“There is no evidence in the data to support anecdotal reports that firms attempt to avoid payroll tax by hiring contractors,” the federal Treasury claimed this week, adding that it also had found little evidence that businesses were capping their workforce to avoid breaching payroll tax thresholds.
Yet several My Business readers disputed Treasury’s claims, outlining that payroll tax has a very real impact on their business and hiring intentions.
“I have 20 employees and pay payroll tax. I consider the additional payroll tax payable before any additional employee,” said one.
“I definitely prefer contractors of whom eight are supported by my business. I think [T]reasury is deliberately misinterpreting the data to suppprt [sic] Government fundraising. There is no magical nexus at the threshold. It is merely the point at which you start paying this odious tax.”
Another suggested that every SME “with a turnover of less than $2m should be exempt”.
“We limit our employment in our SME to avoid the extremely unfair payroll tax,” the reader said.
“The answer is simple... raise the GST to 25 per cent and dump all other taxes and excises, including income tax. Has anyone crunched the numbers on that?”
Another bluntly added that “as a business owner close to the threshold, the answer is easy for me”.
“Of course we consider our options each time we take on an employee if we are close to the threshold. The tax has a direct effect on company profits. We have to take into account the balance between growing the business (with all the added stresses etc) vs government strangulation.”
Meanwhile, tax agent Dr Terry Dwyer of Dwyer Lawyers suggested that businesses may ultimately pass on payroll tax to their workforce, putting downward pressure on wages at a time when wage growth is at record lows.
“Who really pays payroll tax? Is it passed back to the employees? The silly thing is it can be avoided and employers and employees can be both better off at the expense of rapacious State Treasuries,” he said.