Differing payroll taxes across Australia stunts productivity, BCA warns
South Australia and NSW have the most competitive payroll rates for businesses, a new report has revealed.
New research from the Business Council (BCA) has revealed Australia’s ad hoc payroll taxes across the country have impacted jobs, business investment and the economy.
BCA has suggested national payroll reform across the country to address the negative impacts differing taxes have had on Australia and its businesses.
The report, Regulation Rumble 2024, found South Australia and NSW had the most competitive payroll rates, while Victoria and the ACT had the worst.
Victoria and the ACT were ranked as the worst in payroll rates based on both systems taxing businesses too much, which had the effect of job and economic growth constriction.
BCA noted the report assessed the regulation, taxes and planning systems of each state and territory and released the first scorecard on payroll tax last Friday.
BCA chief executive Bran Black said Australia had a myriad of payroll taxes across each state and territory, which added costs and complexity to hiring people, therefore holding back businesses that wanted to expand.
“Payroll tax is a tax on jobs and business growth, and our patchwork of different systems is a handbrake on our economy,” Black said.
“There are over 30 different kinds of payroll tax conditions in Australia that businesses need to navigate, so that’s a huge headache for any business trying to grow, both big and small.”
Black also noted high payroll taxes could deter businesses from expanding and hiring more workers, which was counterproductive to governments seeking to support jobs.
According to the report results, South Australia came out on top of the payroll ranking based on it having the lowest payroll tax rate for large employers and the second-highest threshold at which the tax was applied.
Research demonstrated South Australia also had a progressive rate and deduction system that reduced the relative burden on small but expanding businesses.
Black said Victoria and the ACT could model their payroll processes on South Australia.
“South Australians have a competitive advantage in driving more investment and jobs to their state due to it having a more competitive payroll tax system,” he said.
“Similarly, Victoria and the ACT need to seriously review the competitiveness of their payroll tax systems, because they are holding back businesses and economic growth.”
With the differences across the country, a national business would have to deal with up to eight different payroll tax regimes, with differing rates, thresholds, scaling systems, exemptions and administration processes.
Black said a national reform fund should operate to incentivise states and territories to move on difficult but important reforms, like the synergy of payroll tax, to increase productivity.
“We need to strive for efficiency and make it easier to do business in Australia, and this has to include harmonising payroll tax systems,” Black said.
“If a business has to comply with up to eight different payroll tax systems, it’s going to increase cost and complexity, and only further deter investment from our shores.”
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