One Nation Senator Pauline Hanson has thrown down a challenge to Malcolm Turnbull to work with the states to abolish payroll tax, but small business owners say that while the levy is a “handbrake” on their growth, the government has to come up with other revenue sources if this was to happen.
Writing for Fairfax on Monday, Hanson outlined that she would not support cuts to the company tax rate for big businesses, but did “challenge the government to do a deal with the states and remove payroll tax because that will lead to more jobs”.
Smaller operators have long marked the tax on their wages’ bills as a policy that ends up stifling growth, but with $22 billion collected annually from the levy across the nation, small business groups say Australia needs to discuss its possible abolition within a broader conversation about tax reform.
“The states definitely need that revenue, and they’ve got to find it somewhere,” Council of Small Business Australia chief executive Peter Strong tells SmartCompany.
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He supports removal of payroll taxes, but says there has to be another revenue solution.
“The answer is [changes] to the GST, I can’t think of any other way of doing it.”
Strong says at the very least more should be done to increase the threshold at which smaller operators have to pay the levy, given the burden it places on smaller employers.
“The other way of looking at it is saying, ‘we should increase the threshold’, so perhaps it should be to above 200 staff of the equivalent wages’ bill of 200 staff.”
Government should tackle “big issues” to make up the difference
Founder of design business Diva Works, Fiona Jefferies, says payroll tax is a “handbrake” for business growth, and feels like it does make businesses pause when they think about adding additional staff.
“Today’s a huge day, because it’s the first time Pauline Hanson and I have agreed on anything,” Jefferies says.
She believes that governments should look at scrapping the tax entirely, but observes that this would mean politicians would have to find another revenue solution to fill the gap, which would involve them tackling big issues that nobody else wants to touch.
“I think we have to look at the GST, nobody wants to touch it,” she says.
In terms of federal issues, she says she’d also be keen for the government to look at changes to negative gearing policies, observing that these are also having an economic impact and influencing property prices.
“Would love to get rid of it”
Smaller operators grudgingly pay the tax because they have to, says founder of online bookseller Booktopia, Tony Nash.
“I’d say, I would love to get rid of it, fab, but explain how much we wouldn’t get [in tax revenue] if we did that,” he tells SmartCompany.
Nash says smaller operators are keen to reduce their tax bills and that payroll tax can be a burden, but that the overall health of the economy and the revenue states have is also important for business success.
He says Hanson would have to outline an alternative revenue generator to make sure removing payroll levies didn’t have the impact of reducing the amount governments could pay for education, health and other services.
“In her explanation, has she articulated whatever that tax is paying for, is it going to be ok that we no longer have that income?”
SmartCompany contacted Senator Hanson’s office but did not receive further comment prior to publication.