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Top payroll tax rate up

A BILL allowing the increase of WA’s top payroll tax rate from 5.56 per cent to 6 per cent has been introduced into Parliament.

The payroll tax increase has been introduced as part of the Taxation Administration Bill and comes into effect on January 1.

The Bill is designed to simplify WA’s taxation system and combine the administrative of laws of the State’s four major taxes into streamlined rules.

It is also understood to be broadening the payroll tax rate to include the before-tax component of taxable fringe benefits.

Treasurer Eric Ripper said the Bills had been developed over a long period of time and that industry had been widely consulted.

He believes the rate increase will add $63 million to State coffers in its first full year.

The tax hike is expected to only affect those businesses with a payroll of more than $4.5 million.

WA has 26 State taxes, although the bulk of Government revenue comes from just four.

The largest take is more than $900 million from payroll tax. The Government’s other major revenue raisers are motor vehicle registrations, land tax and stamp duty on conveyances and transfers.

The Government promised the tax increases it proposed in this year’s budget would not diminish the State’s tax competitiveness.

However, WA has been the only State in Australia to increase its payroll tax rate in the past two years. All other States have been reducing theirs.

Chamber of Commerce and Industry senior economist Dan Engles said tax competition relied on more than just the top tax rate.

“It involves compliance, the tax base and the tax mix – how much is raised from which taxes,” he said.

Mr Engles said increasing the top rate of payroll tax would hurt WA’s tax competitiveness.

At the moment the most tax-competitive State in Australia appears to be Queensland.

The Queensland Government’s approach to stamp duty on motor vehicle registrations for large trucks is an example of this.

It charges 2.5 per cent stamp duty on the prime mover portion. Trailers are stamp duty free. As a result, a large number of WA truck drivers are heading to Queensland to buy their equipment.

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