Business group slams Victoria’s payroll tax deferrals, calls for exemptions instead

Business groups have balked at the Victorian government’s $1.7 billion payroll tax deferrals, arguing the state should scrap the charges over the next year rather than delaying them.

Outlined as part of Victoria’s $3 billion business support package on Sunday, the deferrals mean businesses with payrolls up to $10 million will be able to defer payroll tax payments for the full 2020-21 financial year.

The measure, which is designed to boost business cashflow in the final months of Victoria’s extended COVID-19 lockdown, will build on more than $540 million in payroll tax refunds granted to businesses in the state last financial year, which have supported almost 20,000 companies.

But business groups say the Victorian government should have gone a step further and cancelled payroll tax altogether in 2020-21, arguing the employment tax will hinder the state’s economic recovery from the pandemic.

Ai Group’s Victorian head Tim Piper said the deferral will mean outstanding taxes will hang over businesses moving into 2021-22.

“We are extremely disappointed that the government has only deferred payroll tax. It means this debt will continue to hang over businesses, which may not have recovered enough by the time they need to repay the government,” he said in a statement.

“This should have been a waiving of payroll tax offered to businesses across the board. It would provide a much needed injection of confidence when they are looking to re-invigorate their businesses.”

Business groups have long opposed payroll taxes, which were first introduced as a revenue raising measure during World War II, and have campaigned for their winding back across each state and territory in recent years.

In recent years Victoria has sought to change the shape of its payroll tax regime, seeking to exempt smaller employers and those based in regional areas.

Currently, the payroll tax regime applies to businesses with annual payrolls of $650,000, with a monthly threshold of $54,166.

The rate is 4.85%, but is lower for regional businesses, which pay 1.62%.

However, the Victorian government has announced several deferrals and waivers throughout the COVID-19 pandemic.

This started in March, when the government unveiled a waiver for taxable wages up to $3 million in the 2019-20 financial year, including a deferral for the first quarter of 2020-21.

In July, the government extended the deferrals for the second quarter.

SmartCompany contacted Victorian Small Business Minister Jaala Pulford but did not receive a response prior to publication.

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