Payroll Tax (Exemption for Small Business) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 3 July 2018.)

Mr MURRAY (Davenport) (16:37): I rise to speak to the Payroll Tax (Exemption for Small Business)—

Members interjecting:

The DEPUTY SPEAKER: Member for Davenport, could you just take your seat for a moment, please. Members will listen respectfully to the contribution from the member for Davenport, please.

Mr MURRAY: Thank you for your protection and encouragement, Deputy Speaker. I rise to speak to the Payroll Tax (Exemption for Small Business) Amendment Bill 2018. The bill amends the Payroll Tax Act 2009 to exempt small businesses from payroll tax. Under the existing act, payroll tax is levied on taxable wages at the rate of 4.95 per cent above an annual tax-free threshold of some $600,000. The changes in the bill will mean that businesses with annual taxable payrolls below $1.5 million will now as a consequence no longer be liable for payroll tax, with effect from 1 January 2019. Businesses that have an annual taxable wage above $1.5 million will continue to receive a deduction of up to $600,000 from their taxable wages, consistent with the existing tax-free threshold.

There is additionally a transition for rates of payroll payments between the values of $1.5 million and $1.7 million, designed to smooth the transition from a tax-free quota to the full rate. The net effect of that is that businesses that have taxable wages between $1.5 million and $1.7 million will pay a tax rate that increases proportionally from zero per cent at $1.5 million to 4.95 per cent at $1.7 million. For example, at a payroll of $1.6 million, the tax rate will be the equivalent of 2.475 per cent applied to the amount that is in excess of $600,000.

Businesses that have an annual taxable wage above $1.7 million will continue to pay a rate of 4.95 per cent, as previously. The results of this change are that approximately 3,600 businesses can expect to have a reduction in the payroll tax burden that they shoulder on behalf of the state of South Australia. These businesses currently pay an estimated $44 million every year, and we anticipate the savings on a business-by-business basis to amount to some $44,500 per annum.

It is estimated that of these 3,600 businesses some 3,200 will be completely exempt from payroll tax and that a further 400 will receive some form of reduction in their payroll tax liability. As a consequence, this represents around 39 per cent of the current payroll tax payers who will no longer need to pay payroll tax or who will pay a lower rate. Just to recap, as a result of the government's changes 39 per cent of businesses in this state will pay lower, if not zero, payroll tax as a consequence of the changes we have made. As a result, these changes will remove major disincentive to businesses, creating more jobs and employing more people, as well as making South Australia a much more attractive place to invest in and grow a business and, dare I say it, employ people.

As something of a segue, but worthy of consideration in this context with the impact this will have on the South Australian economy, I note with incredulity, amazement and, indeed, horror, the ministerial statement from the Treasurer, delivered today, which analyses the performance of those opposite and, in particular, the way in which they claimed minor budget surpluses of some $12 million and $14 million for the years 2017-18 and 2018-19 respectively, followed by modest surpluses in the two financial years subsequent to that.

My horror—disgust, actually—is not at the minor amounts claimed but, in fact, at the completely irresponsible and fanciful mathematics underpinning that, which essentially involves everyone believing that these surpluses could have been achieved with budget cuts of some $247.7 million in 2018-19, and three-quarters of a billion dollars in budget cuts inflicted on the South Australian community in 2021-22. The Labor government was going to cut $715 million from the South Australian community in order to achieve those razor thin budgets.

Because clearly the damage done was not enough—the damage already suffered, the damage that we are living with today—I note with complete amazement that the biggest recipient of those cuts was going to be to the health department, who were going to be suffering cuts of $141.3 million in 2018-19, climbing to $445.5 million in 2021-22. I will let that sit for now and return to some good news for South Australia and South Australians and by way of complete contrast with the absolutely optimistic mathematics on show courtesy of the analysis done by the Treasurer of the previous government's budgeting.

I want to move now to explain and cover off what a small business is and why small businesses are important. In particular, I want to provide the explanation not only for the benefit of those opposite but for the broader South Australian community as well because I think appreciation of the value and importance of small businesses to Australia's economy, and particularly to that of South Australia, has been woefully misunderstood and, if understood, cheerfully and casually disregarded.

Why is it that people go into business for themselves? In covering off what a small business is and why it is important, we need to discuss concepts that, as I said, have been completely alien in this state for the best part of a decade and a half. These are concepts that we will see experience a renaissance under this government. We will see a cultural shift here in South Australia. We will see small businesses having a go. We will see those small businesses being encouraged by their government and we will see an environment in which small businesses that are driven are actually encouraged.

