A new idea to overcome the payroll tax burden on business has been proposed, which would see the unpopular tax retained but refocused on the types of jobs it taxes.
In response to the debate around the idea of taxing technology that eliminates jobs, which has attracted intense debate, one business leader suggested that payroll tax need not be abolished, but instead applied when Australian businesses outsource jobs offshore.
“How about a tax per person that an Australian company employees overseas. i.e. Telstra would have to pay tax for everyone in their call centres that has taken an Australian job,” the My Business reader offered.
Such a proposal may be more palatable as well as practical, given concerns among business leaders about introducing any new taxes, restricting innovation and technical efficiency, and the delivering on the primary aim of supporting Aussie jobs.
‘Technology tax not the answer’
The original idea put forward by a My Business reader was for a tax on technologies that take away jobs, which divided opinion.
Most, however, were against the idea, claiming it is impractical to implement and would likely cost more jobs than it saves.
One response even suggested that new taxes are never a good idea, as they inevitably tend to become permanent.
“Payroll tax was brought in as a temporary tax during the Second World War. It was never repealed. Once the government gets a tax in place it is never abolished.”
Payroll tax ‘has to go’
The one thing the business community does agree on is that payroll tax has no place in the modern business world.
Across all of the states and territories, a staggering $23.65 billion was stripped out of businesses last financial year alone under the tax (full breakdown below).
“It makes no logical sense that you pay tax for employing people, no matter what your financial position is,” one reader noted.
Concerns have also been raised that payroll tax unfairly impacts some businesses rather than others.
Professor Robert Deutsch of The Tax Institute told My Business that medium-sized businesses collectively feel the greatest pressure from payroll tax.
“Payroll tax doesn’t cut in at low levels… so it’s not a tax that is actually paid by very small businesses,” he said.
But at the same time, Professor Deutsch said large companies and multinationals have significant resources to deal with payroll tax calculations. That leaves mid-sized firms, particularly those operating nationally, most heavily exposed.
“The rates and the thresholds are all very different [state-by-state],” he said.
“A business that is operating nationally will have eight different sets of payroll tax rules to look at and think about and understand and comply with. That is a nightmare.
“It’s not a nightmare for the BHPs that have the resources to dedicate to dealing with all that; but if you’re a medium-sized firm employing 150 to 200 workers across the country and operating in each state and territory, that’s a real issue for you.”
Meanwhile, one reader noted that by their very nature, service businesses are slugged more heavily than product-driven businesses.
“Service companies that hire staff are penalised compared to businesses that can use machinery, technology or offshore services. It is just a stupid and unproductive tax and anti-Australian employment.”
Estimated payroll tax revenues in 2017/18
- NSW: $8.6 billion
- Vic: $5.9 billion
- Qld: $3.8 billion
- WA: $3.2 billion
- SA: $1.1 billion
- Tas: $0.3 billion
- NT: $0.25 billion
- ACT: $0.5 billion
TOTAL: $23.65 billion
Source: The Tax Institute
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
- Marketers need to reclaim the art of explaining value
By James Lawrence
- ATO’s 37% tax on Christmas festivities
By George Morice
- Performance anxiety not just a bedroom thing
By Dr Louise Mahler