Land tax to surge by an extra $870m as values continue to rise

Land tax receipts from owners of investment properties and holiday homes in NSW are forecast to be $870 million higher than expected over the next three years due to a spike in values.

The windfall figure is contained in the half-yearly budget review released by NSW Treasurer Dominic Perrottet on Thursday, which also reveals the initial anticipated cost of the government's announcement that motorists who pay more than $1300 in motorway tolls a year will receive free registration.

While Premier Gladys Berejiklian initially estimated the cost at up to $100 million, the half-yearly update says it is forecast to cost $162 million over the four years from 2018-19 and 2021-22.

The review says that following a determination by the NSW Valuer-General in July, land tax revenue is expected to be $105.9 million higher than the forecast in the June budget for 2017-18.

Over the three years to 2020-21 it says land tax revenue is expected to be $867.2 million higher than forecast in June "due to higher than expected land values and their ongoing effect through three year averaging".

As foreshadowed by Fairfax Media on Thursday, Mr Perrottet announced the forecast surplus for 2017-18 has increased from $2.7 billion estimated in June to $3.3 billion.

This is due to a shift in the timing of agency expenditure, leading to a reduction in expenses this financial year.

Average surpluses of $2.1 billion a year are forecast across the forward estimates to 2020-21.

The review also shows NSW's infrastructure spending will increase from $72 billion to $80.1 billion over four years.

Net debt sits at negative $9.3 billion, but the review shows it is expected to climb to $23.7 billion by 2020-21 as surpluses and the proceeds of transactions like asset privatisations are ploughed into infrastructure projects.

As also foreshadowed, stamp duty revenue in the three years to 2020-21 being revised down by $657 million.

This was largely due to the take up of stamp duty concessions for first home buyers in a housing affordability package announced in the June budget.

Between June and November, 13,672 people have received stamp duty concessions, compared with 3970 people in the same five month period last year.

The review reveals that payroll tax revenue has also been revised upwards by $189.5 million since June due to strong employment growth. In the three years to 2020-21, payroll tax revenue is expected to be $991.2 million higher than forecast in June.

However, expenses are forecast to grow by an extra $2.4 billion to 2020-21 due to new policies including $2 billion in reservations for projects from the government's Restart NSW infrastructure fund as well as energy rebates and regional council roads grants.

Announcing the results, Mr Perrottet said despite the surpluses "slowing revenue growth and emerging expense pressures will create challenges for the budget in the years ahead".

"These challenges will require the government's continued financial discipline and pursuit of reforms that contribute to economic growth and maintain a sustainable budget position," he said.

This story Land tax to surge by an extra $870m as values continue to rise first appeared on The Sydney Morning Herald.