Call for suspension of payroll tax

A director of a South Australian advice firm has called for a temporary suspension by the states and territories of payroll tax to allow small and medium-sized businesses, including advice firms, to recover from the effects of the global financial crisis.

AdvantageOne director Tony Martin added that a temporary suspension of payroll tax earlier in the global financial crisis could also have helped to avoid job losses and pay reductions in the financial services sector.

Martin said the temporary suspension of payroll tax could be achieved by the Commonwealth paying incentives to the states to buy significant reductions in the tax across the states and territories.

“One approach could be for the Commonwealth to pay the states and territories $2 for every dollar they reduce payroll tax, thereby creating major reductions and splitting the cost across the two tiers of government.”

He said, for example, that a 20 per cent cut in payroll tax revenue by the states and territories would cost approximately $3 billion per annum.

At the same time, this would “put a windfall gain in the hands of Australia's business owners to share with their workers through job creation or higher wages”.

Martin described payroll tax as one of the most regressive in existence as it is paid by medium and larger-sized employers on wages and, as such, reduces incentives to hire more staff and pay staff more.

“If this burden were reduced, businesses, including advice firms, could more easily afford to grow by hiring more staff or paying them better wages.

“Every business over the past 12 months, including advice firms, has looked at ways to reduce their expenses or increase their income.

“If you can’t increase your income then expense lines get looked at, and the biggest expense line has been wages and salaries.

“What many have been doing is trying to hold on to their good people, and to the extent this has not been possible, reducing the overall time worked by staff,” he said.