Queensland most tax-effective state for SMEs: Report

Queensland remains the most attractive state for SMEs when it comes to state taxes, a study by Pitcher Partners has found, as a major bank tips the resources states of Queensland and Western Australia will outperform next year.

The accounting firm’s report of state taxes looked at what two businesses would pay in their first year of operation. One business had $1.1 million in wages, the other $5.5 million.

Combining the Workcover premium, payroll tax, land transfer duty and land taxes, state taxes in Queensland for the smaller business totalled $135,745. New South Wales was next at $159,257, while Victoria was third at $166,465 and South Australia was next at $182,301.

Sydney-based Pitcher Partners tax partner John Ross says Queensland’s leadership could lure migrants to the state, and others interstate.

“Queensland has always had a bit of a pull,” Ross says, largely because of its weather, the state’s aggressive stance in encouraging businesses to set up shop, and current big spending on infrastructure projects.

But don’t expect states to match Queensland any time soon. Ross says states are stretched for funding so they’re holding on to their revenue sources for dear life. (An increase in the GST would also help the states, but is unlikely, he adds.)

“We’re not seeing other people replicating reduced taxes in other states,” Ross says.

“Some states are higher because they say, we have a higher consumer market here, so if you want to do business here, you have to pay more.”

His advice? “If you’re wanting to set up a business, and can sell goods online, move to Queensland.”

The report comes as ANZ tips a widening divergence in the performance of Australia’s big four states – NSW, Victoria, Queensland and Western Australia – next year.

The bank says prospects are brightest for Queensland and Western Australia.

“In the short-term, Queensland will remain constrained by both the impact of the higher AUD on its tourism sector but also the slower than expected recovery from the floods, with ANZ not expecting Queensland coal production to return to pre-flood levels until mid-2012,” it says.

“But with (by far) the second largest pipeline of private investment work, Queensland is well placed to grow strongly over 2012-13.”

“In contrast, the New South Wales, Victorian and Tasmanian economies are expected to slow next year. NSW and Victoria have a relatively small investment pipeline and appear more sensitive to the current (slightly) restrictive level of interest rates.”

“NSW, which accounts for 42% of Australia’s financial and insurance sector, is also particularly vulnerable to the recent gyrations across global financial markets.”

“A current strong reliance on the residential building cycle, whilst boosting growth in 2011-12, is shaping as a notable risk to the Victorian economy over 2013.”