PAYROLL TAX INQUIRY
Survey Results
Findings
•
the business, with the remainder of savings spent on
reducing debt.
Background
A
pproximately 64 per cent of businesses indicated that they
would consider hiring more people if they did not have to
pay payroll tax;
• A third of all businesses said payroll tax had a significant
impact on hiring decisions or prevented hiring altogether;
•
• A quarter of all funds saved would be re-invested into
S
urvey results indicate 23 per cent of businesses that paid
payroll tax in 2015 made losses that same year;
• A round 46 per cent of money saved through payroll tax relief
Payroll tax is a general purpose state and territory tax assessed
on payments by an employer to its employees. The tax applies
to wages and salaries and employee benefits such as bonuses
and fringe benefits.
An increase in the payroll tax exemption threshold would likely
increase employment and business investment in the WA
economy, with estimated benefits considerably outweighing
the cost to the State.
would be spent on increasing employment; and
Payroll tax threshold increase
Likelihood to employ
64%
Yes
26%
Unsure
10%
No
Around 64 per cent of businesses
surveyed said they would employ more
staff if they did not have to pay payroll tax.
1
Methodology
An online survey comprising 11 questions was developed to
identify potential business behaviour associated with a change
in the payroll tax threshold. The questions were structured in a
way that captures the predisposition of a business to respond
in a certain way to an increase in the exemption threshold.
Marginal propensities to increase employment, to re-invest into
the business and to reduce company debt were measured by
industry type. Businesses which would be exempt from payroll
tax under an increased threshold were analysed separately to
identify any differences in the payroll tax influence on their
hiring decisions. Stakeholders were also given an opportunity
to express their opinions on the payroll tax and how it
influences their business decisions overall.
Future actions of businesses exempt
from the payroll tax
If the payroll tax exemption threshold was to increase from
$850,000 to $950,000, businesses that would be newly
exempt from the tax are largely small firms employing less than
20 people. Overwhelmingly, these businesses indicated that
payroll tax affects their hiring decisions. Importantly, 13 per
cent of respondents stated that payroll tax even prevents them
from hiring more staff.
Hiring decisions
All surveyed businesses
Percentage of respondents
by total payroll tax bill
$6,001 - 10,000
Payroll tax prevents
me from hiring
Payroll tax
has no impact
on my hiring
decisions
13%
$3,001 - $6,000
3%
$1 - $3,000
> $100,001
5%
12%
27%
Payroll
tax has a
significant
impact on
my hiring
decisions
26%
$10,001 $20,000
20%
16%
17%
21%
40%
Payroll tax has a
marginal impact on my
hiring decisions
$20,001 - $50,000
$50,001 - $100,000
CCI’S PAYROLL TAX CALCULATOR
VISIT PAYROLL.CCIWA.COM TO FIND
OUT HOW MUCH YOU COULD SAVE
Savings
Savings
Where saved tax dollars will be spent
Cents in the dollar spent on employment
Reduce debt
In this study, the marginal propensities represent how many
cents in every dollar of tax savings businesses would spend
on increasing employment, reinvesting into the business or
reducing debt.
Increase
Employment
25%
Marginal propensity to increase employment in this study
includes employing more staff and increasing the number of
hours for the existing employees.
46%
Results indicate businesses are most likely to increase
employment (46 cents per dollar saved) and invest back into
the business (29 cents per dollar saved). They were least likely
to reduce debt (25 cents per dollar saved).
29%
Re-invest
Results by industry
Marginal propensities for each industry differ, with the construction sector most likely to increase employment (63 cents in
the dollar), followed by Information, Media and Telecommunications (60 cents in the dollar) and Professional, Scientific and
Technical Services (59 cents in the dollar). Industries with the highest marginal propensity to employ are also some of the largest
contributors to the WA economy. This fact once again supports the preposition that the payroll tax reduces the potential benefit
businesses could bring to the economy.
Results by industry
Construction
Increase employment
Information Media & Telecommunications
Re-invest
Professional, Scientific & Technical Services
Wholesale Trade
Reduce debt
Agriculture, Forestry & Fishing
Rental, Hiring & Real Estate Services
Manufacturing
Accommodation & Food Services
Electricity, Gas, Water & Waste Services
Public Administration & Safety
Education & Training
Arts & Recreation Services
Other Services
Retail Trade
Administrative & Support Services
Mining
Transport, Postal & Warehousing
Financial & Insurance Services
Health Care & Social Assistance
0%
10%
20
30%
40%
50%
60%
70%
80%
90%
100%
3
Respondents characteristics
The survey was distributed through CCIWA to all its members and 138 responses were received. The sample represents a
proportion of the businesses paying payroll tax in WA. Ninety of 138 respondents provided complete answers, identifying their
potential behaviour should the exemption threshold be increased. These responses were used to estimate marginal propensities
to increase employment, invest and reduce debt.
The majority of respondents are medium size businesses (54 per cent) employing between 20 and 100 people. Small businesses
constitute approximately 46 per cent of the total number of businesses in the sample with four per cent being microbusinesses
employing less than five people.
Almost half of businesses pay more than $50,000 in payroll tax - 21 per cent contribute between $50,000 and $100,000 in payroll
tax and 26 per cent more than $100,000.
Importantly, 12 per cent of businesses fall under less than $3,000 payroll tax contribution, which indicates that these businesses
would be exempt from payroll tax under an increased threshold.
4