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- 31 August 2006
Pay-roll Tax Amendment (Supporting Jobs and Small Business) Bill
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Page: 1265
Second Reading
Debate resumed from 13 October 2005.
Mr DAVID CAMPBELL (Keira—Minister for Water Utilities, Minister for Small Business, Minister for Regional Development, and Minister for the Illawarra) [10.30 a.m.]: The Government is opposed to the Pay-roll Tax Amendment (Supporting Jobs and Small Business) Bill, and I will explain why. It is a bit hypocritical of the Opposition to bring forward a bill of this nature when payroll peaked at 8 per cent when the Coalition was last in office.
Ms Peta Seaton: Shame!
Mr DAVID CAMPBELL: It is a shame. I note that the shadow Treasurer says it is a shame that they peaked at 8 per cent under the last Coalition Government, and that is why it is hypocritical of the Opposition to introduce this bill. The Coalition had payroll tax at 8 per cent when it was in office.
Mr SPEAKER: Order! The honourable member for Southern Highlands will have the chance to reply in the appropriate way. She will not continue to call out while the Minister is addressing the House.
Mr DAVID CAMPBELL: The Coalition had payroll tax in this State at 8 per cent when it was last in government, and it is now at 6 per cent through the dogged, determined, hard policy work of the Labor Government. The payroll tax cuts introduced by the Labor Government have ensured that New South Wales remains an attractive location for businesses to operate. Payroll tax has been progressively reduced to its current 6 per cent. That is a saving to employers of more than $900 million in 2006-07. It is important to point out that less than 10 per cent of all businesses in New South Wales are liable for payroll tax. Therefore, the overwhelming majority of all businesses in New South Wales pay no payroll tax; certainly the overwhelming majority of all small businesses pay no payroll tax in New South Wales under the targeted and appropriate policies of this Government.
The Government has also raised the payroll tax threshold from the Coalition's $550,000 to a more sensible and more appropriate $600,000. The Government has also introduced payroll tax exemptions for trainees and apprentices, as we seek to encourage businesses to train people. As the honourable member for Wollongong says, that is a commendable thing to do_to encourage people into training roles as part of the drive to improve the skills base of the State, particularly in regional economies such as the Illawarra. We have also made sensible and deliverable changes to payroll tax that help all those who are liable.
In stark contrast, the Opposition's proposal that we are debating_to increase the threshold_is not targeted. It assists businesses only in a very small payroll range. The Opposition bill fails to outline how its policy, which, according to members opposite, will cost $282 million, is to be funded. So, we see the Peter meter in action again—more expenditure but no process to fund it. It is laughable that the bill's title contains the words "supporting jobs and small business" when the Opposition's reckless spending commitments would send small businesses to the wall, leading to higher unemployment. If this proposal were adopted, the cost would be reduced government services for the people of New South Wales, a familiar theme of this Opposition's adventures into public policy-making. Small business would be much happier if the Opposition were to support it in a regime of increasing interest rates. Members of the Opposition are silent on this. They will not ask John Howard or Peter Costello to do something about interest rates. They have been totally silent on the issue of increase fuel costs.
Mr SPEAKER: Order! Members of the Government will cease interjecting across the Chamber. Members on both sides of the House will come to order and allow the Minister to make his contribution.
Mr DAVID CAMPBELL: As the honourable member for Strathfield and the honourable member for Wollongong interject, the Opposition just does not stand up for New South Wales. It certainly does not stand up for the small business sector in regard to interest rates and rising fuel prices. The gaggle on the other side of this Chamber has not learnt anything about the importance of fiscal discipline and has fumbled around in Opposition. The Opposition's over commitments have climbed to more than $20 billion on that Peter meter. That is more than half the annual State budget. The Opposition is fiscally irresponsible, and this bill demonstrates that fiscal irresponsibility. The Opposition's crazy spending proposals would rip New South Wales' triple-A credit rating to pieces and would send the State bankrupt.
Unlike the Opposition's confused stab in the dark policy, the Government's new payroll tax scheme is totally targeted at businesses that relocate to or expand in regions of New South Wales with higher than average unemployment—regions such as the far North Coast and Northern Rivers. One would think the honourable member for Lismore would be supporting the Government's policy that targets investment for new jobs in the far North Coast region. On 23 February this year the Premier announced a $95 million payroll tax incentive scheme to encourage business investment and job creation in New South Wales.
