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No new taxes in SA Budget welcome but businesses still face challenges

No new taxes in SA Budget welcome but businesses still face challenges

The Labor State Government handed down its second Budget on 15 June 2023 with a focus on funding health, housing and cost of living relief.

In good news for SA businesses, and despite the Budget falling into deficit, the State Government has again met its pre-election promise to not introduce any new taxes or increase existing taxes. This decision is particularly pleasing considering the uncertainties that SA businesses will face due to increasing interest rates and other economic pressures over the next 12-18 months.

There is good news for some first home buyers, with the introduction of Stamp Duty relief for eligible first home buyers who enter into a contract to purchase a new home or vacant land to build a new home on or after 15 June 2023.

First home buyers will also benefit from an increase in the property value cap from $575,000 to $650,000 for the first home owner grant in relation to eligible transactions entered into on or after 15 June 2023.

Further housing changes:

  • the removal of Stamp Duty for eligible first home buyers purchasing a new home valued up to $650,000 on or after 15 June 2023, with relief progressively phased out for properties valued up to $700,000
  • the removal of Stamp Duty for the purchase of vacant land valued up to $400,000 on or after 15 June 2023 upon which a new house will be built, with relief phasing out for land valued up to $450,000
  • an increase in the property value cap for the first home owner grant for eligible first home buyers who enter into a contract on or after 15 June 2023
  • 50% reduction in the land value of relevant parcels of land, where the land is being used as an eligible build-to-rent project (where construction commences on or after 1 July 2023)
  • changes to allow RevenueSA to issue individual Notice of Emergency Services Levy Assessments to lessees of privately leased shack sites, relieving the difficulties previously experienced by shack site group owners of apportioning, collecting and paying the emergency services levy.

The Budget included the single largest residential land release in SA history, with 25,000 new blocks to come to market across Adelaide’s northern and southern suburbs. Funding was also committed for the delivery of up to 700 affordable homes, while stamp duty was abolished for first home buyers buying new homes valued up to $650,000 or vacant land valued up to $400,000.

The State Government would be hoping that the first home buyers’ relief will, at the very least, prop up the construction industry. Abolishing stamp duty for first home buyers is positive, however, there is a shortage of workers in the construction industry, so there are capacity concerns, in the short, medium and long term in response to this budget.

On the positive side for business, the $20.8 million boost over four years to major event spending would have significant flow-on effects for the wider SA economy. When SA hosts an event like LIV Golf or the AFL’s Gather Round, it’s generally been extremely successful. Even for non-sport events such as Adelaide Fringe, which this year sold 1 million tickets, the additional funds will make it more accessible and support more diversity.

The Budget’s $200 million Digital Investment Fund and a $63.8 million investment in new skills initiatives would provide further support to industry. These measures are going to help businesses in South Australia navigate what’s ahead of them in a tight labour market. Innovation and digitisation are very important, particularly with the pressure on profitability and margins.

However, the private sector still faces significant challenges post-pandemic, with rising interest rates, sticky inflation, tight labour markets and skills shortages in key sectors impacting their ability to produce profits and drive economic growth.

Despite not introducing any new taxes and notwithstanding the challenges facing business, the 2023 Budget’s forecast significant increases in tax revenue for the SA government.

Taxation revisions and growth expectations:

  • Land Tax revenue has been revised up in 2023/24 to reflect strong growth in property site values over the 2022 calendar year
  • Payroll Tax revenue is expected to grow by around 5.2 per cent on average over the four years to 2026/27 based on an estimated underlying growth in employment and earnings.
  • Total property taxes have been estimated to rise from $824 million in 2022-23 to $1.048 billion in 2026-27, while insurance taxes have been estimated to rise from $605 million to $718 million over the same period
  • Motor vehicle tax revenue is expected to increase by $70 million by 2026-27 and payroll tax is expected to rise from $1.6 billion in 2022-23 to $1.96 billion in 2026-27

The Budget’s economic growth forecasts were pulled back to 1% in 2023-24 and 1.75% in 2024-25, from 1.25% and 2% respectively. Stamp duty has risen because of stronger than expected growth in property values, but the forecasts show property transfers are likely to decline by 6% next year.

More information about the South Australian Budget can be found here.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

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