The Northern Territory and the Australian Capital Territory are providing better tax environments for small businesses, while states such as New South Wales and Victoria have regressed when it comes to SME taxation, a new Pitcher Partners report has found.
The accounting giant’s State Tax Review 2012-13 has found that – taking into account WorkCover premiums, payroll tax, and taxes like land duties – the Northern Territory is attracting new business due to its generous concessions and tax rates.
But as senior tax manager Gary Matthews tells SmartCompany, while some states have better tax environments than others, the perfect fit depends on what business you’re trying to build.
“When you look at the analysis, all things being equal, you see things like the Northern Territory getting better and Queensland worsening.”
“But in many ways, it’s a personal preference. In the grand scheme of things it may only be a minor consideration, but it could end up tipping you one way or the other.”
Some of the changes from state budgets since last year have been factored into the report, including a higher payroll tax threshold in New South Wales, Queensland and the ACT, along with higher WorkCover premiums in Queensland, New South Wales, and Western Australia. Premiums actually fell in Victoria.
Some of those changes make businesses worse off. The study mentions businesses with a $5 million payroll in New South Wales and South Australia “remain significantly worse off than other states”.
The survey considers two scenarios. The first is for a business based in a state that has an annual payroll of $1.13 million, including superannuation. That business purchases a property for $2.2 million, with an unimproved value of $1.15 million.
Based on the first full year of that business, and with total costs payable ranked by states, the Northern Territory comes out on top when all taxes are combined. The state is a new entrant to the study, and has beaten out former champion Queensland.
South Australia still remains in last place, with aggregate charges and taxes 69% higher than the Northern Territory.
Queensland came in second, followed by Tasmania, Western Australia, the ACT, New South Wales and Victoria.
The second scenario imagines a business with a payroll of $5.6 million that purchases a property for $11.3 million with an unimproved value of $5.7 million.
The Northern Territory, once again, comes out on top, including for the payroll tax category, followed by Western Australia and Tasmania. Queensland, the long-standing leader, dropped to fifth.
The two scenarios show that while Queensland has consistently held a positive position when it comes to tax, the ACT and Northern Territory are taking over.
But Matthews says while it’s important for businesses to consider issues like payroll tax, which continue to put an immense amount of pressure on small businesses, choosing a state based on taxation depends on any one business’s preferences.
“This is a simplistic analysis, but…it may tip you either way.”