The program will provide a payroll tax exemption worth up to $144,000 a year for the first three years for businesses investing in areas of New South Wales with higher than average unemployment. Those businesses will also receive a payroll tax discount in years four and five. The initiative assists small- to medium-sized businesses looking to establish or expand in New South Wales. The payroll tax incentive will be available for start-up businesses in their first year of operation, businesses relocating from interstate or overseas—there are many of them—and expanding businesses liable for payroll tax for the first time.
The clear message to the community is that New South Wales is open for business. This Government is determined to encourage investment and boost employment. New South Wales continues to enjoy historically low unemployment rates, but the business community has identified payroll tax as a priority issue. This incentive program of the Government will directly appeal to businesses interested in creating employment. In just 12 months this Government has cut many State taxes, including the abolition of vendor duty. It has made an initial 5 per cent reduction in workers compensation premiums, to be followed by a further 10 per cent cut in workers compensation premiums.
That initiative was warmly welcomed, as the honourable member for Illawarra and the honourable member for Wollongong will recall, by the Illawarra Business Chamber. As the honourable member for Wollongong said, it was celebrated by the Illawarra Business Chamber. The Government has also delivered a fair and responsible deal for clubs. It has raised the land tax threshold from $330,000 to $352,000, exempting an extra 12,000 to 13,000 small investment property owners from land tax. The payroll tax incentive I have been discussing will be directed at businesses seeking to relocate or expand in the following regions: Richmond-Tweed and the mid North Coast, Illawarra and Wollongong, Fairfield-Liverpool, Newcastle, Central Coast, outer south-western Sydney, Canterbury-Bankstown and the Hunter.
Eligibility for the exemption will not be affected by improved employment statistics in the nominated regions. The Government's sensible payroll tax incentive scheme stands in stark contrast to the Opposition's unfunded policy adventure. The New South Wales Government has also led a strong argument to the Commonwealth for an increased share of the goods and services tax. The honourable member for Southern Highlands was screaming and screeching earlier about the Illawarra Business Chamber. The Illawarra Business Chamber, as part of Australian Business Ltd, has warmly and strongly supported the Government's call for the Commonwealth to allocate more GST to New South Wales.
Mr SPEAKER: Order! The honourable member for Southern Highlands will have the opportunity to reply to the debate.
Mr DAVID CAMPBELL: As always, the New South Wales Opposition refuses to stand up for New South Wales and to stand up to its bosses in Canberra to call for a greater share of GST revenue for New South Wales. The number of services that funding would support across New South Wales, whether it be in the small business sector or in training, is measurable. That $3 billion would be a great support to the State's economy. Our strong economy, with our triple-A credit rating, means we have a strong environment for hardworking small business people who often put in 24 hours a day running their businesses. Our strong economy gives them the opportunity to put in that effort and make a quid to support their families. The recklessness in the bill would undermine those efforts of the small business sector. It is vandalism of the State's economy for the Opposition to run around with all these unfunded promises. Whether they are core promises or non-core promises, if I can quote from the Prime Minister's get-out-of-gaol card, remains to be seen.
Small business in New South Wales knows that the New South Wales Government supports it strongly. That is why so many small business operators will take part in events during Small Business September, which starts on Friday. About 300 events are to be held around New South Wales, with more than that 100 different sponsors and partners hosting those events. There will be a number of networking events, business facilitation events and events that will encourage people to look at their business management skills. Such events will bring people together to look at trade opportunities and the opportunities that go with expanding business as a result of that. The Small Business September initiative is another example of how the New South Wales Government demonstrates to our community that the Government means business and that New South Wales is open for business.
