Money
Issue No. 24 - August/September 2005
[ tightening up tax]
by John Rawson
This article continues from our focus last issue of ideas that could be considered to make our state taxation regime a more competitive environment for business. Payroll tax and land tax now considered.
Payroll Tax
Payroll tax is generally thought to be a major disincentive to employment and is a direct and significant cost associated with the use of staff by businesses.
There are several pay-roll tax options that could be considered including:
- business start up exemptions
- temporary concessions for business relocations to South Australia (SA)
- rebates for increases in staff numbers
- rebates for employers involved in research and development or innovative activities
- ability to de-group employers that are related corporations under the Corporations Act 2001.
Business start up exemptions
Starting up a new business is expensive, with high levels of initial cash outlays placing a drain on limited financial resources. In order to provide some assistance to start up businesses SA could offer start up businesses an exemption from pay-roll tax for a specified period, for example 12 to 18 months. From a strategic perspective, it may be better to support business in early periods (and have a later tax stream from an established business) than to contribute to the possibility of early business failure.
A progressive scale using variable pay-roll tax rates and an adjusting threshold for start up businesses could also be introduced. For example, if a new business is started in South Australia the first 12 months may be tax free provided wages are under $1,000,000 with pay-roll tax applied at 2% beyond that threshold level. The second year may have a threshold of $800,000 with a rate of 4% with the third year reverting to the normal rate and threshold level.
Temporary concessions
In order to entice existing businesses to r...
