Tax

SA budget delivers payroll tax relief, but some SMEs will miss out

Matthew Elmas /

Industry groups have delivered a mixed assessment of the 2018-19 South Australian Budget, which has delivered payroll tax relief for more than 3000 small businesses in the state.

Unveiling its first budget since taking office earlier this year on Tuesday, Premier Steve Marshall’s Liberal government honed in on lowering the cost of doing business.

Businesses with taxable wages of up to $1.5 million will soon be exempt from payroll tax, with the threshold increasing from $600,000 from January 1, 2019.

South Australian businesses with annual taxable wages above $600,00 but below $1 million currently pay a 2.5% payroll tax, and this will be reduced to nil under the changes.

The reforms are expected to save around 3,200 firms a combined $157.2 million, while a further 400 businesses with taxable wages between $1.5 million and $1.7 million are slated to benefit from an unspecified reduction in payroll tax.

Businesses with taxable wages that exceed $1.5 million currently pay a 4.95% payroll tax in South Australia.

“This government’s reform agenda reflected in this budget will help create jobs by lowering the cost of doing business,” Treasurer Rob Lucas said in his budget speech on Tuesday.

But the government has been criticised for failing to abolish the tax for small businesses with taxable wages above $1.5 million, which BDO business services partner David Fechner said will see some miss out on relief.

“[Payroll tax] relief is extremely encouraging, we’d expect it to assist jobs growth,” Fechner told SmartCompany.

“But it’s a small component of the business community, there’s no general relief from payroll tax,” he said.

The government said it had “abolished” payroll tax for all small businesses in the state, but Business SA chief executive Nigel McBride told SmartCompany that isn’t entirely accurate.

He said tax the relief would benefit the majority of businesses though, a move that he believes recognises the role of small employers in the state.

“I’d rate it as very positive,” he says. “South Australia puts the s in SME and the payroll tax threshold has become a barrier.”

Funding for 20,800 trainees

McBride also welcomed the government’s decision to allocate $202.6 million in funding over four years for the creation of 20,800 apprenticeship and traineeships in the state, which he said would go some way to heading off an impending skill shortage.

“The combination of the payroll tax relief and funding for 20,800 trainees is fantastic,” he says.

“We’ve had dangerously low levels of apprenticeship starts and if we don’t turn it around we will have a skills crisis.”

Fechner, who rated the budget as a five-out-of-10 for business, also welcomed the funding, but says it is effectively a substitute for Labor’s Job Accelerator Grant scheme, which has not been extended.

“We have a lot of feedback from business that it is difficult to recruit staff and that it is difficult to recruit the right staff,” he says.

The budget also committed a further $95.9 million to land tax relief, while the tax-free land threshold has been increased from $369,000 to $450,000.

However, Fechner criticised a lack of incentives for businesses to invest in renewable energy generation.

“Business missed out on incentives for energy investment, so will have to go it alone for the next four years, whilst the national market sorts itself out,” he says.

A recent survey of regional businesses in South Australia found the number one issue facing businesses was “exorbitant” electricity costs.

Business SA called on the government to continue with the former state government’s Electricity Productivity Program, which it said had assisted businesses in reducing their costs.

The program assisted small businesses with taking energy efficiency measures.

NOW READ: Victorian budget gives SMEs payroll tax relief

NOW READ: Pauline Hanson challenges Turnbull to axe payroll tax: Aussie entrepreneurs weigh in

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Matthew Elmas

Matthew is the news editor at SmartCompany.

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