We will see the notion of risk versus reward and the so-called Father of Economics Adam Smith's notion of the invisible hand of self-interest come into play and encouraged by this government, a government that not only understands but also appreciates the importance of people in small businesses having a go. To reinforce the references to the invisible hand and the cultural change, I would like to take the opportunity to quote Mr Smith in 1776, when he made the point in his seminal work, which is referred to in shorthand as The Wealth of Nations, but was actually An Inquiry into the Nature and Causes of the Wealth of Nations. Mr Smith's theory was:

Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

He further goes on to say:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.

Small business is driven by attention to doing what they can to having a go, and this government has given those small businesses the biggest single opportunity—some $40,000-odd a year in reductions for well over 3,000 businesses.

Talking of small businesses here in South Australia, I think some statistics are invaluable: 98 per cent of all businesses here in South Australia are actually small businesses, a small business being one with an FTE count of anywhere from zero up to 19 people. South Australian small businesses employ 34 per cent of South Australia's workforce. They contribute something in the vicinity of $34 billion, or about 36 per cent, of the state's gross product. There are about 140,000 small businesses here in South Australia in total.

I will make the blindingly obvious but nonetheless salient point that, if each of them could be encouraged to add one new employee each, that is another 140,000-odd South Australians in a job who would not otherwise be employed, all other things being equal. I invite the contrast with the previous government's plans for 100,000 new jobs, everyone getting a new pony and all the types of promises that by and large never eventuated. The change in payroll—

Mr Mullighan: Certainly no ponies.

Mr MURRAY: Well, by the look of some of the budget calculations and the assumptions there, somebody was getting a pony for that work or something equivalent; anyway, I digress. As I said, small business is the engine room, an integral and very vital part, of the South Australian economy, and this move helps support that sector.

I turn now to reflect on small business and its place in Liberal Party philosophy. What we are doing here is not just done from the practical perspective of its likely impact on the South Australian economy, which, in and of itself, is a valuable thing and an entirely credible means to go about this. I will point out that small business and the support of small business is what is in the Liberal Party's DNA.

In 1942, Robert Menzies, the founder of the Liberal Party, made a series of speeches—the so-called 'forgotten people' speeches. I will provide some quotations from those speeches. He talked about the fact that, in Australia, 'the class war must always be a false war'. It is instructive, 75 years on, to reflect on what Menzies observed in relation to those who have power influence and those who do not. He observed that there were some people who 'controlled great funds and enterprises'. There are those that we would now call the 'business community', which he described none too flatteringly as:

…able to protect themselves—though it must be said that in a political sense they have shown as a rule neither comprehension nor competence.

This was Menzies talking about big business; Menzies had no time for big business or big unions.

Other people whom Menzies said were politically well organised—the so-called labour movement—he identified as a third group: 'salary earners, shopkeepers, skilled artisans, professional men and women, farmers', amongst others, and who he famously described as the forgotten people. These people were, in Menzies' words:

…unorganised and unselfconscious, not rich enough to wield power in its own right and too individualistic for pressure politics.

Yet he referred to them as the backbone of the nation. Menzies said the real life of our nation was not found:

…in great luxury hotels and the petty gossip of fashionable suburbs or in the officialdom of organised masses.

That was code for unions. The real life of Australia was then and is now to be found in the homes of those whom he praised as the 'nameless and unadvertised Australians'.

The Liberal Party was founded on the basis of representing those in small business: professionals, farmers, tradespeople and very deliberately not big business or unions. This bill delivers for South Australia's small businesses by making it cheaper to operate in South Australia and, in particular, by making it cheaper to employ people here. I am sure everyone here will join me in agreeing on how important it is to provide more jobs here in South Australia. Nothing is more important.

This bill demonstrates the deep and abiding commitment of this government to the philosophy espoused by Menzies and, indeed, Adam Smith, and to the task of rebuilding South Australia's economy and its future. This bill reflects the cultural shift underway in this state. Accordingly, I commend the bill to the house.

Mr PATTERSON (Morphett) (16:53): I also rise to contribute to the Payroll Tax (Exemption for Small Business) Amendment Bill. This bill amends the Payroll Tax Act 2009 to exempt small businesses from payroll tax. We will do this by exempting businesses with taxable payrolls of up to $1.5 million from paying any payroll tax, removing this tax for businesses employing, in broad terms, between one and 20 employees. It is another one of the Marshall Liberal government's commitments that sees the government delivering in its first 100 days.

The latest Australian Bureau of Statistics figures show that there are approximately 143,000 small businesses that employ fewer than 20 full-time equivalent employees here in South Australia. This number makes up approximately 98 per cent of all businesses in this state. Another almost 2 per cent is medium-sized business, having between 20 and 199 full-time equivalent employees, and the final 0.1 per cent is large business, having over 200 full-time equivalent employees.

