Payroll Tax Policy Comparison

Wednesday 22 November, 2017 | By: Kate Whittle

Payroll tax is a direct tax on an employer for giving someone a job. Payroll tax is a tax on the fair go. It prevents young people entering the workforce, mature age workers gaining employment later in life, and acts unequivocally as an impediment to business growth.

Our modelling shows that by lifting the payroll tax threshold from $1.1 million to $1.5 million, tax relief could be offered to approximately 15,500 Queensland businesses. By lifting the payroll tax threshold, these changes will deliver 2000 direct jobs in addition to flow on effects for indirect jobs across Queensland.

We have told repeatedly Queensland political representatives and senior treasury officials that the payroll tax is absurd. We know that the tax sends a clear message to employers that it will cost them, literally. But no matter how strong the modelling demonstrates that lifting the payroll tax threshold creates positive employment outcomes, Australian State and Territory governments rely ‘more on payroll tax than other OECD countries’.

Politicians also tell us that this is a problem for big business, not small. However, based on the average full-time wage, payroll tax captures businesses with as few as seven employees. At a rate of 4.75 per cent in Queensland, payroll tax is a strong blow to businesses without sufficient cash flow, profit, or bank balances.

What have the parties put forward on this critical issue to Queensland’s business community?

ALP Queensland: Bread and butter Labor policies

It is a great shame both for the business community and industry more broadly in Queensland, that the government of the last three years has failed to mention payroll tax threshold relief for Queensland small business during this election campaign. CCIQ acknowledges the announcements in the 2016-17 Budget for apprentice and trainee payroll exemptions, however this commitment has not been reaffirmed during the campaign, and not a single candidate in the Labor Party has mentioned payroll tax threshold relief as part of their policy platform. It is no wonder that Queensland’s employers feel as if the Labor Party either ignores their concerns, or takes them for granted.

Liberal National Party: Good, but good enough?   

On the first day of the election, the Liberal National Party announced its ‘Getting Queensland Back in Business’ Plan. CCIQ welcomed commitments to cutting taxes and charges for business, and the suite of small business friendly policies contained in the plan. Specifically, CCIQ were pleased to see the LNP make a commitment to lift the payroll tax exemption threshold by $25,000 every year for the next ten years. While CCIQ believes greater payroll tax relief could be offered to employers, we welcome the commitment from the LNP to provide policy certainty and stability over the next 10 years. Overall, CCIQ welcomes any attempt to reduce the tax burden on business, but we believe more can be done on payroll.

It is worth noting that the $25,000 over ten years does not exceed CPI in any single year. In 2018, lifting the exemption to $1.125 million is a 2.3% increase – below the midpoint of the RBA target. Over time, payrolls will continue to grow with ongoing increases to minimum wages and awards. In nominal terms, this is a tax relief proposal however in real terms, the number of businesses caught up with payroll tax will most likely not change over time as long they don’t hire anyone. This is the essence of the problem; the policy fails to remove the disincentive to put on more staff.

One Nation & The Greens: Strange Bedfellows  

In their Policy Handbook: Economic Development, One Nation has pledged a 5-year moratorium on payroll tax for all new, innovative, startup business employing up to 40 people established after 2017. In addition, One Nation’s website makes the following claim: “State payroll tax also needs to be abolished to encourage companies to employ more staff. Common sense tells you, you don’t tax someone for the more people they employ.” Similar too, The Greens state online that the payroll tax should be abolished, however have failed to mention this throughout the campaign.

CCIQ is of the view that abolishing the payroll tax immediately and its entirety would result in a short-medium term shock to Queensland’s economy in which it could not effectively adjust, particularly in the absence of holistic structural tax reform at the federal level. Coupled with the economic and fiscally irresponsible suite of economic policies put forward by the protectionist and populist One Nation and the remarkably idealistic Greens economic policies, CCIQ cannot responsibly support either party when it comes to tax-related commitments.  

To explain, payroll tax is the single biggest tax earner for the government and generates roughly $4b of tax revenue annually (about 7% of all revenue/receipts). Eliminating this immediately would leave a huge hole in the budget, leading to mass public sector sackings, reduction in service provision (hospitals, schools, police) and a big debt blowout.

Katter’s Australian Party: Silent  

The Katter’s have made no announcements regarding payroll tax in Queensland. Should they be Kingmaker’s after Saturday’s election, the Chamber does not believe it to be a priority for party at this stage. 

Click here to read our breakdown of small business policies in Policy Watch

Post your comment


  • Peter Lowe 23/11/2017 6:49am (12 months ago)

    Payroll tax is such a huge burden on our bottom line, that we are considering downsizing to reduce or not pay the tax. The problem is also the definition of a small business. Depends on which government or department you have to deal with.

  • Noel Reid 23/11/2017 6:37am (12 months ago)

    Fortunately in NZ, we don't have Payroll Tax. As you state in your intro, it's blatantly anti-employment; favouring machines over people.
    Sadly, from your summary it seems unlikely it'll be removed in Q'land. But, if it was, does just the Federal Govt benefit from increased income tax arising from increased employment?
    Because you get the GST revenues generated in your State, you're a bit closer to the Swiss "ideal" than NZ is. What do you think of this?

RSS feed for comments on this page | RSS feed for all comments