WA held back by payroll tax, but there is a solution

Payroll tax – essentially a tax on jobs – is holding back the WA economy and businesses.

WA has the highest payroll tax burden of any state, meaning it is more expensive to create a job here than anywhere else in the country.

Payroll tax is a cost that businesses are wearing in a time when four of five (81%) have experienced higher labour costs and low levels of profitability, according to CCIWA’s Business Confidence Survey from December 2022.

CCIWA’s new payroll tax campaign has been launched and calls on the WA Government to prioritise reducing payroll tax, thereby releasing the burden it has on the business community. Our calls have been a key part of formal submission to the WA Government, made ahead of the State Budget (through our Pre-Budget Submission 2022-23).

CCIWA’s strong position on payroll tax reform has been informed by consulting with WA businesses like yours. CCIWA membership provides a voice for WA businesses to our decision-makers.

Impact on WA businesses and the economy

CCIWA chief economist Aaron Morey said: “The cost of doing business is rising, and WA’s payroll tax burden is compounding the pain for our local operators. It’s like WA businesses have to compete with one arm tied behind their back and it’s just not fair.”

WA’s reliance on the mining and resources sector (46% of gross state product (GSP)) poses economic risk, so strong action is required to increase business investment in all sectors to diversify the State’s economy. Reforming WA’s tax on jobs would represent an investment in our State’s economic resilience.

How does WA’s payroll tax differ among states?

CCIWA has an interactive Payroll Tax Calculator which enables you to see how your payroll tax liability compares to businesses in other states, based on your total gross annual wages. The calculator shows that from $2.5 million of gross annual wages, WA businesses pay more payroll tax than any other state.

For example, at gross annual payable wages of $3.5m, WA businesses pay $39,225 more than a similar organisation in Queensland.

A simple, effective solution

CCIWA has proposed a new payroll tax model for WA, which Aaron Morey said would “help diversify the economy and boost employment”.

Under CCIWA’s model, payroll tax would not apply to businesses with taxable wages less than $1.3m. Businesses with wages between $1.3m to $4m would receive a 15% tax rebate on your tax liability, with the rebate tapering down to zero for organisations with taxable wages at $7.5m.

CCIWA is also calling on the government to commit to regular reviews of the payroll tax threshold and impact on business.

Reform will attract investment to WA

WA is in a strong economic position with its GSP making up 17.5% of Australia’s gross domestic product (GDP) and per capita was 63% above the country’s GDP. This positions WA with an opportunity to achieve a more competitive tax system to encourage further investment.

Competition for capital is intense and WA relies on international capital more than any other state. To grow current and future industries, a more competitive tax system is essential.

“With the GST system now fixed, there is no jurisdiction for WA to have the strongest budget, yet the highest payroll tax burden,” Aaron Morey said.

“This is a great opportunity for the WA Government to relieve the burden on businesses. We can increase our competitiveness with our national and global competitors, and power up the WA economy.”

Will you join us in our campaign for tax fairness?

With over 130 years of proven success advocating for changes that make WA the best place to live and do business, CCIWA has the influential relationships and trust with people that matter most.

CCIWA invites you to share your story around payroll tax to help us fight for fairness. Join our campaign here.

Receive the latest business news and advice by becoming a CCIWA Member today, with access to exclusive information to help you do business better. Find out more here.

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