Jun 19, 2019
South Australian State Budget 2019-20 Overview
Economic growth measured as Gross State Product is estimated to increase to 2.5% in 2019-20 from 2% in 2018-19. Employment growth in 2019-20 is estimated to be 1% in 2019-20, down from 1.25% in 2018-19.
Due to significant reductions in GST revenue and conveyance duty revenue, the Government increases borrowings, fees and charges to assist ongoing budget sustainability.
The preparation of this year’s budget papers has also been made more challenging by the need to comply with the new Australian Accounting Standards, resulting in the total Non-Financial Sector Public Sector debt increasing by $1.3 billion in 2019-20 to $16.7 billion.
The South Australian Government is introducing targeted measures to crack down on individuals and companies who have reduced their land tax bills by setting up complex legal structures to avoid the land tax aggregation provisions of the Act. This initiative introduces improved land tax aggregation provisions and a surcharge on certain trusts and is estimated to raise an extra $40 million per year or $120 million over three years.
While the government is reducing land tax rates to increase the competitiveness of the tax system, it also wants to ensure there is equity between taxpayers.
An improved approach to the aggregation of land for land tax purposes will be introduced in South Australia and will include:
- a shift to aggregating 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 companies to be grouped for land tax purposes
- 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. This is designed to minimise the incentive to own properties in trust to avoid aggregation by increasing the tax payable. Exclusions from the surcharge will apply for certain types of trusts. The government will set a surcharge with the intention of minimising avoidance practices following consultation on the proposed changes.
These changes apply from 1 July 2020. The final details of the arrangements will be subject to consultation prior to implementation.
Associated with these land tax changes the government will progressively reduce the top land tax rate from 1 July 2020. The top land tax rate for the value of ownerships above $5 million will be reduced by 0.1 percentage point each year from 3.7 per cent in 2019-20 to 2.9 per cent from 1 July 2027. The initial cost in 2020-21 will be $2.7 million rising to $8.6 million in 2022-23.