Payroll Tax Relief

Adjourned debate on motion of Hon. C. Bonaros:

That this council—

1. Expresses its disapproval of the absence of any genuine and meaningful payroll tax relief measures within the 2024-25 state budget.

2. Recognises South Australian businesses continue to call for payroll tax reform, including:

(a) an increase in the $1.5 million threshold;

(b) a recalibration of payroll tax rates;

(c) incentives to stimulate regional employment and investment;

(d) sector-specific incentives to fill critical gaps; and

(e) the return of incentives for the hiring of apprentices and trainees.

3. Notes the current $1.5 million payroll tax threshold has remained stagnant for five years despite escalating wage and superannuation costs.

4. Recognises the current payroll tax system disincentivises businesses from employing additional staff, including in the critical allied health sector.

5. Recognises the impact of recent payroll tax decisions on the allied health sector will ultimately lead to increased pressure on emergency departments, thereby exacerbating wait times and ambulance ramping.

6. Calls on the Malinauskas Labor government to provide meaningful payroll tax relief to South Australian businesses.

(Continued from 19 June 2024.)

The Hon. H.M. GIROLAMO (23:41): I move to amend the motion as follows:

Paragraph 3—After 'threshold' insert ', which was lifted by the previous Liberal government from $600,000,'

Tonight, I rise in full support of the motion put forward by the Hon. Connie Bonaros. I thank her for her continued interest and dedication to this important topic, a topic I am also very passionate about. Payroll tax reforms last occurred in 2019 under the previous Liberal government, hence my amendment that I have tabled today. It is time to ensure that we take another look at these reforms.

Businesses are struggling and dying every day under the burden of payroll tax. Many are having to pay payroll tax for the first time, not because of massive expansion or major profits but purely because of major wage growth and bracket creep. This tax in its current form is a significant burden on South Australian businesses, stifling growth, disincentivising employment and potentially increasing the skills shortage in what is already of great concern in our state.

The South Australian Chamber of Commerce released a discussion paper earlier this year on 24 March, highlighting the urgent need for payroll tax reform. This is not just a matter of financial policy. It is about the livelihoods of South Australians, the viability of our businesses and the future economic prospects of our state.

We are not alone in calling for reforms. On 10 April, our colleague the Hon. Connie Bonaros brought an excellent motion to the Legislative Council, seeking to establish a select committee to inquire into payroll tax. Unfortunately, despite support from the opposition, this motion failed, as it was not supported by Labor and the Greens. This was a missed opportunity to thoroughly examine and address the pressing concerns of our business community.

The reality is that the current $1.5 million payroll tax threshold has remained stagnant for five long years. During this time, wages and superannuation costs have escalated, placing an increasing financial strain on businesses. Yet, despite these rising costs, the threshold has not been adjusted. This has created a situation where businesses are penalised for growth. Every new employee brings them closer to a tax that undermines their profitability and their ability to contribute to the state's economy.

On 27 May, the Liberal opposition announced a policy position to create an increase in the payroll tax threshold to $2.1 million, a move that will create much-needed relief to businesses and encourage them to expand and hire more employees. Additionally, we proposed exempting apprentices and trainees from payroll tax. This policy is designed not only to reduce the financial burden on businesses but also to address the skills shortage by incentivising the hiring of new-to-industry employees. This will be a key policy for us to champion in the lead-up to the 2026 election.

On 18 June, we announced our intention to axe the GP payroll tax proposed by this government. This tax will be devastating right across the healthcare system. By removing this burden we will aim to reduce the costs of seeing a GP, therefore alleviating the pressure on an already struggling health system.

The motion before us today supports the call from the business sector and from GPs. It is aligned to the policies that the Liberal Party has already announced. I urge all members to support this motion. Let us send a clear message that we stand with South Australian businesses and that we support economic growth, job creation and a fairer tax system.

The Hon. S.L. GAME (23:45): I rise briefly to fully support the honourable member's motion for the Malinauskas government to take immediate and effective action on payroll tax reform. Given recent increases in wages, it makes perfect sense to raise the current payroll tax threshold for South Australian businesses. We need to encourage and reward South Australian businesses that employ more workers and that continue investing in our people and economy. Payroll tax prevents businesses from expanding their operations, so I fully support calls for the current government to take action and reduce the burdensome tax for South Australian business, especially for businesses operating within the allied health sector.

We are all living through a cost-of-living crisis. Consumer spending is shifting and many businesses are struggling to stay afloat. In such a challenging economic climate, payroll tax relief could mean the difference between survival and going under. The government should be incentivising business growth with tax relief, not penalising growth with payroll tax. I fully support the honourable member's motion and join her in calling on the Malinauskas government to bring much-needed tax relief to the South Australian business community.