Small business contributes up to $35 billion to this state's economy and employs more than a third of South Australian workers. In Morphett, the make-up of business is very similar to the statewide trend, with most being small business. Businesses tend to concentrate on main roads such as Marion Road, Anzac Highway, Brighton Road and Jetty Road, Glenelg. A lot of these businesses are service related, including travel, medical, health and tourism. Other roads, such as Morphett Road and Mooringe Avenue, also have light industrial businesses.

Many of these local businesses employ people who live locally in the electorate of Morphett, so the initiatives of this Marshall Liberal government to reduce the cost burden on business, such as abolishing payroll tax for small business, not only helps these businesses to reduce costs but also allows them to grow, which in turn allows them to create more jobs and employ people who live both locally in the area of Morphett and also more broadly across the state.

This state is a small and medium enterprise state, and we want our small businesses to grow into medium businesses and for our medium businesses to grow into large businesses. Unfortunately, the growth in small businesses between the 2016 and 2017 financial years grew by just 1.6 per cent, close to half the national average of 3.1 per cent. This is hardly surprising when you consider South Australian businesses were operating in such a challenging environment. For far too long, South Australian businesses have been held back by the burden of red tape and skyrocketing business costs, such as electricity bills and taxes such as the emergency services levy and payroll tax.

Payroll tax is a tax on jobs and is a disincentive to employing people. In a perfect world, such a tax would not exist at all, but, unfortunately, it is not practical at this point in time, given how important a revenue stream it is to the state government. However, it certainly is important to do what we can as a government to help business grow. The Henry tax review identified that payroll tax is one of the most inefficient taxes, as it is not a broad-based tax. It is a tax on a business and the number of employees who run their business. It does not take into account the profitability of a business.

We are currently seeing in the federal sphere the level of company tax being debated in the federal parliament. We have seen the significant undertaking that the Turnbull government is making to businesses across this nation, with tax cuts for businesses with turnovers of up to $50 million being reduced to 27.5 per cent this financial year. This tax rate is a tax on profit, not turnover, so as the business grows so, too, will their company tax. For a company with increasing profits, this is usually a good problem to have and one that can be managed.

Compare this with payroll tax which, regardless of a company's profitability, taxes a company on the total wages of the business. Different businesses require different levels of staffing for the same profit. Service-based businesses and industries require more employees to generate their increased income, whereas other business types, where processes can be automated, such as manufacturing or IT, can invest in capital instead of employees to increase their income. Hence, payroll tax penalises those businesses with high employment to turnover ratios.

What we do not want to see is those businesses moving away from employment as a means to grow their business. When weighing up a decision to invest in capital, and potentially automation or employment, if we can take payroll tax out of the decision-making process for small businesses it will make it more likely that those businesses will choose to grow via employing people.

Additionally, we are at a time in the state's history when South Australia is moving towards a services-based economy. Instead of goods, companies are selling their smarts. Many of these smart businesses, such as education, engineering and tourism, are reliant on employment. Added to this factor is that small businesses, especially those starting up, have a smaller number of employees. Many of them are family-owned businesses and as they grow, the decision to employ additional staff is not only a financial one, but also takes into account culture. One extra staff member for a business with five or 10 people, for example, certainly changes the dynamics more significantly than an established business employing, say, 100 people.

The advantage of small business is that the owners take a very active interest in each staff member as they recognise that the staff member has such a significant effect on the future success of a business. I know that from firsthand experience running my business with my business partners, it is an especially big step to employ not only the first employee but also each subsequent one. The cost of the employee comes directly out of the owner's pocket.

Usually for a small business, as they are growing, they need to employ staff before they are quite ready to cover the additional staffing costs financially. This sees the business owner having to sacrifice and take on risk in anticipation of growing while in the short term, potentially having to go without for themselves. There is no truer saying than that the business owner has to pay themselves last. Once business staff wages exceed the tax-free payroll tax threshold, the decision to employ a staff member has another dynamic added to it: it is not only, 'Will this employee help the company continue to grow?' but for each additional wage, there is also an additional payroll tax impost of 4.95 per cent in South Australia.

For a small business, where every dollar is tight, this represents such a significant burden so it is easy to see why a payroll tax is a tax on jobs. Entrepreneurs need to be encouraged to take these risks if we are going to see businesses across the state grow and consequently employee more people. That is exactly what this government is encouraging. Under the existing act, payroll tax is levied on taxable wages at the rate of 4.95 per cent above an annual tax-free threshold of $600,000.

This tax-free threshold has remained the same since 2009. Since then, inflation has seen employee wages rightly increase over this period. For example, the average weekly wage for adults employed full-time in South Australia in 2009 was $1,270 per week. For the same period in 2017, this has grown to $1,505, representing an increase of approximately 18 per cent. This means that a small business that was employing staff with a payroll of $510,000 back in 2009 would now be tipped over the $600,000 annual tax-free threshold without employing a single extra person.