Mr THOMAS GEORGE (Lismore) [10.39 a.m.]: The object of the Pay-roll Tax Amendment (Supporting Jobs and Small Business) Bill 2005 is to amend the Pay-roll Tax Act 1971 to increase the tax-free threshold for payroll tax from $600,000 to $850,000, which will take effect from 1 July 2007. Now I can understand why small businesses in this State are struggling. The Minister for Small Business stood in this House and claimed that the Government had lifted the land tax threshold. But who brought every landholder in New South Wales into the land tax bracket? Which government was it? It was none other than this Government. For 12 months the Government took the money, then increased the threshold to big-note itself. The Minister for Small Business, as part of the Carr-Iemma, Government says that the Government removed the vendor tax. But who introduced it in the first place? Who introduced the club tax? Again, it was the Carr-Iemma Government and, again, the Government is big-noting itself for lifting the club tax.
Let us consider workers compensation. I would like the Minister for Small Business to produce documentation to prove to me that workers compensation premiums have been reduced for small businesses in this State. I have asked a number of small business operators in my electorate to provide documentation that their premiums for payroll tax have been reduced, but no-one has been able to provide me with that evidence. I challenge the Minister for Small Business to produce the figures of any small business that has had its payroll tax reduced overall. As the House knows, I have been involved with the Northern Co-operative Meat Company Limited at Casino. It is all declared in my interests. I was a director of the company. For years I have been complaining about payroll taxes in the border areas where the company has been brutalised year after year because of the ineptitude of the Government, which promised 5 per cent payroll tax in 1997 when the Labor Party came to power.
Mr David Campbell: Get your facts right. It was 1995.
Mr THOMAS GEORGE: I correct that. If it was 1995 the Government has done nothing for 11 years to honour its promise of reducing payroll tax to 5 per cent. Instead the Government has offered payroll assistance to people in start-up businesses. It has not helped one person who is paying payroll tax today. Which businesses are benefiting from the Government's payroll tax assistance today? I challenge the Minister to produce the names of businesses that are benefiting, but I doubt whether he will be able to. The trouble with the Government is that it does not support current businesses. It wants to look after only new businesses.
Mr SPEAKER: Order! The honourable member for Wollongong will come to order.
Mr THOMAS GEORGE: Businesses in this State that are currently struggling to meet their payroll tax and workers compensation premiums do not get any benefits from the Government's decisions. The bill is important because it would lift the threshold for payroll tax from $600,000 to $850,000. It will support businesses that need support, current businesses that could employ extra staff if the payroll tax threshold were lifted. A company in Lismore that employs 40 painters is currently paying payroll tax. It does a lot of government work, but it has to compete with painting contractors from over the border in Queensland where the payroll tax threshold is not a problem. The Queensland contractors come into New South Wales, quote against New South Wales contractors and get the jobs—government jobs. New South Wales companies cannot lower their prices because of our payroll tax threshold. There is no support for New South Wales companies. The Government should reconsider its position and support the bill instead of knocking it. Employers in this State who pay payroll tax need support, and they need it now.
The Minister for Small Business went to Kyogle following the disaster at Norply to offer assistance. I was there this week and I have been writing to the Government to get help for the Kyogle Neighbourhood Centre, which has helped small businesses and has tried to be there to assist individuals. But, no, we cannot get any support for them from the Government. What support does the Minister suggest the Government is providing to country and regional New South Wales? The next time the Minister intends to be in my area I will supply him with a telephone so that he can ring me to tell me when he is coming into my electorate. It is a shame. The Minister for Small Business stands in this place and tells us what the Carr-Iemma Government is doing and, in my opinion, not doing for the business community in this State. I am proud to stand in this place and support the shadow Treasurer in her presentation of the Pay-roll Tax Amendment (Supporting Jobs and Small Business) Bill 2005. I call on the Government to reverse its decision. I urge the Government to support this very important bill.
Mr ANTHONY ROBERTS (Lane Cove) [10.46 a.m.]: I support our shadow Treasurer and the honourable member for Lismore, who spoke to the Pay-roll Tax Amendment (Supporting Jobs and Small Business) Bill 2005. Out of all the taxes in this country, payroll tax has to be the most stupid because it is, as we all know, a tax on jobs. A Liberal-National Coalition government will cut payroll tax by increasing the New South Wales payroll tax threshold to $850,000 at a flat rate of 6 per cent in line with Queensland's threshold. The Coalition policy is about giving New South Wales businesses an even break. Under the Coalition policy New South Wales businesses will pay less than the equivalent business in Queensland. I commend our shadow Treasurer, who has the vision, the leadership and the ability to take New South Wales into the black, and attract jobs and investment back to New South Wales.
