A payroll victory for small and medium business

A payroll victory for small and medium business


Many of you might not know that ATB Director Michael Mehkitarian is also a member of the NSW Business Chamber Economics Committee!

This year Michael and his fellow committee members successfully lobbied the NSW Government to increase the payroll tax threshold to at least $1 million per annum.

Payroll tax threshold

This win for small and medium business means the payroll tax threshold will increase to $1 million over the next four years.

“It’s our duty of care as the peak body for business in NSW to ensure our State’s businesses remain competitive,” Michael said.  “As it stands, NSW has the third lowest threshold in the country. Increasing the payroll tax threshold to $1 million would translate to cross-border competitiveness. It would also enable SME’s – particularly in regional NSW – to grow their businesses without being penalised for hiring more staff.”

Prohibitive payroll tax liability

One of the major barriers to growing a small and medium business is the (almost) prohibitive payroll tax liability. The more employees a business hires – or the more hours it gives its existing employees – the more it has to pay the ATO in tax.

How it works…

‘Payroll tax is a state tax applied to the wages of a business once they have exceeded a payroll tax threshold. Currently, the payroll tax rate in New South Wales is 5.45 percent, with a threshold of $750,000 for the 2017-18 financial year. Payroll tax is calculated on the amount of wages a company pays per month, with monthly thresholds calculated per number of days

New payroll tax threshold

The new payroll tax threshold will increase by $100,000 to $850,000 next year (from 1 July 2018), rising to $900,000 in 2019-20, $950,000 in 2020-21 and $1 million in 2021-22.

One of the major reasons Michael and his colleagues pushed for reform to the payroll tax threshold was to stimulate business growth by removing the biggest block to progress.

For many SME’s, the threshold is a disincentive for growth due to the significant jump in tax payable once a business’ monthly wage threshold has been exceeded.

In addition to the increased tax payable once a business has more than $750,000 in wages, there are also increased administrative costs associated with ensuring compliance.

Australia Business

A $250,000 increase in the threshold represents a significant number of new full-time or part-time positions or traineeships and apprenticeships that come with no extra tax.

The NSW Business Chamber estimates the new threshold limit could reduce tax administration costs to small and medium businesses by up to $40 million.

Interesting fact: Small and medium enterprises account for around 70 percent of the NSW workforce.

Which is the second-highest productivity per hour worked in Australia.

Contact a member of the ATB team if would like help understanding the new changes to the payroll tax threshold, or want to find out how it could benefit your business.