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$250 million tax slug looming for business

WA businesses are bracing for the full effects of a $250 million-plus State tax slug from July 1.

Several WA Government tax measures introduced in last year’s budget, such as removing the land tax exemption for residential homes owned through family trusts, come into effect next month. Last year’s budget brought in $147 million in new tax measures, while the May budget added a further $110 million.

Businesses also will face the expected increase in land tax due to come from the tri-annual revaluation of land.

Admittedly, some of the tax measures proposed in last year’s budget, such as broadening the payroll tax net to catch employee-like contractors, have since been scrapped.

Opposition leader Colin Barnett said the tax hikes would catch many more small businesses than was usually the case because the thresholds at which the taxes came into effect had not been pushed up with inflation.

“There will be several thousand small businesses drawn into the payroll tax net this year because the threshold hasn’t been increased,” Mr Barnett said.

“You normally have to employ between 10 and 15 people to be drawn into the payroll tax net, but the way the Office of State Revenue is treating contractors, many small business’s payrolls will become much bigger.”

Many tax professionals believe State Revenue already had strong powers to go after employee-like contractors, even before it made its bid to have those powers widened.

Since Labor came to power, major business taxes have increased between 3 per cent and 14 per cent across the board.

Mr Barnett said businesses had not taken into account the true meaning of the tax rate increases, according to figures confirmed by Treasurer Eric Ripper.

He said while the Government had increased stamp duty on property conveyancing from 4.85 per cent to 5.5 per cent for properties worth more than $500,000, the real effect was an increase of 13.4 per cent.

With motor vehicles, the increase in stamp duty to register a car worth more than $40,000 increased from 5 per cent to 6.5 per cent.

Mr Barnett said this equated to a 30 per cent increase on the stamp duty collected on the registration of a car worth between $40,000 and $50,000.

“The Labor Government has reduced WA’s tax competitiveness by more than 8.5 per cent in just 15 months,” he said.

Small Business and Enterprise Association executive director Philip Achurch said he did not like to see any increase in costs to business from the tax point of view.

“But we are realistic. If health, education and law and order need more money, then something has to give,” he said.

Mr Achurch said other big concerns facing small business would come from expected further increases in interest rates and the 1 per cent increase in the superannuation guarantee that takes effect from July 1.

“We asked 40 to 50 small businesses how they were going about one month ago – before the Reserve Bank laid down its first rate increase. The answers that came back were pretty ordinary,” he said.

WA Retailers Association chief executive officer Martin Dempsey said the land tax increase and other tax hikes would hurt small retailers because they would be passed on to them through their rents.

“The land tax hike is a kick in the guts for small business,” Mr Dempsey said.

“The land tax hit will be felt hardest in the city. The problem is, business has not gone up as much as the land tax rate has.”

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