Small business came up trumps in last night’s New South Wales state budget, with NSW businesses set to benefit from a rise in the payroll tax threshold.
The NSW payroll tax threshold has been raised from $689,000 to $750,000, effective as of July 1, removing tax liabilities from 1300 businesses.
The state’s undersubscribed payroll tax rebate for new employees will also be raised from $4000 to $5000 from July 1 and extended for two years.
The NSW Business Chamber had been campaigning for the increase of the payroll tax threshold in the lead up to the budget. Yesterday it released a statement praising the budget as a “responsible and positive blueprint for the State’s future prosperity”.
“On behalf of the 300,000 employing businesses across NSW, I’m particularly pleased that the government has begun to address the burden that the payroll tax is imposing on business owners.
“The increase in the payroll tax threshold from $689,000 to $750,000 is a real win for the business community in NSW, and the Premier and Treasurer should be congratulated for this measure,” NSW Business Chamber chief executive Stephen Cartwright said in the statement.
Cartwright said the move got rid of some of “the lead in the saddlebag” which employers grapple with in creating and maintaining jobs.
Council of Small Businesses of Australia executive director Peter Strong told SmartCompany any measure which removes the penalties on employers for employing someone is a good thing.
“Payroll tax is one of the silliest things. Big business can deal with it, but if you’re a small business and you want to grow, if you do step over the threshold it increases the costs quite a bit, so it’s an impediment to growth,” he says.
Strong says his discussions with government indicate they “all understand it’s a bad thing for employment”, but governments do not have the available funds to completely remove the tax.
“If they remove payroll tax they have to find the money from somewhere else. They all know it’s the wrong way to collect tax, but they also need the money,” he says.
Earlier this month, the South Australian government also reduced the burden of payroll tax for business. Strong says more states should follow suit and raise the tax threshold or lower the tax rate.
The South Australian government has halved the payroll tax on payrolls up to $1 million for a temporary period of two years, providing maximum savings of $9800 for businesses.
While the NSW government is expected to lose around $54 million from the budget bottom line because of the changes to the payroll tax, it intends to raise $20 billion in cuts and savings, as it aims to record a budget surplus in 2015-2016.
Budget estimates, not including recent accounting changes for superannuation assets, has the state expected to post a $374 million deficit this financial year, less than half what was predicted in last year’s budget.
“While acknowledging the budget remains in deficit, projected surpluses from next year reflect the substantial budget management measures put in place to return NSW to a solid financial position,” Cartwright says.
While businesses benefit from the payroll tax changes, some will be negatively impacted by the government’s decision to delay the scrapping of the Intergovernmental Agreement taxes, which include duties on transfer of intellectual property and shares in unlisted companies.
The government has decided to delay the removal of these taxes to help fund the Gonski education reforms, but NSW Treasurer Mike Baird said in his budget speech yesterday they would be removed sooner should extra money be raised if the federal government decides to lower the GST threshold on online purchases.
Other budget initiatives included increased spending on the $8.3 billion North West Rail project, funding for a revitalisation of Sydney’s central business district through the sale of the Port of Newcastle and the extension of the $15,000 first home buyers grant for new homes worth up to $650,000 for two years.