Regional businesses are among the winners from this year’s Victorian budget, thanks to a cut in their payroll tax bill announced by the state government on Tuesday.
According to accounting firm Pitcher Partners, the tax cut will give regional Victorian businesses the lowest payroll tax rate in the country.
Victorian Treasurer Tim Pallas said on Tuesday the government will cut the payroll tax rate by 25% for businesses that have a workforce made up of at least 85% “regional employees”.
This means these businesses will pay a payroll tax rate of 3.65%, down from 4.85%.
The government estimates the change will mean around 4000 Victorian businesses will see their payroll tax bill reduced.
“We’re making sure that every region shares in our economic success — with a new regional tax cut that will help regional businesses grow, and encourage more businesses to set up shop and create jobs in regional Victoria,” the Treasurer said in a statement.
The Victorian government is also bringing forward a planned increase in the payroll tax-free threshold for all businesses in the state.
From July 1, 2017, the payroll tax-free threshold will increase from $575,000 to $625,000, and from July 1, 2018, the threshold will increase again to $650,000.
The government estimates the change will benefit approximately 38,000 businesses and will mean in two years’ time, 1600 employers will no longer be paying payroll tax.
Craig Whatman, a partner and executive director in tax consulting at Pitcher Partners, explained in a statement that based on the current payroll tax rate of 4.85%, the change to the threshold would represent an annual saving to a business of $2,400 from July 1 this year, and another $1,200 in savings from July 1, 2018.
“Compared to the rest of Australia, after this change Victoria will have the second lowest payroll tax-free threshold in the country, with South Australia being the lowest at $600,000 and the ACT [Australian Capital Territory] being the highest at $2 million,” Whatman said.
“However, the Victorian threshold will still be significantly less than the current national average of $1.078 million.”
Whatman also welcomed the Victorian government’s decision to increase the annual payroll tax liability threshold for businesses from $10,000 to $40,000.
The change will mean more businesses will be able to pay their payroll tax bill annually, instead of monthly.
“This is a welcome change for small businesses that will benefit from the reduced costs of compliance with payroll tax, as they will no longer be required to prepare and lodge monthly payroll tax returns,’ Whatman explained.
Despite the changes, payroll tax receipts are still projected to grow, with the government forecasting a growth rate of 3% in 2017-18, which brings the amount of government revenue generated by payroll tax to $5.9 billion. This number is expected to increase by 5% over the following three years if job numbers continue to grow.
Overall, the cuts to payroll tax will represent a cost of $221 million to the state’s budget, which forecasts a surplus of $1.2 billion in 2017-18, and average surpluses of $2.4 billion over the forward estimates.
The Victorian government has also pledged $3.5 million in funding to “support small businesses in the digital economy” and deliver recommendations made by the Small Business Regulation Review into the retail sector.
These recommendations include measures to help small businesses gain better access to regulatory information, as well reforms to planning approval processes, regulations governing low risk food safety and retail leasing regulations.
Some of the funding will also be used to digitise some of Business Victoria’s services.
The government has also allocated $2 million to “strengthen Victoria’s presence in the fast-growing Asian markets”, which it says will go towards supporting trade and investment offices in key markets and the Hamer Scholarship program, which pays for professionals to undertake language courses in China, Indonesia, Japan and Korea.
*This article was updated on Wednesday, May 3, at 4.55pm.
Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on Twitter, Facebook, LinkedIn and Instagram.
Editor
Eloise is an experienced business journalist and editor, who has held senior editorial roles at SmartCompany since 2014. Prior to joining SmartCompany, Eloise was news editor at Books+Publishing, the trade press for the Australian book industry. Eloise has degrees in media and communications, marketing and business management, and political science. You can follow her on LinkedIn, and Twitter at @ellykeating.
Comments