2022-23 New South Wales Budget Update

The New South Wales Budget for 2022-23 was delivered on Tuesday 21 June 2022.

The Budget seeks to both address current challenges and deliver transformational reform in NSW.  A number of new measures have been announced, which are underpinned by the strong recovery in the NSW economy since the Delta lockdown and a robust economic outlook. 

In response to current challenges, the Budget provides funding for new healthcare workers, increased support for flood affected communities and a boost to household budgets amid the rising cost-of-living due to global inflationary pressures.  In the long-term, the Budget contains a $112.7 billion infrastructure investment, and makes other long-term investments in women’s opportunities, early childhood education and development, access to housing, scientific and technological developments and renewable energy.  The proposed spending measures will be funded by a mix of borrowings, operating cash surpluses and financial assets, together with $11 billion in debt retirement from the NSW Generations Fund (including WestConnex sale proceeds).  Measures amounting to $2 billion in revenue and savings (including an option for certain first home buyers to pay an annual property tax instead of upfront transfer duty) have also been announced.

The Budget confirms that the NSW Government intends to return the Budget to surplus in 2024-25, in line with previous forecasts.

Infrastructure

The NSW Government has announced a record $112.7 billion infrastructure commitment over four years. Significant projects continuing or commencing delivery as part of the Budget include:

• $76.7 billion for transport and infrastructure, including $12.4 billion over four years for Sydney Metro West and $8.4 billion over four years for Sydney Metro Western Sydney Airport;
• $11.9 billion for health infrastructure to plan and deliver new and upgraded hospital builds (including $1.3 billion for Bankstown Hospital); and
• $9.2 billion for education and skills infrastructure, including $1.4 billion over the four years to 2025-26 to deliver 23 new and upgraded school projects and additional funding for the minor works program.

The Budget also contains a $5 billion ‘WestInvest’ program to fund transformational infrastructure projects across Western Sydney, with $478.2 million allocated to the modernisation of schools and $2 billion to be made available for community project grants.

Tax measures

The Budget makes several key changes to revenue policy.  The changes have been made in the context of the NSW Government expecting State taxation to comprise 38% of total State revenue over the next four years.  The key changes include:

• Introducing the First Home Buyer Property Tax Option: First home buyers purchasing a property up to $1.5 million will be provided with an option to pay an annual property tax instead of transfer duty upfront. Over the four years to 2025-26, this measure is estimated to reduce overall revenue by $663.6 million. This consists of lower transfer duty receipts of $751.8 million, which is expected to be partially offset by an increase of $88.2 million in property tax revenue.
• Reduction in the discount available for early payment of land tax: Land tax is payable annually (on a calendar year basis) either up front in full or over instalments. A discount of 1.5% is currently available to taxpayers who pay their land tax in full within 30 days after their assessment has been issued. The land tax early payment discount will be lowered to 0.5% from 1 January 2023.
• Increase to the foreign investor surcharge land tax: The foreign investor land tax surcharge of 2% will increase to 4% per annum from the 2023 land tax year.
• Payroll tax exemptions under a subprogram of the Future Economy Fund: A subprogram of the Future Economy Fund will offer grant payments and payroll tax exemptions to encourage businesses of future industries to establish or expand in New South Wales. Payroll tax exemptions under the subprogram are estimated to reduce revenue by $51.0 million over the five years to 2026-27.
• Additional compliance investment for land tax and transfer duty: Building on previous investments in system upgrades and improved data management at Revenue NSW, additional compliance investments will be made by the NSW Government.  This is expected to recover additional land tax revenue by $368.0 million and transfer duty revenue by $200.0 million over the four years to 2025-26.

Taxation revenue is expected to be $39.6 billion in 2022-23.  Payroll tax expected to overtake transfer duty as the largest source of taxation revenue from 2022-23 due to the projected weakness in the residential property market and a projected initial downgrade for the First Home Buyer Property Tax Option.

Clean-energy initiatives

The Budget includes investments to address the physical risks of climate change as well as the advantages of clean technologies and emerging green markets.  The Budget reinforces the importance that the NSW Government sees in the development of clean-energy production, transmission and storage to addressing the affordability and reliability of energy in the transition to net zero.  The key investments are focused on:

• Climate adaption – including a $2.5 billion investment from the Climate Change Fund over 10 years in programs to reduce emissions and make NSW more resilient to a changing climate from 2022 to 2030;
• Renewable energy – including $1.2 billion net (maximum, after recycling proceeds) to accelerate the delivery of the new transmission projects required for Renewable Energy Zones across regional NSW (total gross investment, which is intended to be fully recouped, is $3.1 billion over the next 10 years); and
• Protecting the natural environment and reducing emissions – including $222.1 million for the National Parks and Wildlife Service and $206.2 million over 10 years to enhance the State’s natural capital.

The Budget also includes a new target of 50% emission reductions below 2005 levels by 2030, achieved through the Net Zero Plan initiatives including the NSW Electric Vehicle Strategy and the Electricity Infrastructure Roadmap.