“It stops you employing people”: Treasury told to abolish payroll tax, not broaden it

The nation’s peak body for small business has welcomed a review of state taxes as part of the federal government’s tax reform process, but argues payroll tax needs to be cut rather than broadened.

Treasury has been tasked with modelling the potential impact of ending exemptions for payroll tax and broadening stamp duties and land taxes.

Treasurer Scott Morrison told Fairfax it is important for the government to consider state-based taxes as part of its overall tax reform agenda.

“None of these things have been proposed, just like no one has [formally] proposed increasing the GST or broadening its base,” Morrison said.

“But at the end of the day, the public have got to have a lot of confidence that, when and if we go forward, we’ve looked at all this and say this is actually the best package.”

However, Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany payroll tax inhibits employment and the overwhelming majority of small businesses would like to see it gone rather than broadened.

“Medium-sized businesses are a really important part of regional and urban communities and they should be getting a lot more room to manoeuvre and one of the things to do is get rid of payroll tax,” Strong says.

“It stops you employing people, or makes you think twice about it, but it also stops people growing into that area where you pay payroll tax. It’s a punishment for being successful in business. Your staff suffer.”

There are currently a number of payroll tax exemptions across the states.

In New South Wales, for example, certain healthcare providers and fire-fighting services are exempt from paying the tax.

Strong says he would not like to see payroll tax broadened.

This is a view shared by NSW small business minister John Barilaro, who has labelled payroll tax the “most absurd tax of all time”.

“The way it [the tax system] would be made worse through this is if the whole agenda is taken over by the big end of town who think they know it all,” Strong says.

“What is specific for big business is not the same for small business – payroll tax only affects those businesses that want to grow.”

As for what he would like done with other state-based taxes, Strong says small businesses just want certainty across the board.

“It’s the confusion of it,” he says.

“There are lots of little things each state has different from each other. It adds to the confusion.”