Payroll tax reform could have up to $1.3b annual economic benefit

CCIWA is stepping up calls for the WA Government to overhaul its payroll tax regime, spurred by the release of independent economic analysis. 

The findings highlight the substantial payroll tax burden faced by WA businesses – the highest in the nation.  

Research commissioned by CCIWA from independent consultant Pracsys reveals a WA business with an annual wages bill of $3 million is projected to pay an average of $26,000 more in payroll tax annually than an identical business in other states. 

The Payroll Tax Reform Cost Benefit Analysis explores four different reform scenarios for the State’s payroll tax system. All four options show a net economic benefit for WA, with potential annual gains of $276m to $1.37 billion. 

These reforms could also pave the way for the creation of more than 3,500 jobs and deliver $174m-$859m in direct economic benefits from local businesses. Moreover, the proposed models anticipate a growth of up to $500m in interstate and foreign investments in the WA economy. 

The model favoured by CCIWA would see the payroll tax threshold lifted to businesses with payroll liabilities over $1.3m a year. There would be a 15% rebate for businesses above that threshold, which tapers downward for larger employers. 

The report found these changes could result in an annual benefit of $1.35b each year to the WA economy, creating 3,939 jobs. 

CCIWA Chief Economist Aaron Morey

Aaron Morey, CCIWA Chief Economist, says small, medium and family businesses are already grappling with high operating costs and shrinking profit margins.  

“WA businesses consistently identify rising costs as their number one concern,” he says. 

“Payroll tax is a tax on jobs and a tax on success – the more people you employ, the more you pay, and it’s a real burden on smaller and family businesses who are dealing with the ever-rising cost of doing business.” 

The report, based on a survey of 449 WA businesses, highlights that even a modest reduction of $10,000 in payroll tax can have a significant impact. Respondents indicated that 44% would increase employment, 19% would use the savings to pay off debt, and 37% would reinvest the savings back into their businesses. 

Morey says concerns about the impact of WA’s payroll tax burden on the State’s attractiveness to investors, is hindering efforts to diversify the economy and develop emerging industries.  

“This really threatens WA’s attempts to diversify our economy and develop emerging industries with huge potential, like critical minerals, clean energy, agriculture, technology and defence,” he says.

CCIWA’s most recent Business Confidence Report shows 68% of WA businesses want to see a reduction in payroll tax at the upcoming State Budget. 

To find out more about what we stand for, visit our Advocacy page.   

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