As announced in the Victorian state budget this week, payroll tax for regional areas will be cut to 2.425 per cent from 3.65 per cent, bringing it to half the metropolitan rate.
Speaking to The Bookkeeper, Pitcher Partners partner and executive director, Craig Whatman said that while the reduction was a welcome step in easing the burden for growing businesses, the eligibility criteria meant that it applied only to a small pool of businesses.
“That's obviously very significant and they would welcome that but the issue is that it really applies to quite a small group and the threshold test for being an eligible employer is quite strict,” said Mr Whatman.
“You really have to be quite squarely headquartered and have the vast majority of your employees outside of metropolitan Melbourne which is obviously what is intended to do to encourage businesses to move their operations to regional victoria and that is part of the broader push in the budget of measures that are focused on regional and rural Victoria.”
The budget also confirmed a lift in the payroll tax-free threshold to $650,000 on 1 July 2018 but Mr Whatman believes significant reform is needed considering how the threshold has not kept up with the cost of living over the past decade.
“We've been asking for a long time for significant payroll tax reform,” said Mr Whatman.
“If you look at the bracket creep that has occurred in payroll tax over a long number of years, there's now a significant number of what we would regard as reasonably small business that are being caught within the payroll tax net that would never have been caught 10 or 15 years ago and the reason is because as the cost of living and the wages go up, it's a smaller number of employees that now takes you above the tax free threshold than it ever was.
“The payroll tax threshold hasn't really kept pace with the cost of living and increase in wages over time.”