Smaller businesses will receive the greatest proportional benefit. Some 22,000 businesses that have payrolls over the threshold will save up to $15,000. A Coalition government would cut payroll tax revenues in 2007-08 by $282 million, which would bring more than 4,500 businesses under the threshold. The money they save by paying reduced payroll tax can be put back into their businesses to employ more people. As we know, the New South Wales Labor Government has extended payroll tax liability to include bonuses, gifts and other financial benefits to staff as wages for the purposes of payroll tax. In December 2004, 28,267 businesses were liable for payroll tax, which is an increase from 26,730 in December 2003.
I will compare and contrast the payroll tax paid under this high-taxing Labor Government with the policy of the Coalition, which will result in increased employment and growth in New South Wales. For example, under the payroll tax policy of the Labor Government companies with a $700,000 payroll pay $6,000, but under a Coalition government companies with a threshold of $850,000 will pay zero. Companies with a payroll of $800,000 currently pay $12,000 in payroll tax, but they will pay zero under a Coalition government. Companies with a payroll of $1,000,050 currently pay $27,000 in payroll tax, but they will pay only $12,000 under a Coalition government.
Companies with a payroll of $2 million currently pay $84,000 in payroll tax, but they will pay only $69,000 under a Coalition government. Companies with a payroll tax of $3.4 million currently pay $168,000 in payroll tax, but they will pay only $153,000 under a Coalition government. Australian Business Limited [ABL] states that it costs businesses in New South Wales $2,627 for every person they employ, taking into account workers compensation premiums and payroll tax. On average New South Wales employers are paying an additional $1,100 per employee in payroll tax and workers compensation premiums than employers in Queensland. New South Wales is not competitive. The cost of employment for businesses in New South Wales is 71 per cent higher than it is in Queensland and 19 per cent higher than in Victoria.
Ms Noreen Hay: Point of order: The honourable member for Lane Cove is misleading the House. The member says that the Opposition has a policy. We all know the Opposition has no polices.
Mr SPEAKER: Order! The honourable member for Wollongong cannot dispute an issue by taking a point of order. If she feels aggrieved, she may make her point by making a personal explanation or contributing to the debate.
Mr ANTHONY ROBERTS: After 11 years, coming up to 12 years, of neglect of the small business sector by the Carr-Iemma Government, it is time to get the monkey off the back of small business in New South Wales. Under Labor, New South Wales continues to lag behind other States. New South Wales used to be the engine room of the Australian economy. Now we are the millstone. The major reason for this State's poor economic performance is the incredible burden of red tape and regulation that Labor has inflicted on businesses. As the shadow Treasurer, the honourable member for Lismore and the honourable member for Hornsby can confirm, when we talk to small business owners they tell us how much they are suffering under this Government.
A Coalition government will reduce the red tape imposed on businesses in order to stimulate economic growth and create employment opportunities. Our six-point plan will steer the State's staggered economy onto the road to recovery by reducing red tape and introducing accountability measures to ensure that New South Wales businesses have the ability to prosper. It is estimated that New South Wales businesses spend about 200 hours each year filling in forms to comply with regulations. The State has recorded some of the lowest business competencies of any State or Territory for the last seven to eight quarters. Under this Labor Government there is no end to this situation in sight.
As the honourable member for Lismore said in his speech, the Government's plan—which it has put together with a bit of wire and sticky tape as it trundles along, trying to get re-elected—does not help country New South Wales. The State Government's focus is on New South Wales: Newcastle, Sydney and Wollongong. With respect to the honourable member for Wollongong, the Coalition has the full support of the Illawarra Chamber of Commerce. We have the support of the New South Wales Chamber of Commerce and most chambers of commerce throughout the State. In relation to payroll tax the ABL said:
Payroll tax continues to be a burden on NSW businesses. NSW has the highest payroll tax rate in Australia … and the Budget projects accumulated increases of $3.5 billion going forward.
The ABL continued:
The payroll tax burden is increasing—and it makes no sense to increase the burden on business when NSW is the slowest growing state in Australia, with the highest business taxes and the highest unemployment.
