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State moves to scrap payroll tax for small business

State moves to scrap payroll tax for small business

Could the announcement that one Australian state will abolish payroll tax for small businesses signal the beginning of the end for one of the biggest bugbears in business?

In its state budget this week, the South Australian government unveiled plans to “abolish payroll tax for all small businesses”, at a cost of $157.2 million over four years.

From 1 January 2019, all businesses with annual taxable payrolls of up to $1.5 million will be exempt from paying the unpopular tax. That is expected to deliver a saving of up to $44,550 each year for around 3,200 businesses.

A further 400 businesses that have taxable wages of between $1.5 million and $1.7 million will receive a cut in the amount of payroll tax they are forced to pay.

According to The Tax Institute, South Australia raked in an estimated $1.1 billion in revenue from payroll tax in the 2018 financial year alone.

That was a fraction of the total revenue the despised tax brought in across all the states and territories, which came in at an estimated $23.65 billion.

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However, the changes appear to be more tinkering around the edges than delivering any meaningful tax reform. Particularly since most small businesses in Australia are already exempt from paying the tax.

Last month, business leaders offered a range of ideas to replace payroll tax so as to promote, rather than discourage, the creation of new jobs.

These included a tax on overseas employees to boost local employment, as well as the abolition of payroll tax in favour of a technology tax.

South Australia’s move to alter the number and rate of payroll tax echoes a similar move earlier in the year by NSW.

That was said to benefit around $40,000 businesses in the country’s most populous state.

NSW also recently addressed another concern of small business with a pledge to introduce five-day payment terms for SME suppliers.

State moves to scrap payroll tax for small business
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