Other states have recognised this, and each state except South Australia has increased their threshold not only to take into account the effects of inflation, but many have gone further and are seeking to stimulate their economy. It is worth noting the differences. Victoria has a current threshold of $650,000; New South Wales, $750,000; Western Australia, $850,000; Queensland, $1,100,000; and Tasmania, $1,250,000. Of the territories, the Northern Territory has a threshold of $1.5 million and the ACT has a threshold of $2 million, compared with South Australia's current tax-free threshold of $600,000.

The changes in this bill will mean that businesses with annual taxable payrolls below $1.5 million will no longer be liable for payroll tax from 1 January 2019. This will be the largest annual tax-free threshold in relation to payroll tax of all the state jurisdictions, taking us in the one step from the worst to a leadership position in Australia. This is sending a clear signal to businesses throughout our nation: if you are considering expanding or setting up a business, then under a Marshall Liberal government, South Australia is open for business.

Businesses with annual taxable wages above $1.5 million will continue to receive a deduction of up to $600,000 from their taxable wages, consistent with the existing tax-free threshold. I have spoken about the decision-making process previously endured by business owners and managers as they cross the tax-free payroll tax threshold and this needs to be recognised with the new bill we have before us, increasing the threshold of $1.5 million to avoid this figure becoming a ceiling.

To smooth this transition to standard rates of payroll tax, businesses with taxable wages between $1.5 million and $1.7 million will pay a tax rate that increases proportionately from zero per cent at the $1.5 million to 4.95 per cent at the $1.7 million in taxable wages. Businesses with annual taxable wages above the $1.7 million will continue to pay a rate of 4.95 per cent.

These changes are expected to benefit about 3,600 businesses, reducing the payroll tax they pay by an estimated $44 million each year, with individual businesses saving up to $44,500 per annum. It is estimated that 3,200 of these businesses will be exempt from payroll tax and that 400 will receive a reduction in their payroll tax liability. This represents about 39 per cent of payroll tax payers who will no longer need to pay payroll tax or who will pay a lower tax rate.

Not only does this reduce a significant financial burden to approximately 3,200 businesses it also helps boost the productivity of the business itself. Money and, in the case of many small businesses, time are spent on complying with and reporting company payroll tax obligations. Quite often the small business owner performs this reporting obligation; in addition, they are also filling out pay-as-you-go statements to the federal government by virtue of employing people. Removing this payroll tax from approximately 3,200 small businesses means that time can now be spent in a more productive way, such as marketing the business or business development.

Additionally, in this house we have heard, on multiple occasions, the Premier speak of growing our exports not only internationally but also bringing interstate income into South Australia through South Australian businesses winning projects nationally. Having the highest tax-free threshold of all the states now allows South Australian small businesses, when tendering for work against interstate competitors where they might have to employ additional staff should they win the tender, not to have to make an allowance for payroll tax in their pricing.

So not only will abolishing payroll tax assist with direct employment but it will also assist South Australian companies to win business against interstate companies and help to grow South Australia's economy. These changes will remove a major disincentive to businesses, creating more jobs and employing more people as well as making South Australia a much more attractive place in which to invest and grow a business.

To provide certainty for business the government will continue to implement the small business payroll tax rate measure, introduced by the former government administratively, until 31 December 2018. The measure reduces the effective tax rate payable to 2.5 per cent for businesses with taxable wages up to $1 million per annum. The rate then progressively increases to 4.95 per cent for businesses with taxable wages above the $1.5 million.

This reform has support from peak bodies, such as Business SA, as well as small businesses alike. Business SA's executive director of industry and government engagement, Anthony Penney, has stated that:

Increasing the threshold to $1.5 million would see South Australia no longer have the nation's lowest threshold at which it is introduced, and would allow the state's business to compete on a level playing field when trying to attract new business.

Importantly, this reform will deliver broad-based changes to the state's economic settings by improving our competitiveness and investment attractiveness rather than attempting to pick winners amongst individual businesses.

The reform itself is just one of our broad reform agenda. As I mentioned previously, South Australian businesses have been weighed down by some of the highest cost structures in Australia. When I was speaking with businesses in Morphett, some of the other critical costs to those businesses were the emergency services levy and some of the world's highest electricity prices. As an example, the award-winning Orange Spot Bakery, which has been voted as having the best pasty here in Australia—

The Hon. D.C. van Holst Pellekaan interjecting:

Mr PATTERSON: They are very nice. The Orange Spot Bakery has seen its electricity bill increase significantly each month. This is a cost increase it is hard for them to try to recover by increasing the cost of their pies and pasties, so the increase is absorbed within the business. Speaking to the owner, he is committed to his staff, though, as he sees them as integral to creating an award-winning product, but it does make it harder for the bakery to bring in extra staff.