The Hon. R.A. SIMMS (23:46): I rise to speak very briefly in support of this motion on payroll tax by the Hon. Connie Bonaros and indicate that the Greens will be supporting the motion. Earlier this year, the Greens listened to the calls of the Royal Australian College of General Practitioners when they argued for an end to payroll tax for GPs, and we supported the honourable Connie Bonaros's motion that passed this place in April in response to that issue. Indeed, I also put forward a motion on that important issue. Great minds often think alike on the crossbench, it seems, when it comes to these issues.

The motion notes that the business community is calling for payroll tax reform. It is fair to say that the Greens have a nuanced view on this issue. I do not necessarily support the calls of the business community in terms of the need to totally overhaul payroll tax. Indeed, it is my view that big corporations should pay more payroll tax. We have advocated for that previously, and I wrote to the Treasurer in the lead-up to the state budget advancing that position. But we certainly do not want to see payroll tax making it more difficult for small and emerging businesses to get off the ground in our state.

I should point out that it is the big corporations that are making millions or potentially billions of dollars in profit that we should be targeting here. They should not be given relief in their responsibility to provide for the greater good of the state. The money that comes from taxing big business can provide the funding we require for public services and social programs such as better health care; public schooling; trains, buses and even regional rail; and infrastructure that supports liveable cities and towns.

It is also the view of the Greens that we need to look at reform in terms of ensuring that gig economy businesses are subject to payroll tax. That was a recommendation out of the parliamentary inquiry into the gig economy, and I look forward to the government responding to that. This motion is a call to the Malinauskas government to support small businesses in remaining viable and maintaining their objectives and, of course, also looking at this issue in respect of GPs. We therefore support it on that basis.

In the interests of time, I might take this opportunity to indicate that the Greens will not be supporting the backslapping amendments of the Liberals, giving themselves a pat on the back for their time in government. We will not be a party to that, but I am happy to support the Hon. Connie Bonaros's motion.

The Hon. J.E. HANSON (23:49): Who does not like talking about payroll tax at 11.50 in the evening? Payroll tax is one of the more efficient state taxes and made up around 30 per cent of South Australia's taxation revenue in 2022-23, representing a significant source of funding for the many vital services provided by the government, including education, health, transport and infrastructure.

South Australia has one of the most competitive payroll tax regimes in the nation, with the second highest exemption threshold of $1.5 million in wages and one of the lowest standard taxation rates at 4.95 per cent. After surcharge levies applied in other jurisdictions are considered, South Australia has the lowest standard top payroll tax rate.

The Commonwealth Grants Commission's (CGC) measure of tax effort provides an indication of how a jurisdiction's effective tax rate differs from the average of all Australian jurisdictions and can be used as an indicator of tax competitiveness. In its most recent 2024 Update, the CGC assessed South Australia's payroll tax effort in 2022-23 as below the national average. In 2022-23, it is estimated that approximately $911 million in payroll tax relief was provided to businesses, including around $567 million associated with the existence of an exemption threshold, deduction and phased tax rate. I will not go into what that is because it is really late.

Australian states and territories have harmonised a number of key areas of payroll tax administration, including grouping provisions. These provisions ensure tax equity across businesses such that two businesses with the same level of taxable wages would be subject to the same payroll tax liability irrespective of corporate structure.

The government has not changed the legal application of payroll tax, including to general practitioners. The current contractor provisions of the Payroll Tax Act 2009 have been in place for many years and reflect a harmonised approach across other jurisdictions.

The government acknowledges that a number of medical practices have not accurately understood the contractor provisions within the Payroll Tax Act 2009 and have therefore needed time to fully understand those obligations, which are theirs. In recognition of this, the government worked with the Royal Australian College of General Practitioners and agreed to provide an amnesty to general practitioner medical practices to 30 June 2024.

Any eligible medical practice that registered with RevenueSA during the amnesty period will not be required to pay payroll tax on payments made to contracted general practitioners up to 30 June 2024 and for the previous five years. The government's provision of an amnesty is more generous than other jurisdictions, including Victoria, the Northern Territory and Tasmania, which have not offered similar amnesties.

The Hon. C. BONAROS (23:52): I do not quite know where to start with the last contribution, but I might start with the other contributions first. I thank all honourable members for their contributions today and for their support for this motion.

I might start with the opposition's contribution. I know that this is an issue that we share our similar views on and I am grateful for their support. In relation to the amendment itself, and in the spirit of hopefully getting this amendment up, I do not want to politicise the motion but I will say this: there is no question that that increase in the threshold that was moved that increased the threshold to $1.5 million from $600,000 made a significant impact.

The issue has since been the creep effect. We know what the issues are. If we had another increase to $2.1 million perhaps then we could maintain the success of that previous one, but we have whittled that down. There have been five wage increases, three super increases, inflation, and so effectively we have worn down the very positive impact that that threshold had—but we are still lucky to have it. That was a good move by the government at the time and one that ought to be acknowledged.

