On Tuesday 18th June 2019, Treasurer, Rob Lucas, handed down the 2019-20 State Budget, being his second Budget of the current Marshall State Government.
After last years announcement of a ‘financial mess’ and a ‘financial blackhole’, the Government has announced a modest operating surplus of $94 million for the 2019-20 year, despite a $2.1 billion reduction in Federal GST revenue since the Mid-Year budget review in September 2018.
The Budget estimates have the State delivering a net operating surplus of $94 million with a continued focus on additional investment in infrastructure as part of their commitment to “building a better South Australia”. To meet this commitment, South Australia’s debt is set to double from $6.3 billion to $13.2 billion by 2022-23.
The Budget estimates has the State’s economy growth rate at 2.5% for the next year, whilst employment growth is forecast to be 1% over the next four years.
Key initiatives include a $11.9 billion investment in key infrastructure projects, $537 million in health spending, $550 million provisioned for the construction of the new Women’s and Children’s hospital and significant investments in modernising school infrastructure and the education sector.
The key revenue measures are outlined below:
A new ‘aggregation model’ will be introduced for land tax purposes from 1 July 2020, to provide a ‘level playing field’ for taxpayers.
Under the existing legislation, taxpayers that have interests in multiple parcels of land can avoid or minimise their land tax liability by setting up complex ownership structures. For example, a taxpayer who controls 5 taxable land parcels across 5 separate land holding trusts, could be subject to land tax based on the value of each individual parcel, rather than the combined value of all land parcels.
Legislation has not been released however the State Government is taking inspiration from similar aggregation models implemented in Victoria and New South Wales.
The new aggregation model will include:
- A shift to aggregating based on an owner’s interest in every piece of land, rather than only aggregating properties held in the same ownership structure;
- Introducing provisions to allow two or more related companies to be grouped for land tax purposes; and
- Introducing a surcharge on land owned in trusts in cases where the interests in land of trust beneficiaries are not disclosed or cannot be identified. Exceptions will be provided from the surcharge for certain trusts (e.g. special disability trusts, guardianship trusts, complying superannuation funds). Consultation will be undertaken prior to implementation.
In addition, the existing top land tax rate for the value of ownerships above $5 million will now be progressively reduced by 0.10 percentage points each year from 3.70% in 2019-20 to 2.90% from 1 July 2027.
The State Government will provide additional funding to RevenueSA to undertake additional payroll tax compliance work to increase taxpayer compliance with payroll tax obligations. RevenueSA will expand existing and develop additional compliance programs focusing on businesses who have failed to register for payroll tax, the grouping of businesses, the use of contractors and other high risk areas.
Emergency Services Levy / Workers Compensation
Following on from the announcement in the Mid-Year budget review, the State Government continues to reduce the ESL bills for business, by providing general remissions for fixed property. These remissions have been estimated to return $90 million back to the community annually.
Workers compensation premiums will be reduced to 1.65% from a peak of 2.75%.
The Economic and Business Growth Fund
- $7.5 million will be provided over three years for the Red Meat and Wool Growth Program. The program will focus on improving productivity, installing infrastructure and enhancing market access
South Australian Landing Pad
- $1 million each year for four years will be granted to international and interstate companies to assist with the establishment into South Australia. Successful applicants will receive a once-off grant of up to $80,000 to help towards office accommodation and local professional services in their first 12 months of business.
Accelerate Discovery Fund
- $10 million over three years will be provided to co-fund greenfield exploration activities. The initiative will facilitate exploration, innovative technologies and stimulate growth.
The State Government will invest $104.5 million over the next two years in a housing stimulus package, with the aim to grow local jobs, support the local construction industry and assist first-home buyers to enter into the property market.
This package will include:
- A housing construction program to build about 90 new homes, of which the majority will be sold as affordable housing;
- Preventative maintenance and upgrade by the South Australian Housing Authority to improve up to 450 ageing Housing SA homes; and
- The creation of a new time-limited interest-free deposit gap loan of up to $10,000 for five years, funded via a new Affordable Housing Fund to be administered by HomeStart
- Finance for low-income borrowers.
