The NSW government revealed plans to cut payroll tax for thousands of businesses with the aim of creating jobs and stimulating economic activity following the Coronavirus pandemic. The new changes will come into effect from 1 July 2021.
So, how will this affect your business’s payroll tax calculation? Find out below.*
Why does a change in payroll tax matter?
Payroll tax is a significant expense for everyone, but especially for small and medium businesses. Payroll tax is the state and territory tax based on the total wages an employer pays employees in a month.
How is the tax threshold changing and how will it affect my business?
The payroll tax threshold in NSW is changing. For the financial year starting on 1 July 2021 and ending 30 June 2022, the threshold will increase by $100,000 to $1 million total.
RELATED: How to reduce your small business tax bill.
Why is there an increase in the payroll tax threshold?
Currently, the payroll tax in NSW is one of the lowest among all the states and territories within Australia. Only Western Australia and Victoria have a lower payroll tax threshold than New South Wales.
Payroll tax is a significant cost for small and medium businesses and can often be a hindrance to other opportunities and further business growth. It can also prevent businesses from further expanding their operations or hiring much needed employees.
What are the benefits of increasing the payroll tax threshold?
There are over 20,000 businesses in New South Wales. An increase of the payroll tax threshold to $1 million will help to reduce administration and payroll tax for them all.
It’s likely that the increase of the payroll tax threshold will save businesses in New South Wales up to $40 million in administrative tax costs. For most business owners this will translate to more available cash to expand their operations. It will also stimulate job growth as new opportunities will be created across the state.
RELATED: 10 things you didn’t know you could claim on tax.
It’s estimated that of the 20,000 businesses in New South Wales, over 7,000 are regional and suffered even more from the Coronavirus pandemic. The payroll tax threshold increase will bring the much needed relief to help boost regional employment rates while stimulating growth and recovery after the pandemic.
Ultimately, this means that small and medium businesses in New South Wales can stay competitive with other states and start to recover faster from the economic issues faced over the last twelve months.
Stay up to date with the key Australian tax dates with our handy infographic, so you don’t miss out on vital information.
*We endeavour to provide accurate material for Australian businesses consistent with Australian tax laws; however, this material is for reference only and is not designed to be, nor should it be regarded as professional advice.
