Payroll Tax

Adjourned debate on motion of Hon. C. Bonaros:

That this council calls on the Premier to refer to the South Australian Productivity Commission the matter of payroll tax in South Australia and require the commission to report on the inquiry identifying further actions the South Australian government may take to improve the effectiveness of the current payroll tax system in promoting economic growth and job creation and its alignment with the overall economic goals of the state, and the inquiry should include evaluation of:

1. Payroll tax threshold and rates, including consideration of an annual review;

2. Incentives to promote regional employment and investment;

3. Opportunities for industry-specific incentives to support the growth and sustainability of key sectors;

4. The impact of recent payroll tax decisions on independent general practitioners and the general practice sector, including the exacerbation of workforce challenges and reduced access to health care;

5. The effect of grouping provisions on independently operated but co-branded businesses across various industry sectors;

6. Retrospective payroll tax liability determinations;

7. Compliance challenges faced by businesses;

8. Payroll tax systems in other jurisdictions to identify best practices and potential areas for reform and alignment; and

9. Any other related matters.

(Continued from 15 May 2024.)

The Hon. H.M. GIROLAMO (21:56): Tonight, I rise in full support of a motion put forward by the Hon. Connie Bonaros about payroll tax, and particularly in support of productivity. The member has shown tenacity and persistence in this space, and I commend her for not giving up on this crucial issue. Our party position is very firm: we have clear policies that would see the threshold raised, trainees and apprentices exempted and GP payroll tax axed.

Tonight, I would like to remind the chamber of the establishment of the South Australian Productivity Commission. In 2013, the then opposition leader, Steven Marshall, in his official response to the state budget that year, made a promise to the people of South Australia to establish a state-based productivity commission aimed at delivering more efficient public spending. I quote his 2013 budget in reply speech:

…government must not just preach. Government needs to focus on its own efforts…Improving productivity is about maximising outputs with finite inputs…the solution to every problem is not necessarily new spending…It is about working smarter.

I could not agree more. When elected as Premier in 2018, Premier Steven Marshall delivered his promise. Unfortunately, this was unlegislated due to Labor's unworkable amendments. Six years on, the Productivity Commission provides vital insight to the parliament and to the people of South Australia about economic viability, competitiveness, industry regulation, governance and more.

Our world changes: wages grow, markets change, technology expands. The commission helps us to adapt to these changes. Payroll tax is the single largest tax in the state at $1.8 billion. This $1.8 billion is made off the backs of hardworking small businesses and, more recently, hardworking struggling general practitioners, our doctors. The people trying to prevent South Australians from going to the emergency room and from being ramped are now facing new taxes under this government.

By this government's own admission, in 2027 payroll tax will increase to an enormous $2.2 billion. The reality of today is that payroll tax is closing businesses. What will happen to that $1.8 billion of revenue if there are no businesses left to pay this tax? The government cannot afford to not take action.

Increasing the threshold supports small business. Increasing the threshold could potentially keep businesses open. Exempting trainees and apprentices from payroll tax could help address the state's skills shortage. Axing the GP payroll tax could lower the cost of people seeing their doctor or visiting our crowded emergency rooms.

South Australian businesses are owed the right to know the economic viability of payroll tax. Employees are owed the right to know if job prospects could broaden and employable hours could increase if the payroll tax was lifted. Our doctors are owed the right to know if axing GP payroll tax will address the state's enormous health crisis. South Australia deserves to know if increasing the threshold could see manufacturing return to this state.

These are all questions and answers that could be found in an inquiry made by the South Australian Productivity Commission. A responsible government wants to see this state prosper. A responsible government wants to increase productivity, to increase jobs growth and to allow businesses to flourish. A responsible government will allow the Productivity Commission to conduct an inquiry to investigate the operations of payroll tax, because it is transparent, it holds them to account and it is the right thing to do.

I implore the crossbench and those opposite to support this motion. To vote against this motion would be to deny South Australians the right to know if their money is collected and spent wisely. To vote against this motion would be to deny the state the tools to increase productivity across a range of economic indicators, including job growth, business growth, investment and capital market productivity. To vote against this motion is anti productivity and pro red tape. With that, I commend this motion.

