PAY-ROLL TAX (HARMONISATION PROJECT) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 2 April 2008. Page 2489.)

Mr GRIFFITHS (Goyder) (11:14): It is a pleasure to contribute to this debate. I indicate that I am the lead speaker for the opposition, but I believe that at least one other member will be contributing to the debate. I admit that when the Treasurer introduced this on 2 April I was immediately excited, and I thought that payroll tax would have a substantial review.

Ms Breuer interjecting:

Mr GRIFFITHS: The member for Giles made a funny comment, but I will not repeat it. Payroll tax is an important issue for all South Australians, but I will allude to that later. I will take a few moments to talk about the bill as it presents itself. As I understand it, commitments were made by all states in March of 2007 at a states-only ministerial council meeting of commonwealth/state financial relations at which agreement was reached to implement this harmonisation project across all states to ensure that commonality exists in the issue of payroll tax.

From the briefing provided to me, and from the second reading speech made by the Treasurer, it appears that this bill will look at eight areas, and I will briefly touch on those. One is lodgment for which there will be a common lodgment date being on the seventh day of every month. Allowances will be standardised for motor vehicle and accommodation allowances which will be amended to align the rate of payroll tax to the Australian Taxation Office, and the allowances paid will be reviewed annually.

As to fringe benefits tax, under the commonwealth, two gross rates can be used for payroll tax purposes. This bill proposes to amend the act so that, when fringe benefits are grossed, only the lower gross factor (being type 2) under fringe benefits tax is then used. An exemption is to allow for taxable wages paid or payable in respect of services performed wholly in another state or country for a continuous period of more than six months to apply from day one, and I believe that is a positive step forward.

In the area of superannuation, amendments are to include superannuation contributions for non-employee directors which will be added to the payroll tax base, and I support that. Grouping provisions will be amended to prevent avoidance measures being used to exploit the tax-free threshold. I will talk about that later and that tax-free threshold is currently $504,000. For share acquisition schemes, amendments will make the payroll tax treatment of employee share acquisition schemes more transparent. The amendments will ensure consistency of treatment with other forms of remuneration.

Some administrative changes are also proposed to be made to the term 'eligible termination payment' which will now become 'employment termination payment' and 'termination payment'. This change arises as a result of the commonwealth government's superannuation reforms which were introduced with effect from 1 July 2007 in order to be consistent with New South Wales and Victoria in particular.

The Treasurer is proposing in this bill to introduce exemptions from 1 July 2008 for wages paid in respect of maternity and adoption leave, not including other forms of leave taken in conjunction with maternity or adoption leave; wages paid to bushfire and emergency service workers while performing volunteer activities, and the opposition supports this because it is important that we provide every possible opportunity to support those people who volunteer an enormous number of hours to provide those services to our whole community, so that is a progressive step; wages paid to charities in respect of employees directly undertaking the charitable activities of the organisation; and, finally, wages paid under the Community Development Employment Project program.

As I mentioned at the start of my contribution, when the Treasurer introduced this on 2 April, without my having had the opportunity to read his second reading explanation I was hopeful that it was going to be a raft of reforms for payroll tax. For the opposition, as part of the tax summit that we will hold next Monday and the tax discussion paper we issued, it has been obvious to us that payroll tax is a very important issue for all South Australians. Of the 45 submissions we received, it is interesting to note that some 13 included points related to payroll tax. A lot of people are upset about the fact that $504,000 is the threshold and that South Australia currently has a rate of 5.25 per cent above that threshold.

The Hon. K.O. Foley interjecting:

Mr GRIFFITHS: I recognise the Treasurer's comment that he announced, as part of last year's budget that, in altering the rate from 5 per cent to 5.25 per cent this financial year, he will decrease it to 5 per cent from 1 July 2008 but with no adjustment to the threshold.

The Treasurer raised a point in his second reading explanation that consultation had occurred with Business SA and that he was grateful for that. I spoke to Business SA, because I wanted to clarify that point, not that there was any doubt about what the Treasurer said, but the person I spoke to mentioned that, as part of the contact that Business SA had with Treasury officials about this, the suggestion was made that South Australia align itself with Victoria and Western Australia in not including the wages paid to apprentices in a calculation of payroll tax. Unfortunately, that was not supported. We know that the employers of trainees and apprentices can presently claim a rebate of 80 per cent of wages for those who commence their first training contract before their 25^th birthday.