Not only will the government's payroll tax change provide welcome relief, as we have just seen, from 1 July this year the Marshall Liberal government has slashed the emergency services levy by $90 million a year, helping this business but also putting more money in consumers' pockets so they are able to buy a pasty rather than the government using their money to spend on, for example, government advertising, as was the predilection of previous Labor governments.

In addition, we have heard of the work being done in the energy market by the Minister for Energy and Mining to help bring down electricity costs. Recently, the minister updated the house on the draft report by ElectraNet that validated the reduction in costs that an interconnector between South Australia and New South Wales will bring. All this helps businesses, such as the Orange Spot Bakery, to grow. When I look at many of the very friendly staff there, I also notice that many of them are young. Bakeries such as these provide opportunities for apprentices to get their first experience in work and to develop skills. If businesses like this and, similarly, retail and hospitality businesses in the nearby Jetty Road precinct can grow, they will provide more opportunities to employ our youth.

As a state, we can start to give our younger generation the work opportunities they so desperately need and help reverse the trend of our youth leaving the state. We can give everyone the choice to reach their full potential here in South Australia so that we can harness our youth to be part of the solution and take their rightful place in making this state great again.

The Marshall Liberal government has a strong focus on job creation. That is why we are also investing $100 million to create more than 20,000 new places to provide young South Australians with more opportunities to secure an apprenticeship or traineeship. By providing payroll tax relief to approximately 3,600 small businesses, they can be encouraged to employ these young people on completion of their apprenticeship.

Importantly, this reform will deliver broad-based change to the state's economic settings by improving our competitiveness and investment attractiveness, rather than by attempting to pick winners amongst those individual businesses. If the economic conditions improve across South Australia, and the state experiences uplift across the small business sector consisting of 143,000 businesses, this effect will be pronounced. So the payroll tax reform is a sensible and measured reform and takes South Australia in the right direction. It is an initiative that will see the South Australian business community gaining confidence.

Just this week we have seen reports that business confidence here in South Australia is at an eight-year high, and the Premier spoke of it in question time. Consumer confidence is also booming. Importantly, consumers aged between 25 and 34 are the most confident in this state. Pride in South Australia has risen across the state for consumers and businesses, and there is a higher intention by small and medium enterprises to create additional employment over the next three months. With the removal of payroll tax for small business, they can see an opportunity for their business to grow.

This will see good growth in the economy, which will pay a dividend year on year as the tax burden is removed from so many small businesses. By removing this burden, we want our small businesses to grow into medium businesses and for those medium businesses to grow into large businesses. At a time when South Australia needs more jobs and more investment, the Marshall Liberal government is delivering on its commitment of lowering costs for South Australians and creating jobs by introducing this important payroll tax reform for small business. I commend the bill to the house.

Mr PEDERICK (Hammond) (17:12): I rise to speak in support of the Payroll Tax (Exemption for Small Business) Amendment Bill 2018. This was one of the key policy platforms for then the Marshall Liberal opposition that we are delivering in government, as long as this bill goes through this house and that other place.

We are hearing how good the business positivity index is at the minute because we had 16 years when people were essentially crushed and had no incentive to expand their businesses. Thousands of our youth left to go interstate with, sadly, many of them never to come back to South Australia. This is one initiative from the Marshall Liberal government that will keep people working here, it will give those incentives and it will provide a much-needed boon for South Australia. Over time, it will create thousands of jobs and put money back into the economy that would not have otherwise come in, instead of using the old 'tax them to death' syndrome.

You cannot just keep taxing people because you think it is an easy way to make money. We are here to assist the engine room of the South Australian economy, the many tens and tens of thousands of small businesses, people who are prepared to put their homes and all their asserts on the line to start a small business. Sometimes they fail for a range of reasons and, sadly, too many have failed in the previous 16 years.

I take my hat off to everyone in small business. Obviously I come from a farming background where I employed people, and I have also been employed by many different people, whether it was as a farmhand or a shearer, or in my time in the Cooper Basin working for a small earth-moving firm and then working for a bigger business in the WY Line industry in the gas fields.

This is about taking the threshold from $600,000, which might only be about 10 employees, to $1.5 million, which on average would be something around 25 employees. Instead of people managing their business around not going above the threshold for however many employees they have so that they do not breach the $600,000, as they do, there is that incentive not just to be a small business but to grow and to become a small to medium business and, over time, potentially grow into a large business.

As we have heard from the contributions today in the house, it is about encouraging businesses to spend their money on what they are doing instead of just paying their money out in tax. I know certainly from a small business background that if you have a good, wet year—which sadly it does not look like it is going to be in the regional sector—and you get a good crop or you have good returns on stocks, as long as you can feed them, you could be liable for a reasonable tax bill, and then you get years when you may not be so successful on the land.