The ABL has done its work. It said that Victoria cut payroll tax in its State budget. Victoria is looking at a sensible way forward because it knows it has to compete with other States, such as Queensland. It has no competition from New South Wales under this Government. I hope that after March next year the State will have a new Treasurer who will bring jobs and economic growth back to New South Wales. A Coalition government will support not only metropolitan and regional New South Wales but also rural New South Wales.
Mrs JUDY HOPWOOD (Hornsby) [10.54 a.m.]: It gives me great pleasure to support the Pay-roll Tax Amendment (Supporting Jobs and Small Business) Bill 2005, which was introduced by the honourable member for Southern Highlands. I emphasise "supporting jobs and small business", which is what the Government should be doing by way of legislation and initiatives. The object of the bill is to amend the Pay-roll Tax Act 1971 to increase the tax-free threshold for payroll tax from $600,000 to $850,000. The increase would take effect on 1 July 2007. By way of explanation, the bill states:
An employer is not liable to pay pay-roll tax for a financial year if the total taxable wages and interstate wages paid or payable by the employer during that year is less than $850,000.
In relation to an employer with a payroll of $850,000 or more the bill states:
If the total taxable wages and interstate wages paid or payable by an employer during a financial year is $850,000 or more, the employer is liable to pay as pay-roll tax for that year the amount of dollars calculated in accordance with the following formula …
I will not detail the formula at this stage. The essence of the legislation is to remove red tape and lessen the burden on small business. Over the past four years I have worked closely with my local chambers of commerce at Hornsby and Galston. There is nothing more important for those chambers of commerce than to lessen the burden on small business and encourage their growth, so that they are able to operate their businesses more efficiently. They want small business to have scope for growth so that they can employ more young people and others. Currently small businesses are in a stranglehold as a result of the taxes imposed on them and the amount of red tape. Small business owners spend many hours each year filling out forms, which takes them away from their businesses.
This morning I spoke to the president of the Hornsby Chamber of Commerce. I speak to him regularly. As I have previously reported to the Parliament, I spend a great deal of time visiting businesses in the company of chamber of commerce members and I am involved in the Pollies for Small Business Day. I am well in sync with the need to remove any excess hindrance upon businesses to grow, thereby assisting the State's economy. Small business is being hampered by this Government as a result of the amount of impost it places on them. Greg Bepper, the president of Hornsby Chamber of Commerce, welcomes this legislation with open arms. He has daily conversations with small business owners who tell him they are up to their necks in red tape. They would love to put more money back into their businesses and have the ability to employ more staff. At the moment they are reluctant to do so.
Mr Bepper has stressed to me the plight of small businesses with fewer than five personnel. They will have as much paperwork as large businesses. The owners and managers of small businesses with fewer than five personnel often work on the floor with their employees. For example, Brian Endycott is the owner of Thyme Square, a coffee shop in Hornsby with fewer than five employees. He works in the shop making coffees and assisting with sales, but he also has the impost of paperwork, red tape and payroll tax. He would benefit 100 per cent from the introduction of this legislation, so I urge the Government to take on board the provisions of the bill. He would love to put money back into his business and increase his business, but he is being held back.
The Government now has the opportunity to support legislation that will exempt 4,500 businesses from having to pay payroll tax and provide a reduction of $15,000 for each of the 22,000 businesses that currently are liable to pay payroll tax. Both measures would be a welcome relief for small businesses. No doubt this legislation will create jobs, improve competitiveness and support small businesses. As we all know, small businesses across the nation are the backbone of our economy. It is important to provide all possible relief for small business people.
I cite some recommendations of Australian Business Ltd [ABL] published in the "NSW Mid Term Report 2005." ABL has set out an action plan that it advocates the Government should adopt to promote business in this State. The Government should establish an expenditure task force under the chairmanship of a Minister for economic reform to cut the increase in government expenditure that is putting additional taxation pressure on New South Wales businesses, thereby making them uncompetitive against businesses in Queensland and Victoria. The Government should also commence a four-year program to cut payroll tax from 6 per cent to 5.5 per cent and increase the tax-free threshold to $700,000. At that level, the rate would still be above Queensland's rate of 4.75 per cent and 5.25 per cent in Victoria, but the Government will need to forgo approximately $600 million of the projected $3.7 billion increase in payroll tax revenues.
