The NSW budget is shouting the state a $250 million lunch, even as the 2021 financial year will post an historic $16 billion deficit as Treasurer Dominic Perrottet grapples with the impact of Covid-19 on Australia’s most populous state.
The FY20 deficit was $6.9 billion. It will take until 2025 before the NSW budget is back in the black, with NSW Treasury expecting revenue to fall by $25 billion over five years. The state’s debt peaks at $104bn in FY24.
The impact of Covid-19 is addressed in a $29.6 billion health and economic package over the next five years.
A focus on economic stimulus is the cornerstone of the 2021 NSW Budget. The focus for small business includes payroll tax cuts for most businesses, a $1,500 voucher to smaller businesses and payroll tax relief for businesses expanding their NSW workforce.
The government will spend $500 million sending everyone over 18 four $25 vouchers – $50 worth to spend in restaurants and cafes, the other $50 on entertainment in a bid to bolster the hospitality, arts and performance sectors. The Out and About voucher scheme will be delivered via Service NSW mobile app. The program will be trialled next month before a full rollout in 2021.
Perrottet says the scheme will help those sectors hardest hit by the pandemic and will stimulate the local economy.
Payroll tax cuts
The NSW government previously increased the payroll tax threshold to $1 million as part of its response to Covid-19. The NSW Treasurer announced that he will bring forward an increase to the threshold to $1.2 million this year in a move expected to free 3,500 businesses from the burden of having to pay tax to employ people.
Additionally, the payroll tax rate will be temporarily cut from 5.45% to 4.85% for the next two years (FY21 and FY22). The tax cut is expected to save businesses $2.4 billion over two years.
Small and medium-sized businesses that are not subject to payroll tax will receive a $1,500 digital voucher that can be applied towards the cost of government fees and charges. The move is expected to cost $472 million.
Jobs Plus Program
The Jobs Plus Program aims to create or support 25,000 jobs between 15 December 2020 and 30 June 2022.
Larger businesses that create (net) at least 30 new jobs in NSW will be eligible for payroll tax relief for up to a four-year period. The offer will apply to existing businesses increasing their local employment numbers, or by relocating operations to NSW from interstate or overseas.
ScotPac CEO Jon Sutton said the changes to payroll tax should encourage other states to look at their tax regimes.
“Simplifying the complex national tax system, getting rid of state payroll taxes and cutting red tape nationally would have the biggest daily impact for Australia’s small to medium business sector,” he said.
Dale Dixon, Head of Product for Small Business at MYOB said the budget will go a long way to restoring business confidence and provide a much-needed boost for small businesses.
“Prior to October’s Federal Budget, MYOB found 35% of small and medium sized enterprises (SMEs) in NSW and ACT expected to take more than 12 months to return to pre-COVID levels of profitability. The programs outlined today will support SMEs during this challenging time,” he said.
“We particularly applaud the Out and About program, which will help many smaller businesses in NSW regain some of the losses they experienced throughout 2020, and the payroll tax cuts, which will provide welcome relief to many businesses.”
The government also flagged changes to property stamp duty and land tax as longer-term reforms in the hope that it will lower the barriers to home ownership. A public consultation period on replacing stamp duty will get underway shortly, with a push to replace it with a broader and ongoing land tax – something the ACT government introduced in 2012 as part of a 20-year plan to phase out stamp duty.
A range of infrastructure measures, including significant infrastructure spending, also featured in this year’s NSW budget. Road and transport projects are worth $72 billion over four years. The total infrastructure spend is $107 billion over that period.
City business revitalisation
The NSW government will collaborate with the City of Sydney on a $15 million grants program aimed at reinvigorating the CBD, with a focus on live outdoor entertainment and alfresco dining.
A further $39.3 million is earmarked for the Business Connect program to help small business owners receive the advice they need to survive and thrive post-pandemic.
Perrottet said the Budget will help businesses with funding to keep rebuilding communities still recovering from natural disasters, major investments to generate jobs, and additional mental health services to ease the strain of an impossibly difficult year.
“This will enable the NSW Government to better connect the State’s talent, ideas, products and services to rapidly growing markets and build partnerships with established markets to bring new investment to NSW,” he said.
The programs include
- $100 million in grants to the Regional Jobs Growth Fund for businesses in regional NSW to invest, expand their operations, get new customers through the door and create new jobs.
- $300 million over two years to the Regional Growth Fund in an extra new round of economic development and job creation programs such as Stronger Country Communities program.
* Additional reporting by Cec Busby.