State Based Taxes and COVID19 Assistance in New South Wales
Many directors of businesses focus on Federal taxes, such as PAYG, GST and Income Tax, which accounts for the majority of the total tax revenue raised in Australia. However, business owners also need to consider State based taxes and how they can have an impact on the cashflow of a business.
The major sources of State based tax revenue are Payroll Tax, Land Tax and Stamp Duties. State Governments also impose taxes on gambling and motor vehicles.
As the COVID-19 pandemic continues to impact Australia, State Governments are assisting taxpayers and businesses with the following:
- Providing additional time for dealing with tax affairs, including lodgment deferrals; and
- Offering payments deferrals, payments plans and even reduction in payment of up to 100%.
New South Wales
The NSW Government collects the following taxes:
- Land Tax;
- Payroll Tax;
- Gaming and Wagering Tax;
- Transfer Duties;
- Health Insurance Levies;
- Passenger Service Levies; and
- Mineral Royalties.
Most States imposes Land Tax on land holdings whose combined value is greater than the threshold amount. In NSW, a registered proprietor may have to pay Land Tax if it owns, whether jointly or solely:
- Vacant land, including rural land;
- Land where a house, residential unit or flat has been built;
- Company title units;
- Residential, commercial or industrial units, including car spaces;
- Commercial properties, including factories, shops and warehouses;
- Land leased from state or local government.
However, there are also exemptions for certain types of land holdings, including, but not limited to:
- Primary residential property;
- Farm Land; and
- Any land owned with a combined total taxable unimproved value below the Land Tax threshold.
The thresholds for the unimproved land values change each year and are published in each October with the Land Tax being applied to land holdings held on 31 December of each year. The NSW threshold for the 2021 calendar year for combined unimproved land value is $755,000. As land values continue to increase, Land Tax will become more and more relevant to land holding entities.
Land Tax is applied for the full year and is not calculated on a pro-rata basis. It also creates a Statutory Charge against the title of the land for any unpaid Land Tax liability.
As result of COVID-19, Land Tax relief measures have been re-introduced by the NSW Government for commercial and residential landowners, who provide a reduction in rent to a tenant who is experiencing financial distress, for any period between 1 July 2021 and December 2021. Land Tax relief is provided to landowners equal to the value of rent reduction up to 100% of the 2021 land tax liability. Landowners who do not pay land tax can alternatively apply for up to $1,500 grant per residential tenancy.
For the sake of completeness, Landlords should be aware that they currently cannot evict retail or commercial tenants without mediation, with this protection for tenants lasting for the whole of the COVID-19 lockdown period.
Most States also imposes Payroll Tax on employers (or group of employers) whose gross wages (including superannuation) are greater than the threshold amount. In NSW, employers must register for payroll tax if its total Australian gross wages exceed the relevant monthly threshold, which for 2022 Financial Year is as follows (or $1.2m gross wages for the financial year):
|Days in Month||Threshold $|
The Payroll Tax rate for NSW is 4.85% for the 2020/21 and 2021/22 financial years.
Due to the impact of COVID-19, the NSW Government have extended the lodgment and payment of the 2021 annual reconciliation until 7 October 2021. Businesses can also defer payment for July and August 2021 return periods until 7 October 2021. Businesses also have the option to enter into an interest free 12 month repayment plan with Service NSW for the deferred payment of Payroll Tax.
In addition, businesses with Australian wages of up to $10 million gross and who have had a 30% decline in turnover, are potentially eligible for a 25% reduction for their Financial 2022 Payroll Tax liability.
Importantly to note, businesses can be grouped at any time and therefore, deemed liable for Payroll Tax purposes if there is a link between the businesses. Grouping for Payroll Tax purposes in NSW can be formed in following ways:
- Related companies (as defined pursuant to Corporations Act 2001);
- Common employees;
- Common control;
- Tracing of Interest;
- Smaller Groups subsumed into Larger Groups;
Businesses that are grouped for Payroll Tax can only claim a single tax free threshold between them and are jointly and severally liable for any outstanding Payroll Tax liability of the group.
As such, should a company be placed into liquidation, then the other entities within the deemed group for Payroll Tax purposes will be jointly and severally liable for any Payroll Tax debts incurred and that remain outstanding by that company.
State Based taxes, like most taxation liabilities, can be complicated. Accordingly, seeking appropriate and professional advice early, prior to making any material decisions, is critical for any business.
Should you have any queries regarding this topic or if you have a client experiencing financial distress, please contact Joanne Keating on (02) 9262 1944 or your locally based Rodgers Reidy Director at www.rodgersreidy.com.au.
Disclaimer: This material is intended to provide general information in summary form on legal and accounting topics, current at the time of first publication. The contents do not constitute legal or accounting advice and should not be relied upon as such. You are strongly recommended to seek specific professional advice before taking any action based on the information contained herein. No warranty expressed or implied is given in respect of the information provided and accordingly no responsibility is taken by Rodgers Reidy (International) Pty Ltd or any affiliated Rodgers Reidy firms or any member of any affiliated firm for any loss resulting from any error or omission contained within this material.
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Joanne joined Rodgers Reidy in August 2020 bringing with her in excess of 18 years of experience in corporate insolvency at national accounting firms within both the UK and Australia. Joanne has worked on various types of formal and informal corporate insolvency appointments including voluntary administrations, deed of company arrangements, receiverships, liquidations, investigative accountant reports and solvency reports.