Payroll tax changes will save Western Australia’s largest employers around $230 million next financial year, according to state government budget papers.
A sliding rate levy on payroll tax introduced in 2018 meant companies with national payrolls of more than $100 million had, for the past five years, been subject to a higher payroll tax rate than the standard 5.5%.
Those paying a wage bill of between $100 million and $1.5 billion were taxed at 6%, with those above $1.5 billion worth of payroll subject to a higher 6.5% rate.
The levy was introduced in the 2017/18 budget and applied from July 1, 2018 for a five-year period, after the state reported two consecutive financial years of negative payroll tax revenue growth.
Today’s budget papers confirmed that it would not be extended, while also revealing significant growth in the state’s income from payroll taxation. But not all are pleased with the response.
Revenue generated by payroll tax will increase an estimated 12.4% in 2022/23, on top of a 17.8% increase the prior financial year. The budget papers said this was partially the result of employment growth, but that payroll tax growth had been higher than usual across all industries in the current financial year.
WA is expected to collect almost $5 billion from the tax in the current financial year, with the mining industry the state’s largest payroll contributor.
Despite the rollback of the levy, the WA government expects payroll tax revenue to remain broadly level next financial year, with further increases in its forward estimates.
That comes as the state recorded low unemployment in 2022/23, averaging 3.4 per cent – the lowest level since 2009 – and 1.53 million Western Australians employed as of March.
Wage growth is forecast at three-to-four per cent in forward estimates, with a strong labour market contributing to the fastest rate of wage growth seen in the state in a decade.
“Conditions in the WA economy are strong and are forecasted to remain resilient even as we face the challenges of rising interest rates and global economic volatility,” Premier and Treasurer Mark McGowan said.
“Treasury is forecasting growth in the state’s economy at 4.25% in 2022/23 – Western Australia’s best result in nine years.”
In response to the budget's payroll measures, the Chamber of Commerce and Industry WA repeated its calls for more to be done to help relieve tax pressures on smaller businesses in the state.
The CCI said WA small businesses continued to bear the heaviest burden of payroll tax in the country.
"It's critical attention is taken to reduce the burden and help alleviate the higher costs of doing business and to make WA a more attractive place to invest," chief economist Aaron Morey said.
