With my looming retirement, this will be my third last article in the Herald. With that in mind I think it’s only fair that I get to rant one last time about a tax that constantly causes me to be cranky.

My first outburst was in 2019. In that article I calculated that payroll tax accounted for 39% of WA’s tax revenue and restricted business growth. Gambling tax accounted for 3% of revenue and restricted gambling. That’s a big mismatch.

I also pointed out that WA had the highest payroll tax in the land.

In the five years since, WA’s payroll tax revenue has grown from $3.7 billion to $5.8 billion and is heading to an estimated $6.7 billion by 2028. WA still proudly holds top dog status. Our 24/25 budget estimates that 43% of revenue will come from payroll tax, contributing to a surplus of $2.6 billion. That’s just greedy.

The Chamber of Commerce and Industry WA are very vocal about this regressive tax. Their website includes a cool calculator where you can enter your business’s wages, and it will tell you how much more payroll tax you get to pay in WA compared to other states. 

At FAJ, we pay 4.3% more than we would in Victoria, the second highest taxing state, and a whopping 29% more than we would if we relocated to the lowest taxing state, Queensland.        

In a previous survey of the Chamber’s members, 90% of businesses said that payroll tax influenced their willingness or ability to employ staff.

Payroll tax was first introduced by the Federal government in 1941 at a flat rate of 2.5% to finance a national endowment scheme for the children of fallen soldiers. At least it commenced with benevolent intentions. WA introduced payroll tax in 1971 after control was handed to the states. The initial rate in WA was 2.5% of taxable wages. Our current rate is 5.5% where wages exceed a certain threshold.

One of the biggest criticisms is that payroll tax thresholds are not indexed to inflation. Year on year, as wages increase, more and more businesses are stung with this tax. This is known as bracket creep, which features in many of our federal taxes including income tax and the controversial proposed 30% tax on significant super balances.

Payroll tax has long outlived its original purpose and now punishes the very act of employing people. As more businesses fall into the net due to bracket creep, the disincentive to grow and hire becomes even stronger. If WA truly wants to support job creation and economic diversity beyond the mining boom, it’s time to rethink this outdated, unindexed, unjust tax. Enough is enough.

by MARK DOUGLAS
FCPA
Managing Partner of Francis A Jones
www.faj.com.au