We also know that there are enormous challenges out there in ensuring that South Australia has the skilled workforce that it needs to move the state forward. There is an enormous number of small to medium-sized enterprises that will need to employ new people over the next 10 years, especially as our baby boomers choose to retire, and it is obvious to me that some employers need a little bit more of an incentive to actually give younger people their first chance in life, especially those areas where they are in apprenticeships or traineeships.

We would have loved to see the adoption of the proposal from Business SA, which is, as I understand it, in place in other states, where a full rebate would have been applied to that or, indeed, a complete removal of the wages paid to apprentices and trainees so that their wages remuneration was not included in payroll tax, but that has not been adopted at this stage. We know from the budget that payroll tax this financial year is, I believe, in the $852 million bracket.

We know that, since the 2001-02 year through to this financial year, payroll tax has increased by 45 per cent in dollar terms as to what it brings in, and it now represents some 26 per cent of the total general government taxation effort. In the 2006-07 year, over 9,000 South Australian businesses were liable for payroll tax. In 2001-02—the period in which the Rann Labor government came to power—only 7,200 businesses were liable for payroll tax. That can reflect a few things: it can reflect the growth in security of wages taking the number of employers above the threshold figure; and it also reflects the fact that more people are being employed now.

We know from the statements made by the Premier and minister Caica that there are about 778,000 people in work in South Australia, which is a good figure and a step forward. It is also interesting to note that from 2001-02 through to the 2006-07 year the state government has actually received additional revenues above that budgeted in payroll tax, in the area of about $144 million, with additional revenues likely this financial year, too.

I want to make some comparisons between the South Australian rates and other states when it comes to the taxation rate and the threshold. In South Australia we know that it is $504,000, with a current rate of 5.25 per cent. In New South Wales the threshold is $600,000, with a rate of 6 per cent. In Victoria the information I have is that the threshold is $550,000, with a rate of 5.05 per cent. In Queensland the threshold is $1 million, with a rate of 4.75 per cent. In Western Australia the threshold is $750,000, with a rate of 5.5 per cent. In Tasmania it is $1,010,000, with a rate of 6.10 per cent.

So, clearly, South Australia has the lowest threshold and at the moment has the fourth lowest rate, but there is an opportunity for reform here. South Australians want to see it. It has been a big focus in the taxation summit that we are holding. We know that we are going to get a lot of submissions from people about payroll tax reform, because that is the issue that affects everybody.

It is important that government philosophy focuses on opportunities to get more people jobs. We see the level of payroll tax rate and the threshold that is in place as currently a disincentive to increase employment opportunities. Even though there would be some financial sacrifices made by reviewing those in a more serious way than what they have been in the past, we are comfortable that, with the growth in the economy, that forgone revenue would be quickly regained.

So, we do support the amendments as proposed in the Pay-Roll Tax (Harmonisation Project) Amendment Bill, but we would love to see an opportunity for the Treasurer, after he gets some guidance from our payroll tax summit on Monday of next week, to actually have a further review of payroll tax as it relates to South Australians.

Mr PISONI (Unley) (11:24): I will make some comments on the bill. Like the member for Goyder, I was very excited when I saw a bill relating to payroll tax come before us but, of course, when we got to the detail 'harmonisation' was the word we saw there—'harmonisation of payroll tax'. I thought that maybe we were going to see a lifting of the threshold to be closer in harmony, if you like, with those of the other states. Queensland, I think, is up there at about $1 million, Tasmania is up there at about $1 million and Western Australia is up over $800,000.

Here in South Australia we are stuck at $504,000. The Premier often boasts about how he has cut the dollar amount of payroll tax from $5.50 every $100 to $5 every $100 (from 1 July). The Premier boasts about that being a great thing for South Australia. Of course, any reduction in tax is a great thing but what he fails to understand is that South Australia is a small business state, and the biggest beneficiaries of a cut in payroll tax are companies with a branch office here in South Australia which are much bigger businesses than our own local businesses and which do not pay the extra 50¢ to the South Australian government: it stays in their home state.

The head offices in Melbourne and Sydney are the beneficiaries of a cut in payroll tax; whereas the biggest beneficiaries of an increase in the threshold are small local businesses that are committed to South Australia. Those businesses start here, from a tradesman working in the backyard through to businesses involving high technology and providing successful education and business services around the state. There is a false sense of security in the Deputy Premier's patting himself on the back about the reduction in the rate itself. He does not understand—

The Hon. K.O. Foley interjecting:

The SPEAKER: Order!

