The upcoming Regulation Rumble report for 2024 by the Business Council of Australia has revealed the top states in Australia that have the most competitive payroll tax rates for business.
The report, which assesses the regulation, taxes and planning systems of each state and territory, found South Australia and New South Wales have the most competitive payroll tax systems in Australia, while Victoria and the Australian Capital Territory fare the worst for taxing businesses too much, constricting jobs and economic growth.
BCA noted that Australia’s ad hoc payroll taxes are impacting jobs, business investment and the economy and the variation in payroll tax systems across the country makes it more complex to do business and is contributing to Australia’s lagging productivity growth.
Business Council Chief Executive Bran Black noted that this payroll tax complexity across states and territories has affected not only the hiring of people but has also held back businesses wanting to expand.
“Payroll tax is a tax on jobs and business growth, and our patchwork of different systems is a handbrake on our economy,” Black said. “There are over 30 different kinds of payroll tax conditions in Australia that businesses need to navigate, so that’s a huge headache for any business trying to grow, both big and small.”
He added, “High payroll taxes can deter businesses from expanding and hiring more workers, which is counterproductive to governments seeking to support jobs.”
South Australia topped the payroll ranking in particular as it has the lowest payroll tax rate for large employers and the joint second-highest threshold at which the tax kicks in. It also has a progressive rate and deduction system, reducing the relative burden on small but expanding businesses.
“South Australians have a competitive advantage in driving more investment and jobs to their state due to it having a more competitive payroll tax system,” Black explained.
The report recommended that Victoria and the ACT seriously review the competitiveness of their payroll tax systems, because they are holding back businesses and economic growth.
The BCA also stated that a National Reform Fund should operate to incentivise states and territories to move on difficult but important reforms, like the synergy of payroll tax, to increase our productivity. Commonwealth, state and territory treasurers are also encouraged to build on previous work to explore how payroll tax compliance could be streamlined, including through harmonisation.
“We need to strive for efficiency and make it easier to do business in Australia, and this has to include harmonising payroll tax systems,” Black said. “If a business has to comply with up to eight different payroll tax systems, it’s going to increase cost and complexity, and only further deter investment from our shores.”
