Payroll tax the number one issue for businesses ahead of WA election

Western Australian businesses have demanded reform of the state’s unfair payroll tax system, identifying it as the number one business issue heading into the 2025 State Election.

CCIWA’s Business Confidence Survey for the June quarter asked more than 800 businesses to identify the top three issues they would like to see addressed by the State Government ahead of the next election.

A reduction in payroll tax emerged as the number one issue, identified by two in three (67%) WA businesses.

An average WA business will pay $3,285 in payroll tax per employee, compared with the national average of $2,463. Some WA businesses will pay tens of thousands of dollars more in payroll tax compared to their equivalent competitors in other states.

CCIWA Chief Economist, Aaron Morey, said the message from business was overwhelming.

“WA businesses have made it very clear – they’re demanding action on WA’s unfair tax to get some relief from ever rising costs,” he said.

“When you consider the current cost pressures on small and family businesses – wages, utilities, insurance, rent, interest rates and materials – payroll tax is rubbing salt in the wound.

“WA’s payroll tax burden is the highest in the nation and businesses are sending a message to the Government that they’ve had enough of paying over the odds compared to businesses in other States.”

Medium-sized businesses (those with between 10 and 100 employees) were most likely to ask for reform to payroll tax, with four in five (80%) identifying it as an issue.

Around a quarter of WA employing businesses pay payroll tax, and there are many more that sit just below the current threshold of $1 million in wages.

“We know that there are small businesses in WA who are deliberately staying small, because taking on an extra staff member would tip them over the threshold,” Mr Morey said.

“It’s a regressive tax that punishes success and disincentivises growth. There’s no better way to diversify the economy than to lower payroll tax to allow business owners to invest in their future.”

The Government’s own forecasts show it will reap $5.8 billion from payroll tax next financial year, increasing to an estimated $6.7 billion by 2028.

Successive wage increases mean some businesses are being hit with a double whammy of a higher wages bill that then pushes them into the payroll tax liability bracket.

“There are WA businesses that are now being slugged with payroll tax that haven’t hired more staff and are not making more profit – they’re simply paying more for the same staff,” Mr Morey said.

“Since the modest reduction in payroll tax in January 2020, wages paid by private businesses in WA have increased by 13.2%.

“If your business was paying $900,000 in wages in 2020, you’d now be paying over $1 million, and therefore liable for payroll tax.

“It’s clear that the payroll tax system has not kept pace with wages growth in a climate where small and family businesses are already doing it tough.”

CCIWA has recommended the threshold for payroll tax liability be lifted from $1 million to $1.3 million, with a discount to the rate applied for businesses at the lower end of the bracket and indexation of the threshold to guard against future bracket creep.

The June Business Confidence survey also revealed the other top issues WA businesses wanted the State Government to address ahead of the election.

Measures to attract more workers into the state ranked as the second priority, identified by 37% of businesses surveyed.

The sectors most likely to want more action to attract workers were in hospitality, wholesale trade and agriculture.

A reduction in stamp duty (34%), major spending on infrastructure (24%) and faster project approvals (22%) were also identified as key issues for business heading into the election.

Overall, WA’s business confidence had weakened over the June quarter, with short-term confidence dropping 1.9 percentage points compared with the March quarter.

“This is largely being driven by cost pressures continuing to pile up, led by wage increases, skyrocketing insurance premiums and taxes,” Mr Morey said.

“The good news for the WA economy is that this slip comes after 16 consecutive quarters of above-average short-term business confidence, which stands in stark contrast to the rest of the country.”

CCIWA has joined forces with seven other WA employer groups to call for reform to the payroll tax system.

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