The Government should also further invest in infrastructure, negotiate with the Federal Government to develop a simplified, unified workplace relations system, and return the benefits of the workers compensation scheme surpluses to businesses in the form of lower premiums. The performance of the workers compensation scheme has improved in recent years and the benefits should be passed on. The Government should also engage constructively with business on labour force and skills issues. The Government should establish and implement a coherent strategy to address the current skills crisis and future skills needs. ABL recommends as a matter of urgency a review of the Occupational Health and Safety Act with particular focus on reforming the duty of care. The current application of duty of care is having significant and unforeseen consequences, including many smaller businesses giving up on occupational health and safety legislation because compliance is far too difficult.
The Government should also amend the draft workplace fatalities legislation by adopting ABL's five-point plan. There is no doubt that payroll tax deduction is a key plank in ABL's platform for regenerating the health of the New South Wales economy. For the reasons I have stated, it is essential for this Government to wholeheartedly endorse and support the Pay-Roll Tax Amendments (Supporting Jobs in Small Business) Bill that is before the House. Governments should be constantly looking for opportunities to reduce taxes and provide an economic return to businesses. That is essential for the development of the small business sector and the provision of opportunities and benefits for individuals and families. As the shadow Minister has stated, a dollar in the hands of a fellow citizen will be better spent than a dollar in the hands of government, and government should impose upon itself the highest level of rigor and performance testing to ensure that government waste and duplication are eradicated and that savings are put into essential front-line services that are expected by citizens and the needy, and into tax relief to promote more jobs and economic activity.
Under Labor, New South Wales is the highest taxing State and relies heavily on payroll tax—a tax on jobs—to produce revenue to pay for a bloated, top heavy, non-productive bureaucracy. It is amazing that this Government has got away with a top-heavy bureaucracy that is taking away resources from front-line services. The existing payroll tax rate exacerbates the taxation burden borne by business and creates more obstacles for decent hardworking business owners. I urge the Government to vote in favour of the bill and to waste no time in doing so.
Mr ANDREW STONER (Oxley—Leader of The Nationals) [11.04 a.m.]: There is no doubt that payroll tax is a tax on jobs. When payroll tax in New South Wales is out of kilter with payroll tax arrangements in other States, there will be a resultant loss of jobs to New South Wales, a loss of businesses and an exodus of families from this State. Clearly, that has transpired in recent years. An ever-increasing number of jobs, businesses and families have been fleeing to other jurisdictions, in particular to Queensland. What is the Government's plan to combat this? The Government simply does not have a plan. The rate of economic and employment growth in New South Wales is the worst in the nation, despite an abundance of wealth and resources in this State.
Although the Government does not have a plan to deal with the loss of business to this State, the Opposition does. The Liberal-Nationals Coalition's plan is detailed in the bill that has been introduced by the honourable member for Southern Highlands, the Pay-Roll Tax Amendments (Supporting Jobs and Small Business) Bill, which I commend to the House. Effectively the bill will provide relief to 4,500 businesses in the form of an exemption from payroll tax. Such relief will enable businesses to employ more people in New South Wales and assist in improving our economy. By raising the payroll tax threshold from $600,000 to $850,000, the legislation will save the average business approximately $15,000 per annum. The policy is good for businesses in New South Wales, good for the creation of jobs in New South Wales, and will therefore benefit New South Wales communities.
The Government may wish to draw attention to its recent payroll tax policy that provides for exemptions to be doled out to particular areas of this State, but guess what? Although the Government claims that the selected areas were based on unemployment rates, they equate roughly to the metropolitan areas of this State. As the Leader of The Nationals, I make the point that regional and rural areas of New South Wales suffer unacceptable levels of unemployment. With the exception of the North Coast, the only break the Government has provided in payroll tax was for business in "NSW"—that is, Newcastle, Sydney and Wollongong. This Sydney-centric Government's version of "NSW" is Newcastle, Sydney and Wollongong whereas The Nationals believe that "NSW" stands also for the North Coast, the South Coast, and areas west of the Great Dividing Range. Clearly there are many rural communities with unacceptable levels of unemployment that should be receiving the benefit of a payroll tax break.