With all businesses, whether you are in a value-added industry, whether you are in a home-based business, or whether you are in a small business that is just looking at that next step, the thinking is, 'Well, if we do this we'll blow above the threshold. This other cost will come in. We'll have to put this extra building on, and then, just to top it all off, we'll pay all this extra tax.'

I am intrigued by the calculations in the bill with respect to payroll tax exemption for small business. For the record, I did not bother to work them out. The maths formula is there. I will have to take the bill home and get my son doing year 12 maths to see whether I can get him to exercise his mind and work it through. That might be an extra test for his year 12.

What we are doing with this is amending the Payroll Tax Act 2009 to exempt small businesses from payroll tax. Payroll tax is levied on taxable wages at the rate of 4.95 per cent above an annual tax-free threshold of $600,000 under the existing arrangements, under existing legislation. With the changes in this bill, businesses with annual taxable payrolls below $1.5 million will no longer be liable for payroll tax from 1 January 2019, which is coming to us pretty quickly.

Businesses with annual taxable wages above $1.5 million will continue to receive a deduction of up to $600,000 from their taxable wages consistent with the existing tax-free threshold. To smooth this transition to standard rates of payroll tax, businesses with taxable wages between $1.5 million and $1.7 million will pay a tax rate that increases proportionally from zero per cent at $1.5 million to 4.95 per cent at $1.7 million in taxable wages. For example, for a payroll of $1.6 million, the tax rate will be 2.475 per cent applied to the amount in excess of the $600,000 threshold. Businesses will continue to pay a rate of 4.95 per cent if their annual taxable wages are above $1.7 million.

As we have already heard in the house, on the modelling, these changes are expected to benefit around 3,600 businesses, reducing the payroll tax they need to pay by an estimated $44 million per year. Modelling shows that individual businesses will be saving up to $44,550 per annum. That is a really significant amount that a business can plough into its infrastructure, its staff or other assets to make their business a better place.

It is estimated that 3,200 of these businesses will be exempt from payroll tax and that 400 will receive a reduction in their payroll tax liability. This represents around 39 per cent of current payroll taxpayers who will no longer need to pay payroll tax or will pay a lower tax rate. These changes will remove a major disincentive to businesses, creating jobs, employing more people as well as making South Australia a much more attractive place to invest in and grow a business. The only place in the country that will have a higher threshold will be the ACT, with $2 million.

To provide certainty for business, this Marshall Liberal government will continue to implement the small business payroll tax rate measure introduced by the former government administratively until 31 December 2018. The measure reduces the effective tax rate payable to 2.5 per cent for businesses with taxable wages up to $1 million per annum. The rate then progressively increases to 4.95 per cent for businesses with taxable wages above $1.5 million. This is an excellent move for South Australia. It has been a long promised policy by the Marshall Liberal team. I wish the bill speedy passage through the parliament.

The Hon. D.C. VAN HOLST PELLEKAAN (Stuart—Minister for Energy and Mining) (17:22): This is a very important bill. As everybody in this chamber knows, this was one of our hallmark election commitments. The Marshall Liberal government is delivering on this commitments, as it is on all its election commitments.

We hope today to finalise this bill through this house and through this parliament. We do want to remove the tax burden as much as possible from employers. The reason we want to do that is very straightforward. It is because we want to grow employment. We want more jobs in South Australia. We want existing employees to be able to grow and we want future employers to be successful. In fact, we want to attract employers from interstate as well into South Australia so that we can grow employment.

The reason we support businesses in South Australia is that they are employers. Supporting jobs growth is one of our highest priorities. This bill goes directly towards that. This bill takes a tax burden associated with employment off employers, so it is a direct benefit to employers. It is one of a suite of measures that the Liberal Marshall government is putting into place so that employment and jobs growth in our state can flourish.

We do not want South Australia to bump along towards the bottom of the table compared with other states, which has been the case over the last several years. We want South Australia to be a leader across the nation with regard to jobs growth and the benefits that flow from jobs growth and, most importantly, the benefits that flow into households. We want households to flourish because jobs growth is flourishing.

Bill read a second time.

Committee Stage

In committee.

Clause 1 passed.

Clause 2.

Mr MULLIGHAN: I move:

Amendment No 1 [Mullighan–1]—

Page 3, lines 5 to 9—Delete the clause and substitute:

2—Commencement

This Act will be taken to have come into operation on 1 July 2018.

