The Chamber of Commerce and Industry WA has reignited its call for the WA Government to overhaul its payroll tax regime following the release of landmark, independent economic analysis that reflects that Western Australian businesses face the biggest payroll tax burden in the nation.
The new figures expose the true payroll tax burden on WA businesses and reveal significant benefits to the state’s economy if the system was reformed.
WA businesses pay the most payroll tax in the country, with research by independent consultant Pracsys finding a business in WA with an annual wages bill of $3 million will pay on average $26,000 a year more in payroll tax than an identical business in other states.
The Payroll Tax Reform Cost Benefit Analysis, commissioned by CCIWA, modelled four different scenarios for reforming WA’s payroll tax system.
All four reform options were found to have a net economic benefit for the state’s economy, adding between $276 million and $1.37 billion a year.
The modelled reform options would support an increase of between 721 and 5,183 full time equivalent jobs and deliver between $174 million and $859 million in direct economic benefit from WA businesses.
Under the proposed reform models, interstate and foreign investment into the WA economy would grow by up to $500 million.
CCIWA Chief Economist, Aaron Morey, said small, medium and family businesses have been struggling with soaring costs and diminishing profit margins.
“All Western Australians know that costs are spiralling and it’s not just households that are feeling the pinch. WA Businesses consistently identify rising costs and their number one concern,” Mr Morey said.
“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.
“We know there are businesses in WA who are actively considering a move interstate or overseas because of the unfair payroll tax burden they’re facing in WA.
CCIWA proposes the threshold for payroll tax be lifted to $1.3 million so fewer businesses at the smaller end of the economy have to pay it. For those that are liable, there would be a 15% rebate that tapers down for larger employing businesses.
The total benefit to the WA economy from the CCIWA model would be $1.35 billion each year, creating an additional 3,939 jobs across the economy.
The report, which included a survey of 449 WA businesses, found a payroll tax reduction of just $10,000 would have a significant benefit.
44% said they would increase employment if their payroll tax burden was reduced, 19% said they would use the saving to pay off debt, and 37% said they would reinvest the savings back into their business.
Mr Morey said WA’s payroll tax burden was threatening WA’s pursuit of interstate and international investment.
“The payroll tax system in this state just isn’t attractive to investors who have the choice to do business elsewhere,” Mr Morey said.
“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.”
CCIWA’s most recent Business Confidence report showed 68% of WA businesses said they would like to see a reduction in payroll tax at the upcoming State Budget.
Mr Morey said the time was right for the WA Government to seriously consider payroll tax reform.
“The WA economy remains in a strong position and the state budget position is very healthy,” he said.
“As the Government prepares to hand down its next budget, the last one before the 2025 election, the message from WA businesses is clear.
“They want a fairer deal that recognises their hard work and allows them to grow and create more opportunities for West Australians.”
