Payroll takes centre stage in states’ tax debates
At federal level, the long-awaited tax white paper may have been delayed. But in three states, payroll tax rebate is currently at the centre of debate.
In Queensland, Labor has finally been officially declared the winner after a lengthy post-election process. One of its election promises was to defer the increase to the payroll tax-free threshold as part of a savings drive to help pay for its priorities. While Labor argued that Queensland’s payroll tax rate of 4.75 percent was the lowest in the nation and so would not harm business, the Chamber of Commerce and Industry Queensland replied that the decision was disappointing and would affect 20,000 small business, costing 4000 jobs.
Meanwhile, in South Australia, the state government last week issued a tax discussion paper, and immediately the state’s peak business body, Business SA, said it was disappointed at the apparent reluctance to pursue any significant reform of payroll tax, a significant part of the costs of doing business and a factor in preventing small and medium-sized businesses employing more staff.
And finally to Victoria, where Labor promised in the lead up to last November’s state election that the first law passed by an elected Labor government would be the Back To Work Act. A key part of this Act, currently being discussed in the State Parliament, is a payroll tax rebate, under which employers who hire unemployed young people, the long-term unemployed and retrenched workers for a minimum of three months will be eligible for a $1000 rebate.
The inspiration for that scheme can be found in the NSW’s Jobs Action Plan and more specifically, the Jobs Action Plan Fresh Start Support Bill, which provides payroll tax rebates for employers who create and maintain new jobs for one or two years in industries prone to redundancies.
While KPMG is pleased to see any extension of the NSW scheme into other areas, there are concerns over the short-term nature of the requirement on Victorian employers – concerns that some unscrupulous employers may be tempted to take advantage of loopholes and claim rebates by continuously employing, terminating and re-employing the same person on a three-month basis. One would hope that the State Revenue Office will be provided with the appropriate powers and guidelines to ensure that the rebate works as intended, to help the unemployed back into work and is not open to rorting.
We have seen payroll tax rebates have success elsewhere – in NSW after a slow start when it was hindered by a lack of awareness the take up by Corporate Australia of the state government’s scheme has steadily increased. And in Tasmania we saw that the existence of the rebate was the decisive factor for a major multi-national deciding to keep its call centre in the state rather than outsourcing it overseas. In KPMG’s experience, a proper scheme of payroll tax rebates can have a material impact for employers.
The news last week that unemployment nationally has reached a high not seen for many years means it is imperative for federal and state governments to do all they can to reduce barriers to businesses employing people. Payroll tax is a key burden in this respect, and all states need to focus on making that as competitive as possible. The federal government meanwhile really needs to get on with issuing its tax and federation white papers so a much-needed debate on tax reform in Australia can begin in earnest.
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