In relation to the Hon. Rob Simms' comments—I am trying to go as quickly as I can—in relation to those big corporations, we are not that different in our views in relation to that. The issue that we now have, because of payroll tax, is that we are capturing small and medium size businesses and we should not be capturing those businesses. It was never the intention to be capturing them.

Every time that payroll tax comes up for those small and medium businesses, mark my words, when you are looking at those hospitality venues that have closed their doors, payroll tax is a factor. I know people who run hospitality venues, and every time they are doing their payroll tax liabilities they are doing their level best to stay just under the bracket, so that they can actually afford to keep their doors open. That is a reality. The creep effect is real, and it is impacting businesses across the state.

The Hon. Sarah Game has spoken positively in favour of these changes, and I thank her for that, and I think that is a genuine view of everyone in this chamber. In relation to the government's contribution, I will say this: if you think for one moment that anyone is going to accept the response that has been given in relation to the GPs or the allied health professionals, then you are very mistaken.

They have been on the record to say, at best, under those changes, it will be a $5 increase to patients for visiting their GP. At worst, it will be a $20 increase. We have clinics all over the state now, and particularly in our regions, who are double-tapping those bills. Patients are double-tapping, so that they can pay what the clinic would otherwise have to fork out in payroll tax.

In relation to the amnesty itself, we need to be crystal clear about what was offered. There was a 12-month amnesty offered. I think 252 clinics signed up to that. Never in a million years did 252 of them expect that they were handing over their information to Treasury only to be told—and each and everyone of them got the same response—'And by the way you are liable for payroll tax.' That is the response they got at the end of it—every single one.

The ones who did not sign up to that amnesty will be retrospectively liable for payroll tax for five years, and nobody can put a number on two things: you cannot put a number on how much revenue this new measure is going to bring in, and you cannot put a number on how many did not sign up to the amnesty. It was inevitably pressure and well-run campaigns by the AMA and the RACGP that saw that concession come in, but both have acknowledged publicly that it was a concession, a middle ground, and it is not going to prevent the impact on GPs and their clinics, particularly in the regions. The quotes are between $5 to $10 at best, $10 to $20 at worst. That is the hits to patients' pockets.

Payroll tax in this jurisdiction is currently sitting at $1.7 billion a year, the forward estimates $1.97 billion a year—$5 million a day in payroll tax. You could be taking that extra that you did not anticipate getting—we cannot put a number on how much extra is going to come in from the GPs—and looking at incentives that are going to offer some relief to all these businesses, GPs, specialists, allied health professionals, and small and medium businesses included, but we are not doing that. We are taking that extra money, putting it into government coffers, and spending it on whatever it is we are spending it on.

There has not been any genuine reform about this. I tried this before in terms of an inquiry, but I genuinely want the government to take on board the criticisms that are being levelled at them, and engage in a process that will look at the sorts of reforms that other jurisdictions have implemented, that will look at the sorts of reforms that the Business Chamber of Commerce, the former Business SA, has recommended here.

Regional discounts of 50 per cent in Victoria have resulted in $157 million extra dollars in businesses' pockets. That is a $157 million saving to businesses that has generated more employment and more economic activity for those areas. It is 1.2 per cent at the moment in the regions of Victoria who pay payroll tax; that is the rate that they are paying. What the government has lost in revenue has been made up for in leaps and bounds in terms of economic activity and revenue.

I am genuinely hopeful that, despite what we have just heard from the honourable member, this motion will pass and the Labor government will put some genuine effort into having not a Treasury and Finance review, not a government review but a Productivity Commission review. We all know the benefits of those sorts of reviews. What has happened across the board in terms of allied health professions has just highlighted that issue even further.

I make a point in relation to that. There is an entire allied health profession out there. The only ones who got the benefit of an amnesty—and well done to them for negotiating it—were GPs and specialists. Obviously, that is where most of the political pressure came from. But when you are a patient, and you need to go to see a physio, and a physio is impacted by those same changes and you cannot afford the physio's bill, inevitably you are going to end up back at that GP paying a separate fee to cover their payroll tax if you can afford the consult. In the worst case, you are going to end up back in an emergency department.

Overall, when it comes to the health crisis, no amount of money that you are going to recoup in payroll tax is going to outdo the impact that this is going to have on the health crisis in this state. Everyone who knows something about this issue will say that. I am not saying it, they are saying it. They are saying it publicly, they are saying it in inquiries; that is the feedback we are getting. If we want to get real about dealing with issues that impact small and medium businesses, if we want to get real about making a dent in the health crisis, then looking at windfall gains (and unintended ones at that) from payroll tax is not and cannot be the solution.

I will leave it there, because I appreciate the hour, but I am very hopeful that that is enough to convince the opposition. It is a good move, we all acknowledge that, and I am very hopeful that that is enough to impress upon members the importance of a systemic review. The Productivity Commission I think—and from what we have heard everyone thinks—is well placed to undertake that review. With those words, I commend the motion and urge all honourable members to support it.

Amendment negatived; motion carried.