South Australia delivers an infrastructure budget

The budget forecasts a $1.78b deficit for this financial year, reduced from the expected $2.6b deficit. The reduction in debt is largely attributable to a $926m GST influx, and stamp duty windfall of $214m from a booming property market. South Australia’s jobless rate has risen from 5.7% to 5.8%, and now has Australia’s highest unemployment rate. However, in May 2021 there were over 60,000 more jobs than in the previous year, and the highest number of people employed in the state on record.

The budget also forecasts a $48m surplus in 2022-23, a year earlier than estimated in the 2020-21 budget, followed by a jump to $498m in 2023-24.

Revenue-related measures

The revenue-related measures include further support to taxpayers arising from the transition to an aggregated land tax model which commenced on 1 July 2020, and announcements for the introduction of tax concessions for build-to rent schemes and introduction of a road user charge for electric vehicles.

Land Tax

The changes to land tax in SA have been quite controversial, and measures have been previously introduced to provide some cap on the amount of increase in land tax which would otherwise be borne by some taxpayers. The land tax transition fund was established as part of the land tax reform package that commenced from 1 July 2020 to assist taxpayers negatively impacted by changes to the land tax aggregation rules which came into effect from midnight on 30 June 2020.

The Budget increases the potential relief for the 2021-22 land tax year from 30% to 70%. The relief only applies if the increase in land tax ranges from $2,500 to $102,500 (compared to land tax charged in the 2019/20 land tax year) and the increase is a direct result of the aggregation provisions for land already held as at 1 July 2020.

Land tax thresholds are also increasing for all land tax brackets except the top tax bracket which continues to apply for land valued over $1.35m. However, taxpayers might not see much overall relief from that measure having regard to the expected increase in land values for the upcoming land tax year.

Previous measures also included a pilot program to develop affordable housing which was limited to 100 properties. Following the lead of New South Wales and Victoria, a 50% land tax discount will be introduced for eligible new build-to-rent housing projects which will reduce the land values for land tax purposes up to 2039-40. The land tax reduction will apply for eligible new projects where construction commences from 1 July 2021. While the initial affordable housing program was not strictly aimed at build-to-rent projects, the Budget provides for more targeted relief to build-to-rent projects more generally and it is unclear whether it has an impact on the initial pilot program.

Payroll Tax

The Budget provides for the following payroll tax measures:

• Extending the payroll tax exemption for wages paid for eligible new trainees and apprentices who commence a relevant training contract up to 30 June 2022 for 12 months from the contract commencement date.
• Abolishing the payroll tax exemption and ex-gratia relief on wages paid or payable in connection to a feature film produced in South Australia from 1 July 2021. It is intended that the increase in payroll tax will be used to fund an increase in the Screen Production Fund administered by the South Australian Film Corporation.

Other revenue measures (including new road user charge)

Other revenue-related measure comprise:

• An increase in the Emergency Services Levy (ESL) general remissions by $5.4m in 2021-22, increasing the total level of general remissions funded by government to $95.4m. Remissions reduce the effective ESL rates payable by taxpayers, lowering ESL bills.
• Licensed businesses that were in receipt of JobKeeper payments during the second extension (January to March 2021 period) are entitled to a reduction of 50% on the annual liquor licence fee in 2021-22.

Following the announced intention in last year’s SA budget, a road user charge for electric vehicles is intended to be introduced in the coming months, with indication that it will be modelled on Victoria (which commences on 1 July 2021). There has been much movement in the last 6-12 months in relation to the taxation of electric vehicles, and of course, no two jurisdictions are the same. The current state of play of state taxation of electric vehicles is .