Payroll tax is penalising local business

While budgets are often viewed through a 12-month lens, or four-year political term, the strength of the NSW economy provides an opportunity to build capacity in both economic infrastructure and human capital.

A key to the future of regional NSW are the small businesses who employ half our workforce, and contribute $300 billion dollars a year to the state’s economy. This is a sector who are doing it tough with cost pressures, such as energy and gas, threaten their viability and ability to grow.

Over the years the NSW business community, represented by the NSW Business Chamber a non-government organsiation, has spelt out the benefits to the NSW Government of increasing the payroll tax threshold as a practical and immediate way to provide a direct stimulus to jobs growth and much needed support for NSW small business.

It is important to understand that payroll tax is a tax on employment. It is charged to businesses on the total wages of their employees. This effectively penalises businesses for hiring workers and providing a useful good or service to their local community.

Unlike company tax, which is charged on profit, payroll tax is charged on a business’s largest expense, its staff’s wages, and their superannuation. This means that even a company who is unprofitable will still be required to payroll tax.

While lowering the payroll tax rate would improve payroll tax competitiveness, the NSW Business Chamber asserts that doing so in any meaningful manner would have a significant budget impact and largely benefit multinationals. On the other hand, increasing the threshold would allow a more aggressive reduction in the effective rate of payroll tax paid by SME’s.

Over April and May, the NSW Business Chamber and local business owners across NSW mobilised writing to our local parliament members, asking for their support to address a major impediment to job creation – payroll tax.

The NSW Business community proposed to the NSW Government that an increase to the payroll tax threshold from $750,000 to $1 million on its own would deliver a significant improvement for small business right across NSW and significantly improve competitiveness for cross-border businesses.

Joe Townsend is the regional manager of the NSW Business Chamber