30/06/2011 - 00:00

Payroll tax tops business leaders’ wish list

30/06/2011 - 00:00


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CUTS to payroll tax and stamp duty sit at the top of the business sector’s tax reform agenda for Western Australia.

CUTS to payroll tax and stamp duty sit at the top of the business sector’s tax reform agenda for Western Australia.

The opposition to payroll tax reflects the very nature of the impost: it is a tax on employment and, as the number of staff increases, the cost of payroll tax goes up.

In WA, payroll tax applies to any business with an annual wages bill of $750,000 or more.

Any business above that size is liable for payroll tax at a rate of 5.5 per cent.

BDO corporate finance partner Sherif Andrawes told the WA Business News boardroom forum that payroll tax in WA is higher than anywhere else in Australia.

“There is the rate, the other aspect is the level at which it kicks in,” Mr Andrawes said.

“It’s quite low, and that needs to be looked at, and the rate itself certainly needs to be looked at.”

ABN Group managing director Dale Alcock, who heads one of the state’s larger employers, said the structure of the tax defied logic.

“It is absolutely illogical that just because you go across a threshold, its welcome to the big club, you now pay a different tax,” Mr Alcock said.

He added that ABN Group currently had 230 apprentices, and was liable for payroll tax on each one.

If the same apprentices worked for individual contractors the payroll tax payment would be zero.

Mr Alcock also expressed concern about the application of grouping provisions, which he described as “a nasty disease that’s crept in”.

The grouping provisions are designed to catch businesses that are artificially divided into separate entities, so that each entity can stay below the payroll tax threshold.

The policy has led to many disputes between businesses and the Commissioner of State Revenue.

A notable case involved Kenwick couple Jennifer and Peter Rowson, whose hairdressing and electrical contracting businesses were grouped together for payroll tax purposes.

Their case went all the way to the Court of Appeal, which ruled in 2008 that the Commissioner of State Revenue’s tax assessment was wrong.

Mr Alcock said that if payroll tax could not be abolished, then the government should look at taking it off apprentices.

JBWere state manager Jason Farrow said it was unlikely the government would remove payroll tax.

“But we should be saying, part of that payroll tax revenue needs to be reinvested, set aside in a fund, to build skills,” he said.

That view was shared by Karara Mining chief executive Steve Murdoch, who said a precedent was provided by the Royalties for Regions scheme, which guaranteed one quarter of mining royalties was spent in the regions.

“You can almost stomach paying a tax if it’s hard-wired into something,” Mr Murdoch said.

He suggested that payroll tax proceeds could be committed to a training fund.

Akamai Management Group’s Tri Suseno shared the criticism of payroll tax, saying it was “ridiculous” to levy a tax on jobs.

However, he would prefer to see action on stamp duty, which he said added to the cost of business transactions, even a restructuring within his investment group.

Town of Cambridge Mayor and former investment banker Simon Withers agreed that stamp duty should be the number one priority.

“I think there is an even greater need to abolish stamp duty, especially on housing,” Mr Withers told the boardroom forum.

Mr Withers said this would make it easier for people to buy and sell houses, which in turn would make it easier to achieve another government goal – urban infill and higher populations in the inner suburbs.

“What we need to do is remove some of the friction in moving houses,” he said.

However, Mr Withers said business groups calling for tax cuts needed a reality check.

“As a country and as a state, we are probably under-taxed,” he said. “Government infrastructure is falling to bits; we are playing catch-up, and we now have to invest more in infrastructure because the economy is growing, and it has to be funded.”

Mr Withers said the reality is that states had limited revenue sources.

“There is no point saying let’s abolish payroll tax unless you can nominate an alternative revenue source,” he said.

“There has to be another source of revenue and in this state the only other source is mining royalties.”

Chamber of Commerce and Industry WA chief executive James Pearson said there was an alternative, and that was for governments to cut recurrent spending.


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