Members interjecting:

The ACTING PRESIDENT (The Hon. R.B. Martin): Order!

The Hon. R.P. WORTLEY (22:01): South Australia has one of the most competitive payroll tax regimes in the nation, with the second highest exemption—

Members interjecting:

The Hon. R.P. WORTLEY: Mr Acting President, please protect me.

The ACTING PRESIDENT (The Hon. R.B. Martin): Continue.

The Hon. R.P. WORTLEY: —and one of the lowest standard tax 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 measure of tax effort provides an indication of how a jurisdiction's effective rate of tax differs to the average of all Australian jurisdictions and can be used as an indicator of tax competitiveness.

In its most recent 2024 update, the Commonwealth Grants Commission 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.

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 the 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 their obligations. 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. F. PANGALLO (22:04): I am not listed on the speakers list, but I just rise to say that I will be supporting this motion. As it currently applies, payroll tax in South Australia is an insidious hurdle to productivity and prosperity and a handicap to jobs that holds back progress for business.

I recall a recent discussion I had with a small business owner who came in to see me. He was extremely concerned about the payroll tax that would have had to have been paid once you went over the threshold. His business is quite successful and unique in South Australia, but he is afraid to expand it. He would go in winning tenders and contract after contract but was dreading getting them because it would push him over the threshold and make the economy of his business difficult with the tax that he had to pay. With that, I will support the motion.

The Hon. S.L. GAME (22:05): 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 to continue investing in our people and our economy.

Payroll tax prevents businesses from expanding their operations, and so I fully support calls for the current government to take action and reduce this burdensome tax for South Australian businesses, especially those 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 some much-needed tax relief to the South Australian business community.

The Hon. C. BONAROS (22:06): Can I thank the Hon. Ms Girolamo, the Hon. Mr Wortley, the Hon. Mr Pangallo and the Hon. Ms Game for their contributions and support today, and also note the previously stated support of the Greens via the Hon. Rob Simms. I have five words for the Hon. Mr Wortley: $5 million a day, and increasing. I have two more words for the Hon. Mr Wortley, through you Mr President, which completely diminishes the contribution—

An honourable member interjecting:

The Hon. C. BONAROS: —it was five; I counted them—that he just gave on the part of the government, and they are the 'creep effect'. The fact is—

The PRESIDENT: The Hon. Ms Bonaros, you are not calling him a creep, are you, because that is unparliamentary. You cannot say he is a creep; I won't allow it the Hon. Ms Bonaros.

The Hon. C. BONAROS: And if you were savvy with payroll tax terminology, you would know precisely what I am referring to when I reference the 'creep effect'. The fact is the government has continued to benefit from unexpected windfall gains and none of that has gone towards softening the blow for businesses doing it tough, and we have heard lots of accounts of that tonight. If we want businesses to thrive and survive, as members have expressed, then the least we can do is to ask for that independent report from the Productivity Commission.

I will just reference one article in particular that made headlines this week nationally in relation to GPs in particular. The quote is by the Coalition spokesperson, Anne Ruston, and others last week, which highlighted at the federal level that patients—and this is specifically in relation to the GPs that the Hon. Mr Wortley referenced—were 'feeling the pain' every time they went to pay at a GP reception desk:

Fees have reached the highest level on record as Medicare covers less and less of the cost. It has literally never been harder or more expensive to see a doctor.

All that is getting worse as a result of payroll tax in this jurisdiction. But, of course, that is only one group impacted.

If you think the closures that we hear about each week in the press of hospitality venues, which we have all loved in this jurisdiction, are not a result of payroll tax, then you are absolutely kidding yourself. Businesses are not asking for much. They are saying there is so much money that is coming in windfall gain to the government—unexpected revenue. Let's look at initiatives, incentives and reforms that can ease that blow. That is all that this motion calls for in terms of the work of the Productivity Commission, and I am pleased with the result of tonight's vote and call on—

Members interjecting:

The Hon. C. BONAROS: Based on the contributions given thus far, I can count—I am not an accountant but I can count—and urge not just the Premier but the Treasurer to take this issue seriously and give those businesses that are having a really hard time out there a leg up and undertake this inquiry.

Motion carried.