This will provide a steady pipeline of building (and other trades) work over the next two years across the State.
Innovation and Science Research
$19.6 million of funds and resources will be allocated to six SA Based National Collaborative Research Infrastructure Strategy (NCRIS) facilities, to allow SA to be at the forefront of Australia’s innovation and science research, complementing the State’s growth in the space, defence and cyber sectors.
The six NCRIS facilities cover the following areas of research and innovation.
- Australian National Fabrication Facility – producing high technology optical components and devices;
- Australian Plant Phenomics Facility (Plant Accelerator) – a high technology glass house facility that measures plant growth and attributes;
- Bioplatforms Australia – provides high technology research to support the wine industry;
- Microscopy Australia – undertakes microscopy and microanalytical research to support medicine, agriculture, advanced manufacturing, geology and materials science;
- National Imaging Facility – provides a range of leading-edge imaging instrumentation and expertise for developing large animal models of human diseases; and
- Terrestrial Ecosystem Research Network – provides Australian land observations to measure changes in Australia’s land-based ecosystem biodiversity.
Adelaide City Deal
As previously announced, the State Government will invest $551 million over the next ten years as part of the Adelaide City Deal, which will be partnered by the Federal Government. This deal will attract interstate and overseas investment needed to generate the high-skilled, high-paying jobs that are the basis of a prosperous future for South Australia.
This deal will include the development of Lot Fourteen (the old RAH site) as an innovation precinct that will be home to leading businesses, entrepreneurs, major cultural attractions and educational programmes and facilities. The site will also be a hub for world class research to foster technological innovation and enhance growth in South Australia’s cultural and tourism economies.
There will also be funding for important tourism projects in the greater Adelaide region including investment into Heysens Gallery at Hahndorf, Carrick Hill House, Mitcham Hills Trail and the Glenthorne Trail.
Funding will also be provided for the Aboriginal Art and Cultures Gallery, an International Centre for Food, Hospitality and Tourism Studies and an Indigenous Business Hub.
Investing in Infrastructure
Improving Our Rural Roads
- $143 million from 2021-22 towards road safety improvements such as new overtaking lanes;
- $92 million from 2022-23 for duplication of Victor Harbor corridor between Main South Road and McLaren Vale;
- $55 million from 2022-23 for the Horrock Highway Corridor; and
- $740,000 per year will be provided to the Outback Comminutes Authority to upgrade and maintain essential infrastructure in outback areas.
- $550 million provisioned to commence the constructions of a new Women’s & Children’s Hospital;
- $537 million in new health spending, including reactivating the Repatriation General Hospital; and
- $140 million over 10 years from 2018-19 to address the vital need for maintenance and improvement works on regional hospitals and health infrastructure.
Investing in Education
- $361 million to building three new State Government schools;
- A comprehensive package of $163.3 million to schools to assist in the transitioning of Year 7 to high school and additional growth in the school system;
- An $80 million project with Telstra to connect every State Government school student to high-speed internet by the middle of 2020; and
- Additional $26.8 million over four years to support TAFE SA in its continuing reforms.
Cost of Living
Motor Vehicle Charges
South Australians will receive a reduction in CTP fees for a standard four cylinder passenger vehicle from 1 July 2019. There will be a one-off increase to fees and charges of five per cent, including licenses, car registrations and traffic fines from 1 July 2019, the first increase since 2011.
Government Fees and Charges
The State Government will index most fees to an increase of 5% in 2019-20.
- Public transport fares will increase by 2%;
- Motor vehicle registration will increase by 5%; and
- Low range speeding fines will increase by 1.7% (equalling a $3 increase).
If you have any questions about the tax issues contained in this summary, please contact our Tax Directors Malcolm Wight or Andrew Nicola via email or on (08) 8409 4333.