TAXING: Payroll tax varies across states and is in need of reform, Alan Clayton says.
TAXING: Payroll tax varies across states and is in need of reform, Alan Clayton says.

Unfair taxes need reform

BUSINESSES in NSW are currently required to pay payroll tax to the Office of State Revenue at a rate of 5.45 per cent on any wages paid over the annual threshold of $850,000 in a financial year.

Payroll taxes are higher in NSW than they are in both Queensland and Victoria, and this disparity places NSW businesses at a competitive disadvantage and creates an impediment to employment.

For example, currently Queensland businesses pay payroll tax on wages above $1.1 million compared to NSW at $850,000 and their rate is 4.75 per cent.

It's frequently acknowledged that businesses try to minimise their payroll tax obligations by staying below their thresholds which limits their growth and in turn much needed job opportunities are missed for the employment market.

By way of example, if you take an average wage in a regional area of say $60,000 per year including superannuation which is included for payroll tax purposes, the current threshold of $850,000 would be reached with about 14 employees.

This means that for every additional employee that a business of this size employs it would incur a payroll tax liability each year of $3270.

So if a business wanted to grow by an additional 10 employees its annual payroll tax liability would be $32,700 which is nearly half of another employee.

It is also important to note that for businesses who have employees working in different states that payroll tax is calculated on Australia-wide employees, not on just a state-by- state basis.

That is an administrative nightmare for small business which leads to further costs.

So as you can see, payroll tax in a disincentive to growing business and creating employment which is completely at odds with state and federal government job growth policies and targets.

Here at the Coffs Harbour Chamber of Commerce we have for some time been making representations to the NSW State Government to reduce the payroll tax burden on small business in New South Wales.

Most recently we raised the issue of payroll tax and the unfair burden it places on small business with candidates in the New South Wales government election at our meet the candidates meeting last month.

Gurmesh Singh, newly elected State Member for Coffs Harbour, was supportive of looking into reductions in payroll tax payable by businesses and made mention of the already announced increases in thresholds over the next three years.

While these increases are an improvement, in our opinion they do not go far enough and we will continue to lobby both state and federal governments for additional changes so that the burden of payroll tax on small business is further reduced or Better still eliminated altogether.