Mr PISONI: He does not understand how important an issue payroll tax is for small business. It is a big issue for small business. Of course, I will be very keen to find out from the Premier, during the committee stage of the bill, just why it is that he decided not to exempt apprentices from the payroll tax calculation.

I know of many small businesses that are bumping that threshold of $504,000. They are plumbers, electricians, restaurant owners—they are the types of business that would take on apprentices and train new staff but they do not want to pay payroll tax; they do not want to be in that regime. Of course, the rebate means that they have to be in the payroll tax regime in order to benefit, whereas an exemption for an apprentice or a trainee would mean that they still would not come into the regime, because the wages of that apprentice or trainee would not be considered in assessing the total annual payroll for that business.

By not addressing that matter, the Deputy Premier has missed a huge opportunity to increase training opportunities and the placement for training of young people in South Australia, and that is disappointing. As someone who trained 20 apprentices in my time in business, I am disappointed that that was not picked up by the Deputy Premier. However, we do know that there is very little small business experience in this government and that it is not very fond of small business; it probably would not see this as being of value to it and, consequently, it was not going to give any assistance whatsoever to small business. The government chose not to, and that is its choice, but in this instance it was a perfect opportunity to deal with this matter.

It is also disappointing that in this day and age, where we have had significant tax reform at a federal level, enormous amounts of GST revenue coming in and the budget has grown by close on $5 billion since this government has been in power, we are still so heavily reliant on the revenue from payroll tax to pay state bills. The budget is still very heavily reliant on payroll tax. That is something that disturbs me, as a former small business person and a former employer. I spent 22 years employing staff, including apprentices, and paying payroll tax. I did not pay payroll tax until about the last five years or so of running my business because it was not big enough to make that necessary before then. However, I was paying payroll tax for staff that I had interstate, as well, when that did kick in.

I am pleased to see that there is some harmonisation which covers that area. However, as the shadow minister for finance (the member for Goyder) has pointed out, we have seen enormous growth of 45 per cent in the payroll tax take, and we still have the lowest threshold in the country when it comes to the payroll tax threshold. That was certainly something I had hoped we would see addressed, but it has not been addressed here.

I am very keen to hear what the delegates have to say at our tax summit next Monday. I am looking forward to it, as we have some very enthusiastic businesspeople and members of the public coming along to present their case. We have received some great submissions, and of course this is all for open debate. We invited the Treasurer to participate, but he chose to mock the idea, saying that we do not need tax reform. Of course, that is not what the new Labor Prime Minister, Kevin Rudd, has said: he also referred to state taxes, and I think that he used the term 'root and branch' in relation to tax reform in Australia. I am very keen to see what comes out of our tax summit on Monday. I will be there for the whole day, and I am looking forward to considering its ideas and outcomes.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (11:31): Fancy getting a lecture from the shadow minister for small business, who put his own business into voluntary administration! Getting a lecture from a bloke who is a failed businessman—

Mr Pederick: You're outrageous.

The Hon. K.O. FOLEY: No; I am not outrageous. I have listened to abuse for years in this place about my prior occupations and my prior jobs, so don't cry crocodile tears to me when you get a bit of it back. I have had to listen to people in this place demean my previous occupation. I am just stating a fact: the member for Unley, as the small business spokesman for the Liberal Party, had a failed business which he put into voluntary administration; that is fact. So, don't cry your crocodile tears with me.

You can have your tax summit next Monday, and good luck to you. I know exactly what the people who come along will say because they have already said it to me; they have been saying it to me year upon year upon year. Every single businessman who will come into this place will be interested in tax reform. They will be interested in lower taxes for their business—and that does not equal tax reform.

What I have done and what this government has done since coming to power is cut taxes where we have been able and could afford to and where it assists general economic activity. You can have all the tax submissions you like but, at the end of the day, you will be held accountable for how you will pay for it.

You have only a few options: first, you cut a service, so if you want to cut a tax, nominate the activity of government you are going to cut; secondly, if you are going to cut a tax, nominate what is an acceptable deficit for the opposition to sustain with its operating accounts; thirdly, determine how much you are prepared to borrow more to fund those tax cuts; or, fourthly, determine what new taxes there will be or which taxes you will increase That is the equation.

