Young Sydney horse trainer James Cummings says a $2 million horse welfare fund will help transform the NSW racing industry and provide justification it is doing all it can to protect animal rights.

The fund, drawn from an estimated $204 million of annual prize money, will ensure all NSW thoroughbreds are cared for outside their racing careers, including those that never make it to the track, according to Racing NSW.

Cummings said the impending demise of the state's greyhound racing industry meant it was paramount Racing NSW staked its claim as a world leader in animal welfare.

"I'm a young trainer and I have young friends from university who are well educated animal activists and animal lovers," Cummings said.

"They ask me that question, `what happens to these horses after racing'?".

The welfare fund will be predominantly funded from a one per cent deduction in prize money which is set to receive a multi-million dollar boost from October.

Racing NSW and the Australian Turf Club jointly announced an almost $53 million increase to prize money on Tuesday, which RNSW chairman John Messara described as a watershed moment for the industry.

The Horse Welfare Fund will support a dedicated team of staff, including an equine veterinarian, to manage the program, as well as establishing partnerships with riding schools and agricultural societies to promote horse re-homing.

The money will also fund training in horse welfare for new owners.

Cummings said the fund would help alleviate some of the financial burden that had previously laid with owners and participants.

"This has been an argument, and explanation that we've needed to give for a long time, a part of our sport that we really need to take responsibility for," Cummings said.