States will be urged to ditch payroll taxes as part of sweeping reforms to rebuild the economy as the government looks to cut red tape for business.
States will be urged to ditch payroll taxes as part of sweeping reforms to rebuild the economy as the government looks to cut red tape for business.

Tax shake-up and small business relief on recovery agenda

States will be urged to ditch payroll taxes as part of sweeping reforms to rebuild Australia's economy post-pandemic as the Morrison government looks to cut more red tape for small and medium business.

Treasurer Josh Frydenberg has revealed that his plan to kickstart job creation as COVID-19 restrictions ease involves income and small and medium business tax reform, with the aim of finalising measures in time for the October Budget.

Treasurer Josh Frydenberg says he hopes to finalise a tax reform plan by the October budget. Picture: AAP Image/Mick Tsikas.
Treasurer Josh Frydenberg says he hopes to finalise a tax reform plan by the October budget. Picture: AAP Image/Mick Tsikas.

"We've focused to date on income tax and small and medium-sized business tax reforms, they continue to be a focus for us," he said.

Speaking exclusively to The Saturday Telegraph, Mr Frydenberg said he hoped to build on the current co-operation with states through the National Cabinet to ease the payroll burden on employers.

"I'd love the states to get rid of the payroll tax," he said.

"(States) have also got their own balance sheets, and their own economic capacity, and we've already announced very significant support and will continue to look at opportunities, but the states will be required to do more I suspect going forward as well."

 

The NSW government received $9.357 billion in payroll tax revenue in 2018-19, but Treasurer Dominic Perrottet told The Saturday Telegraph he was "very open" to working with Mr Frydenberg to improve the tax system.

"If that involves a way to further reduce payroll tax and benefit businesses and create jobs it is a high priority for us," he said.

"At present we are awaiting recommendations from the Federal Financial Relations review led by David Thodey and will consider options once that is finalised."

Mr Perrottet said NSW has progressively cut payroll tax by increasing the threshold from $750,000 towards $1 million, saving around 38,000 businesses up to $8175 off their tax bill.

Businesswoman Sanja Maria, who owns Face by SM in Sydney's eastern suburbs, said scrapping payroll tax would enable her to invest more back into her business.

"The benefit to paying less wage tax means there is more room to … hire more staff to keep up with appointments on demand, incorporating more modalities or services to keep up with latest trends and potentially expanding to multiple locations," she said.

The federal government on Friday announced its budget deficit had blown out to $40 billion as at April 30, as tax revenue fell off a cliff and spending on COVID-19 measures skyrocketed.

Government spending was about $12 billion higher than forecast before the pandemic, while at the same time total revenue was $20.5 billion lower than expected.

Face by SM owner Sanja Maria at her Beauty Shop in Paddington. Picture: Tim Hunter.
Face by SM owner Sanja Maria at her Beauty Shop in Paddington. Picture: Tim Hunter.

The Treasurer said he was also looking at reforms that "don't cost money" but will "enhance the economy".

"There are things we'd like to do for small business by cutting red tape, making it easier for them to borrow as well," he said.

Mr Frydenberg said the government had "big questions to work through" in terms of the JobKeeper and JobSeeker income programs, which are only legislated for six months.

"We are thinking about those sectors that take longer to get where they were, and tourism is an example," he said.

And he believes domestic borders "should all be open".

"The best way to get people back into jobs is not to continue the payments but to lift the restrictions," he said.

"I think there will be a bit of a race now by the states, to generate that economic activity by easing restrictions."

The Treasurer revealed he was currently working with Housing Minister Michael Sukkar on a major residential housing plan using infrastructure projects to boost the economy and secure construction jobs.

He said it was "critical" to start lifting restrictions to give businesses the confidence to reopen without fearing a "second wave" of coronavirus cases.

"A really big part of it is making the work environment safe, having protocols and processes to deal with cases as they may arise," he said. "But also just creating a sense of confidence among the broader community that we can get back to work."

Mr Frydenberg welcomed growth in consumer confidence, which has regained about 80 per cent of the ground it lost during the worst of the pandemic.

"Investment confidence has regained some of its ground, but not as much as consumer confidence, and that's going to be critical going forward with businesses at the centre of the economy," he said.

Originally published as Payroll tax, small business relief on COVID recovery agenda


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