I note that the remainder of the amendments I have filed, nine of them in total, are—perhaps technically the correct word is not 'consequential'—required in order to give effect to what is stipulated in the amendment to clause 2, and that is that we believe these payroll tax cuts should come into effect from 1 July, the beginning of this financial year that we are already in, and for very good reason. As I pointed out in my—

The Hon. S.K. Knoll interjecting:

Mr MULLIGHAN: I realise that no-one is paying attention to the Minister for Transport and that vexes him greatly, particularly when he is in the media messing up one of the infrastructure projects that was left to him. However, as I was saying, as I pointed out in my second reading contribution on the bill, the former Labor government has a fine record of reducing tax for businesses in South Australia, and in particular, on payroll tax. It only takes a cursory review of the history of the more than $220 million per year—

The Hon. S.K. Knoll interjecting:

The CHAIR: Member for Lee, if you could just take your seat for a moment. The member for Lee is speaking to his amendment and will be heard in silence.

Mr MULLIGHAN: Perhaps if the Minister for Transport cannot control himself—he is not on front bench duty—perhaps he could leave?

The CHAIR: Member for Lee, I have suggested that you be heard in silence. You are speaking to your amendment. Continue, member for Lee, speaking to your amendment.

Mr MULLIGHAN: Otherwise, I am happy to move each amendment and speak to the full extent possible on each one, if that is the will of the house and the Minister for Transport.

The CHAIR: It is not the will of the house—

Mr MULLIGHAN: I am seeking some guidance. Is that where we are up to?

The CHAIR: Member for Lee, come back to your amendment please.

Mr MULLIGHAN: Thank you for your guidance to the house, Chair. As I was saying, the Labor government, through successive budgets, has reduced the payroll tax burden on the business community in South Australia by more than $220 million each and every year. In conjunction with other tax cuts, like removing conveyance duties—or stamp duties as they are most commonly known—on commercial property transactions and real estate transactions, and reducing the land tax burden on both businesses as well as households, and also reforming the WorkCover regime, collectively we have reduced the tax liability for the business community by three quarters of a billion dollars each and every year.

So when the new Liberal government says that they want to reduce payroll tax—great, this opposition supports that. We support it so wholeheartedly that we believe these tax cuts should commence at the beginning of this current financial year. Despite the protestations of Mr Lucas in the other place, trying to coerce his cabinet colleagues into signing up for a budget of swingeing cuts to be delivered in just over a month's time and despite his dire portrayal of the budget position in South Australia, we know that the government has been in receipt of more than $270 million of unbudgeted GST revenue since the Mid-Year Budget Review.

We know what the cost of this payroll tax set of changes will be that the government has put forward—approximately $44 million a year—and in bringing them forward by an extra six months in the 2018-19 financial year, it stands to reason that the cost would be approximately $22 million, or less than one-tenth of that additional unbudgeted GST revenue.

We have heard from several members of the government and other members how much they support small business. We even took an historical detour into the works of Adam Smith, going back to the 1700s I think, to establish the new government's capitalist bona fides. If they truly believed that small business needed that relief, then they would get on with it and implement it from 1 July. We know that that is feasible for the Department of Treasury and Finance and RevenueSA because for the last couple of years, if not more, that is how the small business payroll tax rebate scheme has been administered, effectively through ex gratia relief, so it is affordable and deliverable.

We have heard from government MPs that it is the right thing to do for small business in South Australia. They are claiming credit for all manner of economic circumstances that they find themselves surrounded by. They have not yet enacted one policy, legislative change or taxation change that has resulted in these economic circumstances, but apparently, just because the Premier is around the place, thousands of jobs have been created in the last 12 months. This is notwithstanding the fact that, in trend terms, the number of jobs per month on average that have been created over the last 12 months has slowed down under the new government.

Nonetheless, jobs continue to grow as a result of not just the low payroll tax regime, or at least the direction of a low payroll tax regime implemented by the former Labor government, and not just because of the job accelerator grants, many thousands of which paid for the creation of many thousands of extra jobs, and not just because of the investments that were made by the former South Australian government into small businesses and others to grow and expand their operations. This measure would continue the good work of the former Labor government in growing jobs and providing economic strength.

We know that in the 2016-17 financial year, the last financial year for which the ABS has provided economic growth statistics in South Australia on gross state product terms, South Australia grew more strongly than the national average. Deloitte Access Economics recently said that we were expected to do the same thing in the 2017-18 financial year. If we wanted to continue this momentum, and if members opposite were true to the comments they have made in this place, then they would support bringing these payroll tax cuts forward. If they do not, in the face of them knowing that they are affordable and deliverable, then it just goes to show that all those contributions that have been made are hollow. They are hollow words. I have moved amendment No. 1 and I look forward to the government's support.

The Hon. D.C. VAN HOLST PELLEKAAN: That was interesting support of the amendment. When the shadow minister makes it sound as if this is the thing that is going to save jobs in South Australia, he forgets the Marshall Liberal government's economy-wide impact. He forgot to mention the reduction in the emergency services levy. He forgot to mention the reduction in land tax. He forgot to mention the reduction in NRM levies. He forgot to mention a whole range of things that we are doing to support employers and the economy more broadly.

