Let me cut straight to the chase and answer my own question – yes, in my humble opinion, Payroll Tax most certainly is the worst tax.
Let me count the ways (well, let’s kick off with 3 anyway)
- The Threshold is just too low
While Revenue NSW (the old OSR) is finally doing something semi–meaningful about increasing the threshold, looking to move it to $1m by FY 2022. While this is a bit of a start, if Revenue NSW was serious about trying to make a meaningful difference for small business, they would increase it to something more appropriate like $2.5m.
When you take into account the usual suspects like owners and employees Gross Wages, entitlements, Super Contributions, and then move to the various subcontractors that are caught in the net, $1m does not go a long way in today’s numbers. We all know labour is expensive. It is a great thing that all Australians earn a decent wage, but it is time to give the small business owners a break, and some incentive to take on staff and grow their business.
2. Payroll Tax holds SME’s back from employing local staff
Crazily enough, outsourced staff payments are not likely to fall under the Payroll Tax regime, due to the fact that the outsourced staff are genuine employees of another entity that is “not my problem”.
So, for SME’s, who are constantly encouraged to employ more staff, weighing up the costs of employment within Australia, vs outsourcing, the ledger does not look great. Note, SME’s call it “outsourcing”, but for the big end of town it is “Macquarie Bank India” or “XYZ Philippines”. Australia does not get much benefit out of that.
Payroll Tax is just another cost that SME’s have to carefully weigh up when considering the total cost of employment, and for some they will choose to err on the side of caution given the cost and admin of these various added extras like Payroll Tax.
3. The admin involved is a proper pain in derriere
Payroll Tax lodgements must be made and paid within 7 days of month end. For larger businesses, with full time staff dedicated to payroll matters, this might be fine, but for SME’s, who might have a part time accounts person lodging, or need to get it to an external accountant to prepare the lodgement (noting they also then need to pay for that service), 7 days is not sufficient.
Revenue NSW is kindly now allowing SME’s with a total annual liability of up to $20k to pay annually, but what small business wants to cop a $20k Payroll Tax bill in one hit? None that I know of.
One of my clients wrote to the NSW Treasurer some time ago about increasing the Payroll Tax Threshold and recently received a response.
“The Hon. Dominic Perrottet” (spare me the bull$hit titles) congratulated my client on establishing a thriving business, and for providing “valuable employment to local workers”. He pointed out the increases to the Threshold that are taking place, and effectively congratulated the department for taking steps to make it easier to lodge (i.e. making it easier to take their money). He mentioned all the wonderful things they do with the money, and said that if they don’t glean the money from my client, they would have to look elsewhere.
Effectively – thanks, but no cigar. My client, my business and many others out there are the true low hanging fruit. Doing well (because of years of ongoing grind and never taking your eyes off the ball), but not big enough to lobby directly without anything more than the pat on the head that my client received. Because of this it is easy to keep hitting up the SME’s out there who are just trying to get on with the job, employ Australians, and make an impact on many thousands of families around NSW.
It is time for the NSW Government to cut SME’s a break, recognise that the $1m Threshold is outdated and punitive, and get serious about increasing the threshold to cut the impact on smaller employers who are having a red hot crack at building a business. If they need to increase the tax rate for those larger employers, so be it, but give us smaller employers a go.
If you want to see some difference, go to the link below to sign my petition. Send it on to any other SME owners you know and get them to sign.
Let’s make this happen.
I’m TC, and that’s my Two Cents