About 98 per cent of businesses in South Australia are considered small, employing less than 19 full-time equivalent staff. We really do put the “S” in SME and these small businesses are the economic engine room of the state.
But we want small businesses to grow to medium businesses and medium businesses grow to large businesses. One of the biggest constraints to this growth is payroll tax, a tax on jobs, a handbrake on employment.
Legislation introduced to Parliament last Wednesday by the State Government that will provide payroll tax exemptions for small business with a payroll of up to $1.5 million will be welcomed by thousands of businesses and will benefit all South Australians.
It will fuel investment, employment and growth.
It is no secret payroll tax is a handbrake on employment.
SA businesses have consistently stated this tax discourages them from hiring additional workers. For businesses close to the payroll tax threshold, the decision to hire a new employee or increase employee wages exposes the business to a new tax liability; a significant disincentive.
SA’s unemployment rate sits at 5.4 per cent and our youth unemployment rate at 12.1 per cent. These changes will directly decrease the cost of hiring additional workers and/or make it easier for employers to offer pay rises.
The SA Government’s payroll tax changes demonstrate what many have known for a long time – that the best way to grow our state is to support business. Business provides employment opportunities and drives economic growth. The potential savings for a business with an annual payroll of up to $1.5 million could reach $44,550; a significant amount to reinvest.
The Premier, who is, quote, “unapologetically pro-business”, has demonstrated this label is more than just a soundbite. By providing the exemption to small business and extending the phase-in period from $1.5 million to $1.7 million, the Premier and his government have listened to local businesses.
Business SA has long advocated for payroll tax relief, and we welcome this legislation.
But the SA Government can’t stop here. We need to see the threshold increased further and the phase-in period extended. Like it or not, SA is in competition with the other states for attracting and retaining business, and having the lowest cost environment – of which payroll tax is a key component – is critical for growth.
This competition is heating up further, with New South Wales and Tasmania announcing positive changes in the past weeks to their payroll tax regimes.
For each year that SA’s economy grows, but the payroll tax parameters remain static, the jobs handbrake will slowly be reapplied. Payroll tax relief fuels our SMEs, the economic engine room of our state, we can’t let their tank run dry.
Nigel McBride is chief executive of Business SA
This article was originally published in the South Australian Business Journal on Tuesday 26 June 2018