The Liberal-Nationals Coalition will include the provisions of this bill as part of the Coalition's legislative reform agenda, and the Coalition in government will provide relief to businesses in rural and regional areas of New South Wales as well as to businesses in metropolitan areas of this State. In short, while the Labor Government might be prepared to stick its head in the sand as businesses flee to other more favourable jurisdictions and take with them jobs and families, the Federal Coalition Government has assisted families to move by the provision of a grant of $5,000. The contrast could not be more stark: This Labor Government, through its high taxation regime and inattention to the provision of basic services, is encouraging people to leave New South Wales. That is not good enough. I commend the Pay-roll Tax Amendment (Supporting Jobs in Small Business) Bill to the House.
Mr RICHARD TORBAY (Northern Tablelands) [11.08 a.m.]: I also support the bill introduced by the honourable member for Southern Highlands to alter payroll tax arrangements in New South Wales. The object of the bill is to increase the tax-free threshold from $600,000 to $850,000. Payroll tax is often thoroughly debated, particularly in the lead-up to an election, but the history of payroll tax in New South Wales reveals that, by its nature, it is a significant revenue raiser for the operations and activities carried on in New South Wales. Indeed, payroll tax has been the instrument by which business had made very significant contributions to revenue in New South Wales.
We must be fair about this. Regardless of the political persuasion of the party that is in power, the State is constantly being asked to improve arrangements in all areas in New South Wales. We must be fair when we seek to reduce tax revenue and we must fully understand its impact. I am also persuaded by the argument to be competitive. It is important to be competitive. If we are to compete locally, we must ensure that New South Wales is competitive with other States and Territories as well as the international community.
For many years New South Wales has been out of step in relation to payroll tax. This well-considered bill would make New South Wales competitive with other States and Territories. I know there will always be pressures with respect to revenue. The Government asked what we would like reduced if we were to reduce the tax take. As I represent regional and rural New South Wales I wish to put another perspective on that. A considerable number of overdevelopment issues are raised constantly in metropolitan New South Wales. Development and growth opportunities are called for in rural, regional and remote parts of New South Wales.
I would like to see not only an increase of the payroll tax threshold, which would help small business; I would like to see also a differential payroll tax rate between country and city. That would create an opportunity and a culture in which businesses could locate, expand and be competitive in regional, rural and remote parts of this State, as they have done in other States. The Minister for Small Business has been a regular visitor to the northern part of the State. He announced a number of initiatives and opportunities that will create incentives to do things in regional and rural areas. I hope the Commonwealth is made aware of the fact that payroll tax, zonal tax and other issues are incentive-based programs.
Using taxation is an important lever to create opportunities in regional, rural and remote parts of the State. I hope that is something the State and Commonwealth governments can achieve by working together. It must be remembered that New South Wales is a State and not a city. It is important that opportunities are developed broadly and equally across the State taking pressure off much of the infrastructure the metropolitan area clearly is struggling with, and will continue to struggle with, regardless of who happens to govern. If 700 to 1,000 people a week continue to arrive in the metropolitan area, there will be constant and increasing pressure on this State's infrastructure.
Earlier other honourable members said that payroll tax was an unusual tax in that it was a tax on employment. I acknowledge the contributions of Opposition members who said that it was one of our highest taxes. Whilst I recognise that payroll tax has existed for a considerable time, historically its percentage has been trending down in New South Wales. I acknowledge that, as I have looked at the figures. When the Coalition was last in government in New South Wales payroll tax was at 8 per cent, which is significantly higher than it is today. My contribution is not about—and it should not be about—apportioning blame historically; my contribution is about good policy. This bill goes part of the way towards creating good policy.
I would like to see a differential rate that actively encourages growth and relocation, decentralisation into regional communities—using not only payroll tax but also an incentive-based scheme as the Government has done in other areas, in particular, in education—and locating special government services in parts of the State that otherwise would have struggled. Education and health are two classic examples of the decentralisation of services. Payroll tax and other taxation incentives at both levels of government would be another welcome opportunity. This bill will help small businesses and it will reduce red tape. I commend the bill to the House.
