 million. Eligible expenditure will include the cost of depreciating assets and business expenses supporting digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. An annual cap of $100,000 will apply to expenditure eligible for the additional deduction.

The measure will apply for eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023. Where eligible expenditure is incurred before 1 July 2022, the additional deduction will be claimed in the tax return for the following income year.

Apprenticeship wage subsidy extended

The Boosting Apprenticeship Commencements wage subsidy will be extended to support businesses and Group Training Organisations that take on new apprentices and trainees. The subsidy will now be available to 30 June 2022. This measure will provide for an additional 35,000 apprentices and trainees. Eligible businesses will be reimbursed up to 50% of an apprentice or trainee’s wages of up to $7,000 per quarter for 12 months.

Individuals

  • The low and middle income tax offset will be increased by $420 in the 2021–22 income year to ease the current cost of living pressures.
  • A one-off payment of $250 will be made to individuals who are currently in receipt of Australian government social security payments, including pensions, to ease cost of living pressures.
  • Additional funding will be provided over 5 years to support older Australians in the aged care sector with managing the impacts of the pandemic.
  • Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
  • A single Paid Parental Leave scheme of up to 20 weeks paid leave will replace the existing system of 2 separate payments.
  • CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year announced.
  • The number of guarantees under the Home Guarantee Scheme will be increased to 50,000 per year to assist homebuyers with lower deposits.

Superannuation

The 50% reduction of the superannuation minimum drawdown requirements for account-based pensions will be extended for an additional year.

Need help?

If you would like assistance to interpret these changes and how they may affect your individual circumstances or your business, please contact your Allan Hall Advisor on 02 9981 2300.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.

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house keys in open door

First Home Super Saver Scheme (FHSSS) – A leg-up to home ownership for first home buyers?

It’s become a topic of daily conversation for many – the rising house prices in Australia and the impact on the first home buyer. Whether it’s discussed in the media, at a family bbq, or at the local café, it’s a conversation that many are having. As house prices continue to rise, so do the concerns for the younger generations of whether it is becoming simply unattainable to afford to own your own home. The Australian Government has introduced the First Home Super Saver Scheme (FHSSS) to assist first home buyers to save for a deposit. Will this be an effective solution to this very real issue? Let’s take a look…

What is the FHSSS?

It is a Government initiative introduced in the 2017-18 Federal Budget to help first home buyers save for a home deposit. It allows you to save money for a first home inside your superannuation fund. Due to the low rate of tax on earnings inside superannuation (15%) the idea is that it will help first home buyers save faster for their deposit.

How does it work?

From 1 July 2017 you can make both voluntary, before and after-tax contributions, into super to help save for your first home. You can contribute up to your existing superannuation contribution caps. From 1 July 2018 you can then apply to release your contributions together with an associated earnings amount (calculated by the ATO – not actual earnings) to assist with purchasing your first home.

How much can I withdraw?

A total of $30,000 can be withdrawn under the FHSSS, however only $15,000 each financial year can count towards this total. Within 12 months of the amount being released you must enter into a contract to purchase or construct a property.

So what’s the benefit?

  • Pre-tax super contributions such as salary sacrifice and personal contributions where a tax deduction is claimed are taxed at 15% rather than your marginal rate of tax;
  • The additional contributions made, earn income via your super fund investments;
  • These investment earnings are taxed at 15% rather than your marginal rate of tax.
Will this be one of the answers to the ever-increasing housing affordability issue? Time will tell. For those actively saving for a deposit this can be a great way to fast track the process so if you would like to discuss how this can apply to you, please contact your Allan Hall advisor on 02 9981 2300.