You just cannot come in here, as I am sure you will attempt to do, and say, 'Yes; we're going to cut a tax,' but not say how you will pay for it. You will squib on the option of how you will pay for it. As I said in this house the other day, the biggest challenge confronting the nation, and the state as it relates to tax, is vertical fiscal imbalance; that is, that the commonwealth raises the vast majority of taxation revenue in this nation.

Company profits have never been higher. Company contribution to the tax take of national government has never been higher. Income tax has never been higher. The national government is running surpluses reported to be as high as $20 billion.

Mr Pederick interjecting:

The Hon. K.O. FOLEY: That is irrelevant to the argument. If you want to sit down and have an educated discussion about this, I will get some people to advise you so that we can have an educated debate about it.

Mr Pisoni interjecting:

The Hon. K.O. FOLEY: Sorry; I am attempting to do so now, failed businessman.

Mr Pisoni interjecting:

The Hon. K.O. FOLEY: I don't have a marriage; I'm a single man.

Mr Pisoni interjecting:

The Hon. K.O. FOLEY: Always what?

The SPEAKER: Order!

The Hon. K.O. FOLEY: I have been a single man for five years. What's your point?

The SPEAKER: Order! The Treasurer will take his seat.

The Hon. K.O. FOLEY: What's your point, grub?

The SPEAKER: Order! The Treasurer will take his seat.

Members interjecting:

The SPEAKER: Order! I will sort this out.

The Hon. K.O. Foley: I will defend myself.

The SPEAKER: I will sort it out. The member for Unley will withdraw his remarks.

Mr PISONI: I withdraw the statement, sir.

The SPEAKER: Thank you. We should end the discussion there.

The Hon. K.O. FOLEY: I am a single man. I have been for five years. What's your point?

Mr Pederick: Just leave it.

The Hon. K.O. FOLEY: Don't you tell me what to do, Pederick.

Mr PEDERICK: I was talking to my compatriot, thank you, Treasurer. I was looking over here and said, 'Just leave it.' I was acting as the whip.

The Hon. K.O. FOLEY: That's not a bad piece of advice, but I am happy if he wants to engage in that, more than happy. Trust me! The member for Hammond would be surprised how many Liberals tell me things about the member for Unley.

An honourable member: In your dreams.

The Hon. K.O. FOLEY: You'd better believe it, sunshine. What I am saying is that vertical fiscal imbalance is the tax challenge of a nation. When you have states running accrued deficits of up towards $20 billion with those deficits funding the infrastructure needs of the nation, it is clear that state governments do not have the financial capacity to meet the service demands and expectations of the nation.

At some point, if there is to be root and branch reform of state taxation, all state treasurers will be arguing for a bigger contribution from the national government in the delivery of health, education and service delivery because, unless we get that rebalancing of who raises taxes and who spends taxes, this problem will not be resolved.

The member for Hammond says that we get plenty of GST money. If we did not have a GST, we would still get commonwealth general purpose grants. I accept the argument that GST is flowing in larger volumes to the states than probably would have been the case under general purpose grants. I accept that, but it is not enough.

If you look at the percentage and the statistics of the contribution or the amount of revenue raised at a national level by commonwealth government and the tax take at a state level, or the contribution of taxes to states to provide services, there is a growing gap because in strong economic times, whilst we receive the upside of the GST, the commonwealth government gets a massive uptake or upward swing of company tax and pay-as-you-earn income tax. What I am saying is that, if members opposite want to be serious about taxation reform, they should think seriously about supporting an argument for vertical fiscal imbalance.

I am quite relaxed about the opposition's tax summit on Monday because, as I have said in this place before and publicly, when I became Treasurer, I was a bit enthusiastic about seeing how we could reform or change the tax mix until I was confronted with the very point I just made: if you cut a tax to somebody, you either have to raise it on somebody else or cut a service to pay for that tax, or you have to run your surpluses down or run deficits or borrow money. There is no other way through it. That is a very difficult equation to balance. The approach we have taken is that where we can cut taxes we have, and we are bringing down payroll tax to 5 per cent.

I have nothing else to say except this: if it is the opposition's tactic to bring one's personal life into debate in this chamber, I look forward to being a contributor to that debate. It will not be done in a sleazy way, but I say to the member for Unley that if he wishes to attack me in my personal life that will reflect on him, not me.

Bill read a second time and taken through its remaining stages.