But I suppose one of the things that struck me the most from that set of comments in support of his amendment was that $22 million is quite irrelevant and not to worry about it—that would be his estimate of what it would cost to bring this in retrospectively from 1 July—as if $22 million is play money. Well, perhaps it was to the previous government. Perhaps that is exactly how the previous government went about their business and perhaps that is why the budget is in the situation it is in at the moment.

Let me say very simply that the Marshall Liberal government took to the election a commitment to reduce payroll tax in this way with effect on 1 January 2019, and that is exactly what we intend to do. The last thing I would like to say is that while the member opposite talks about the previous government's record on payroll tax reduction, let's not forget that what the previous government actually did was increase the threshold from $600,000 to $1.2 million temporarily, year by year. It was never actually in their budget.

The $600,000 threshold stayed for 12 months at a time. They then added another $600,000 on top to make it $1.2 million and then, leading into the next budget, they said they would do it again. So they kept it out of their forward estimates. We are not doing that: we are being above board, transparent and completely clean and clear.

Not only are we raising that threshold from $600,000 to $1.5 million—which I remind the house is in excess of the $1.2 million the previous government doled out one year at a time so they could keep the full impact off their budget—but we are actually making it a clear, transparent and fully responsible position from the government that will affect our budget. There are no tricks, no smoke and mirrors and no gadgetry, as with the previous government. In the same vein as sticking to our commitments, we will stick with the 1 January implementation date.

The committee divided on the amendment:

Ayes 20

Noes 24

Majority 4

Clause 3 passed.

Clause 4.

Mr MULLIGHAN: I will move the amendment standing in my name.

The CHAIR: My understanding is that you are opposing the clause. You are not moving an amendment; you are simply opposing the clause—technically

Mr MULLIGHAN: Yes, technically; correct.

The CHAIR: You can talk to it, if you would like to.

The Hon. D.C. VAN HOLST PELLEKAAN: It might help the committee and the shadow minister if I inform the committee that the government intends to oppose all the subsequent amendments, Nos. 2 through to 9.

Clause passed.

Clause 5.

Mr MULLIGHAN: I oppose this clause. I just note for the record that I did offer to try to do this en bloc, but I am advised by more experienced heads that we do not do it like that in this place, Chair, so unfortunately, we are doing it one by one.

The CHAIR: Clause by clause.

Clause passed.

Clause 6 passed.

Clause 7.

Mr MULLIGHAN: I am opposing this clause.

Clause passed.

Clause 8.

Mr MULLIGHAN: I move:

Amendment No 5 [Mullighan–1]—

Page 4, line 15 [clause 8(1)]—Delete 'the prescribed amount' and substitute '$28,846'

Amendment No 6 [Mullighan–1]—

Page 4, lines 16 to 20 [clause 8(2)]—Delete subclause (2)

The CHAIR: Minister, did you want to speak?

The Hon. D.C. VAN HOLST PELLEKAAN: No, other than to say that, in the spirit of efficiency, the shadow minister and I will move through this as quickly as possible. As I said before, we will oppose these two amendments and the others to follow.

Amendments negatived; clause passed.

Clause 9 passed.

Clause 10.

Mr MULLIGHAN: I am opposing this clause.

Clause passed.

Clause 11.

Mr MULLIGHAN: I move:

Amendment No 8 [Mullighan–1]—

Page 12, lines 12 to 24 [clause 11(3), inserted subclause (1a), definition of R, paragraphs (a) and (b)]—

Delete paragraphs (a) and (b) and substitute:

(a) if the employer's total annualised relevant wages for the financial year in which the month occurs is more than $1,500,000 and not more than $1,700,000—R is calculated in accordance with the following formula:

(b) if the employer's total annualised relevant wages for the financial year in which the month occurs is more than $1,700,000—R is 4.95%.

Amendment No 9 [Mullighan–1]—

Page 13, lines 17 to 29 [clause 11(11), inserted subclause (2a), definition of R, paragraphs (a) and (b)]—

Delete paragraphs (a) and (b) and substitute:

(a) if the group's total annualised relevant wages for the financial year in which the month occurs is more than $1,500,000 and not more than $1,700,000—R is calculated in accordance with the following formula:

(b) if the group's total annualised relevant wages for the financial year in which the month occurs is more than $1,700,000—R is 4.95%.

Amendments negatived; clause passed.

Title passed.

Bill reported without amendment.

Third Reading

The Hon. D.C. VAN HOLST PELLEKAAN (Stuart—Minister for Energy and Mining) (17:48): I move:

That this bill be now read a third time.

Bill read a third time and passed.

At 17:49 the house adjourned until Wednesday 1 August 2018 at 10:30.