The Tax Business Hates the most!

By Steve Marsten

Recently there has been a fair bit of discussion about which taxes Businesses hate the most. The answer from the feedback we hear from business owners is fairly obvious.

Business owners always say the most hated tax is payroll tax - by far! And we find that small businesses hate this tax with a vengeance because from their perspective, it simply doesn’t make sense to impose a tax on labour when they are trying to grow their business.

The Governments Treasury Department have released a report suggesting that businesses are fairly ambivalent about payroll tax. I’d love to know who on earth they spoke to or whether it was a discussion held in the hallowed halls of the Treasury Building around the water cooler! They suggest Payroll Tax is not a disincentive to grow. But that’s not what SME’s are telling us when we talk to them about their businesses. It halts business growth to a large extent. The Tax also makes some businesses less competitive as a result of an additional overhead for being successful. It’s potentially a success tax and represents around 4% additional costs on your payroll bill. Many look to avoid reaching the threshold because they don’t want to incur this impost.

Each State has their own Payroll Tax rates and unfortunately it’s unlikely the States will make a move on payroll tax unless the Federal government introduces a replacement revenue stream at a federal level.

According to ABS data, in 2016, payroll taxes raised $22.7 billion or about 28 per cent of total taxation revenue for all states.

There’s already angst because of assessment inconsistencies from State to State and it’s very much a state-based tax, so it’s up to the states individually to decide what they do with payroll tax, and given the dollars that flow, it is unlikely they will find an alternative funding source.

We should always remember that the GST was supposed to be the additional cashflow to States but the States never got around to getting rid of the dreaded Payroll Tax. And of course now they feel that the current level GST is  not enough. Wouldn’t we love the Governments of Australia to live within their means? Mr Turnbull consider this in your upcoming budget please.

For more information about payroll tax and other taxes call the team at sothertons on 07 4972 1300.