TAX NEWS - June 2010

NSW Tax: NSW budget back in the black

The NSW government has forecast a budget surplus of $773 million for 2010/11, as the state makes it way back into the black this financial year and gets ready for a state election early next year.

The net operating surplus will come on top of a projected surplus of $101 million in 2009/10, according to budget papers tabled in state parliament on Tuesday.

That represents a strong turnaround from the forecast in the previous budget for a $990 million deficit in 2009/10.

NSW Treasurer Eric Roozendaal forecast general government debt to be $12.23 billion, or 2.7 per cent of gross state product (GSP), by June 2011.

The estimated government debt as a share of GSP is expected to be the peak, before the ratio declines to 2.6 per cent in June 2012 and 2013 and falls to 2.5 per cent of GSP by mid-2014.

"NSW is already back in the black," Mr Roozendaal told parliament.

"At a time when many other economies around the world, particularly in Europe, are struggling, the financial position of our state is strong."

The major measure in the 2010/11 budget was a cut in stamp duty to zero from July 1 for the next two years on new homes and apartments worth up to $600,000 before they're constructed.

This will save homebuyers up to $22,490, Mr Roozendaal says.

The government will also cut stamp duty by 25 per cent on homes that are under construction of have just been built, saving homebuyers an estimated $5,623.

The state will also cut the payroll tax from 5.65 per cent to 5.5 per cent on January 1 next year, and then to 5.45 per cent on January 1, 2012.

The budget papers show revenues have been revised up to $57.7 billion for 2010/11, an increase of $2.2 billion, or 3.9 per cent, over the revised estimate for 2009/10.

This includes a $1.4 billion increase in taxation revenue over the upcoming financial year to $20.2 billion, up 7.7 per cent over the revised estimate of 2009/10.

It also factors in a $1.4 billion increase to $14.8 billion of general purpose grants and an 8.8 per cent increase to $4.6 billion of sales of goods and services over 2009/10.

This will be offset by a six per cent increase in employee expenses over 2010/11, reflecting increased services and frontline staff in the health sector, the budget papers show.

Meanwhile, the NSW government also forecast a budget surplus of $885 million in 2011/12, compared to the 2009/10 budget forecast for a surplus of $86 million.

It also forecast a surplus of $863 million in 2012/13 and a surplus of $628 million in 2013/14.

Budget papers show the government expect the state's unemployment rate to fall to 5.5 per cent in 2010/11, down from the 2009/10 estimate of 5.75 per cent.

The state's jobless rate is expected to fall to 5.25 per cent in the 2011/12 financial year.