State Budgets have a history of being a little less than interesting, especially from a tax and business point of view. In recent years however there has been a real effort to assist business and reduce compliance costs through bolder tax initiatives. The new Liberal State Government seems to be continuing that trend with its first Budget handed down last Tuesday 4th September.
In amongst the swipes at the previous administration, these days common to all incoming Governments ("cleaning up the enormous mess left to us by 16 years of Labor..." and so on) was some very real tax reform. Continuing on from Labor's efforts to abolish commercial Stamp Duty, the Marshall Government set its sights on Payroll Tax, another traditional revenue source for State Governments that counter-intuitively stifles business growth and innovation. From 1st July 2019, businesses with annual taxable payroll of less than $1.5 million will be exempt from Payroll Tax altogether, and those with payrolls between $1.5 million and $1.7 million will pay a lower rate.
The previous Labor Government had attempted a degree of Payroll Tax reform through an annual rebate system for certain businesses, however this was a temporary measure and still required ongoing Payroll Tax record-keeping and compliance. Raising the exemption threshold not only saves businesses from paying the tax, it also frees them of the compliance costs associated with managing it. It's a great step in the right direction, although the problem of disincentivising businesses that are close to the payroll threshold still exists. It's just been moved up a little. Hopefully a total removal of Payroll Tax is somewhere on the radar for the future.
As a further tax relief measure, the tax-free threshold for Land Tax will be increased from 1st July 2020, to $450,000 from the current level of $369,000. Further, a new rate of 2.9% will be introduced for properties valued at between the current top tier of $1.2 million and $5 million. It's estimated that up to 50,000 property ownerships will experience some benefit from this measure, with up to 8,000 more paying no Land Tax at all.
With a range of infrastructure investments, a reduction in the Emergency Services Levy and a very modest estimated surplus of $48 million, there is plenty of good news here for the future of business in South Australia. There's not a lot in the kit for State Governments to draw upon, and the bold willingness in recent years of State Governments to reduce or eliminate a couple of the big ticket items in Stamp Duty and Payroll Tax is to be applauded.