Payroll tax puts the breaks on local business

SA Business Journal  •  Policy  •  Payroll Tax
Anthony Caldwell, Darcy Matthews
Tuesday, March 26th 2024

Richard Billings, Managing Director of RT Diesel, is eager to take on more apprentices but the rate of payroll tax is preventing him from doing so. 

Payroll tax in South Australia is a state-based levy calculated on wages paid by employers to their employees. Those with an annual payroll exceeding $1.5 million (equivalent to approximately 15 full-time employees at the median average wage) are subject to a levy ranging from 0% to 4.95% per annum. Businesses with a payroll over $1.7 million must pay the full 4.95%.

Payroll tax has easily become our biggest challenge since we became obligated to pay it a little over a year ago,” said Mr Billings. It consumes a significant portion of our income because it’s tied to wages paid, regardless of profits, making the decision to hire more staff unnecessarily difficult.”

RT Diesel is a family-owned heavy vehicle mechanic with workshops in Lonsdale and Whyalla.

My team is well-compensated,” said Richard. As heavy diesel mechanics, they often work in remote areas, mines, and challenging conditions. We face fierce competition for their skills from larger competitors. They deserve every cent they earn.”

Richard stressed that payroll tax comes at a considerable cost, not only to his business but also to his region.

Under the current system, there could be four aspiring heavy diesel mechanics from the Upper Spencer Gulf who might have to reconsider their career choice if they want to stay in the region, seek employment with larger businesses that can afford the tax burden, or relocate to regional Victoria where businesses face significantly lower payroll tax rates.”

Situations like this can have long-term implications for skills shortages, which are already severely impacting small businesses like mine, especially in regional areas,” Mr Billings added.

RT Diesel isn’t the only business expressing concern. According to the South Australian Business Chamber and William Buck’s December Quarter Survey of Business Expectations, there has been an increase in the number of businesses subject to payroll tax in the 2022 – 2023 financial year, driven by a rapid rise in wages.

The Chamber wants payroll tax to work better for South Australia and benefit businesses like RT Diesel. In a proposal to the State Government ahead of its 2024 – 2025 budget, the Chamber has recommended several improvements to the system including a 50% tax reduction in regional areas and an exemption on wages paid to trainees, apprentices, and new graduates; reforms Richard Billings says will boost economic prosperity. 

It’s critical the government carefully examine the proposal. This proactive approach would encourage me to keep growing my business, train new people and create higher paying jobs, helping to improve the economy of my region,” said Mr Billings. 

The South Australian Business Chamber’s proposal outlines six suggestions aimed at making the levy more conducive to economic growth and addressing the current skills crisis, forming part of a more comprehensive submission made to the government ahead of the state budget. 

Authors

Anthony Caldwell

Manager, Marketing, Media, Communications

Darcy Matthews

Policy Officer
Recent Articles
10 Jun 2024
Expressions of interest open for small business energy grants
6 Jun 2024
When is the right time to establish a Safety Committee?
6 Jun 2024
The importance of a good business plan and great mentor
6 Jun 2024
Dispute resolution with the Small Business Commissioner
6 Jun 2024
Updated: Another budget, another missed opportunity
6 Jun 2024
Why Luke Rogers is building his foundations in South Australia