Australians aren’t strangers to tax. We pay through the nose every year in income tax, GST, fuel tax, and even an imported vehicle tax that remains long after the automobile manufacturing industry it was meant to protect collapsed.
But, there’s one ‘hidden’ tax we all pay that should be consigned to history’s dustbin by both parties before the NSW state election: payroll tax.
Employers paying more than $850,000 in monthly wages must pay the 5.45 per cent tax. But the real cost is borne by workers through lower wages and less work, or by consumers through higher prices. Ultimately, we all pay.
Unlike income taxes, most of us don’t realise that we’re copping a pay cut.
This ‘hidden’ tax suits state governments because it is less likely to prompt debate nearly as much as it should.
Yet even raising the payroll tax threshold has delivered great benefits. NSW will follow South Australia’s lead by increasing the threshold from $850,000 a month, to $1 million over the next four years, providing relief to 5000 businesses. In South Australia, this pushed business confidence to a 20-year high.
But it simply isn’t enough. Putting a tax on jobs discourages businesses from expanding and hiring more workers or giving them raises. This only exacerbates the problem of low wages growth, which is sapping Australians of our living standards.
If politicians understand that taxing alcohol or cigarettes can discourage these habits, why can’t they understand that the same principle applies when it comes to work or wages?
If NSW becomes the first state to abolish payroll tax, it will lower the high cost of doing business here and cause an exodus of jobs and investment to our shores that encourages other states to follow.
Queensland made history when it became the first to abolish its inheritance tax in the 1970s, and benefited so greatly from that move that other states were driven to do the same.
Gladys Berejiklian has the same opportunity now to make history and potentially cement her place as Premier for the next four years with a sensible reform that is sure to be popular across political divides in the electorate.
It will also reward traditional liberal constituents, including professionals and small businesses, at a time when the state’s coffers are far from short on revenue.
All she needs is the courage to act.