The average amount of payroll tax paid by those in the state’s lowest qualifying bracket increased more than 30 per cent last financial year, part of an overall $5 billion generated by the tax in WA.
A total of 544 WA businesses with payrolls between $1 million and $1.1 million paid $2.42 million in payroll tax in 2022-23 – up from $2.39 million of tax paid by 703 businesses in the bracket the previous year.
While modest against overall wage payments, average payroll tax paid per employer in the bracket jumped by a substantial 30.7 per cent year-on-year – up around $1000 from $3,400 to $4,444.
That was despite the tax rate remaining at 5.5 per cent for payrolls between $1 million and $7.5 million, with changes instead attributed to a combination of fewer businesses in the bracket and a shift in composition of business payrolls.
The average increase was the largest measured across each of the 20 payroll brackets covered by the tax, spanning companies with wage bills as low as $1 million to upwards of $100 million.
It comprises part of the more than $5 billion generated by the state government in payroll tax over the financial year, up from $4.5 billion the previous year.
Shadow treasurer Steve Thomas told Business News the 30 per cent average increase for businesses at the lowest end of the scale showed there was a need for a review into the payroll tax system.
“That’s a massive increase in the average payroll tax being paid by those lower-end businesses,” he said.
“I think it shows there’s an absolute argument for a review of payroll tax, and payroll tax relief for those businesses at the bottom end of the scale.
“They’re paying higher interest rates at the moment, but they’re also paying higher taxes, and they’re getting bogged down by the usual morass of government regulations that get in their way.”
Mr Thomas said he was open to a range of tax relief options, including threshold shifts and rebate schemes.
But Treasurer Rita Saffioti told Business News that the government had delivered a range of reforms to support businesses and cut red tape, including an increase to the payroll tax threshold which rolled out from 2020.
“This provided a payroll tax cut to about 70 per cent of payroll tax paying businesses, including around 1000 that were no longer required to pay payroll tax,” she said.
“In the last three years we have also delivered more than $1.7 billion in financial support for Western Australian businesses, including a $650 electricity credit for small businesses.”
Ms Saffioti said the economy’s strength meant more money was flowing back into government coffers.
“The state government regularly reviews tax settings to ensure they are fit for purpose, but the reality is our economy and jobs market remain incredibly strong with Western Australia’s businesses employing more people than ever before,” she said.
Tweaks were made to the payroll tax system in this year’s state budget, phasing out a sliding rate levy which had subjected those in the top payroll tax bracket to a rate higher than the standard 5.5 per cent.
That prompted calls from the Chamber of Commerce and Industry WA for greater payroll tax relief for smaller businesses in the state.
At budget time, the state estimated the revenue generated by payroll tax for the 2022-23 financial year would increase by 12.4 per cent, on top of the previous financial year’s 17.8 per cent increase.
The reported $5 billion payroll tax represents an increase of around 12 per cent, in line with that prediction.
