ACCI calls for the abolishment of payroll tax

The Australian Chamber of Commerce and Industry (ACCI) on Tuesday released a new issues report, Payroll Tax: A Handbrake on Jobs & Investment, highlighting the burden that payroll taxes impose on both employers and employees alike.  

The paper, based on a survey of 620 businesses, found that almost all businesses (about 90 per cent) consider that payroll tax places them at a competitive disadvantage relative to businesses that either don’t pay the tax or pay it at a different rate. Moreover, 21 per cent said they would increase wages if payroll tax was scrapped. 

As such, the ACCI calls for the complete abolishment of payroll tax, noting that more than half of Aussies businesses would take on more staff and offer pay rises as a direct result of lesser administrative burdens.

“Reform needs to identify inefficient taxes like payroll tax and adopt measures that replace the revenue lost to state and territory governments," said Dr Ross Lambie, ACCI chief economist.

“Businesses right across the country are crying out for tax reforms that improve efficiency, drive business profitability and competitiveness, and raise employment and wages. Now is the time for governments to commit to implementing a simple, fair and transparent tax system that encourages businesses to create jobs, innovate and scale-up their operations."

According to the ACCI, businesses rank payroll tax reform as of the highest reform priority relative to other government taxes, fees and charges, workplace relations and regulation.

This is followed by automating the calculation of payroll tax into standard accounting software, making the definition of employee and contractor provisions consistent with that of other employee arrangements and harmonising the tax-free threshold across the state and territories. Also on the ACCI's radar is seeing to the creation of consistent interpretations of payroll tax legislation across the states and territories.

“A sustainable business-led recovery from the COVID-19 pandemic must be supported by tax reforms that embolden businesses, encourage investment and increase workforce participation,” Dr Lambie added.