Mr GREG APLIN (Albury) [11.14 a.m.]: I support the Pay-roll Tax Amendment (Supporting Jobs and Small Business) Bill and note that it was introduced in September 2005. As usual, it has taken considerable time for these ideas to drift through to the consciousness of the Government. On occasion the Government has seen fit to adopt aspects of the Coalition's policy, albeit in a discriminatory fashion, as in the Premier's statement of February this year. But more of that in a moment. When the honourable member for Southern Highlands introduced the bill she said in her second reading speech:
In introducing the Pay-Roll Tax Amendment (Supporting Jobs and Small Business) Bill 2005, … the object of this bill is to amend the Pay-roll Tax Act 1971 to increase the tax-free threshold for payroll tax from $600,000 to $850,000, with the increase to take effect on 1 July 2007. The legislation offers the chance to support legislation that will exempt 4,500 businesses from having to pay payroll tax at all, and a reduction of up to $15,000 for each of the 22,000 businesses that are liable for payroll tax. This bill will create jobs, improve our State's competitiveness, and support small businesses, which are the backbone of our economy.
It is clear that under this Labor Government, New South Wales, the highest taxing State, relies heavily on payroll tax, which as we all know is a tax on jobs, or a tax on employment. Payroll tax produces revenue to pay for a rather bloated bureaucracy. As we heard from members who spoke earlier, in many cases that creates obstacles for decent, hardworking business owners. Far too often we hear that small businesses spend up to three hours a week on the red tape associated with payroll tax, which in itself is unproductive. However, when called upon to have a good, hard look at reducing payroll tax and providing incentives to business before the State budget this year, the Premier said:
I would love to come out and announce a 1 per cent reduction in payroll tax, but I can't. Financially, that would not be responsible at this point in time. Until our financial capacity improves, much as I would love to announce a general reduction, it's not prudent.
Clearly, the management of this State is not in the hands of people who wish to create incentives, stimulate the economy and create a climate that would lead to increased employment and increased taxes through the various forms of tax that are already imposed. The rejection of any action on general payroll tax angered business groups because they had been pushing for a cut to encourage investment in this State to boost the sluggish economy. That predicament was intensified by the Victorian budget, which announced a reduction in payroll tax from 5.25 per cent to 5 per cent over two years. In the electorate I represent on the southern border of New South Wales, the discrepancy between the two rates is felt keenly by businesses, particularly smaller businesses that have to decide on which side of the border to operate.
Clearly we want to retain businesses in New South Wales; it should be the powerhouse State and the leading State in the country. Unfortunately, the comparisons often result in people crossing the border because it is cheaper to do business, and create and run a business, in Victoria than it is in New South Wales. More to the point, there are incentives and a climate that encourage them to do so. That is the indictment we level at this State Government. Honourable members would be aware that the payroll tax rate of 4.75 per cent in Queensland is lower than the rate in New South Wales. Our State has the most sluggish growth rate of any other State in the country. In the last financial year it was only 1.1 per cent, and economic growth has consistently stayed below 2 per cent a year over the past four years. At the time of the budget the unemployment rate was 5.6 per cent—one of the highest rates in the country—compared with the national rate of 5.1 per cent. Of all the States only Tasmania is worse, with an unemployment rate of 6.6 per cent.
The retail trade has had moderate growth but it has suffered months and months of weakness. When it comes to building approvals we bear the brunt of the downturn in New South Wales, thanks to this Government's policies. In trading terms dwelling approvals for April fell by 2.9 per cent, which is more than in any other State, and at that time added up to 15 consecutive months of decline. I will address that issue in respect to Holbrook, which lies slightly to the north of Albury. Holbrook is currently located in the electorate of Wagga Wagga but from 24 March 2007 it will be in the electorate of Albury.
The Hyne timber mill in Holbrook suffered unfortunate job cuts during June and August of this year. The mid-August announcement that a further 41 jobs would be cut from the Holbrook timber mill was, of course, a huge blow for mill workers, for Holbrook and for Greater Hume shire. The layoffs were in addition to 62 jobs lost in June this year. Why do I raise this problem? As I have mentioned, people living in the southern parts of the State already have the comparisons with Victoria to contend with when it comes to payroll tax. Let us consider the words of the Construction, Forestry, Mining and Energy Union organiser for southern New South Wales and the Australian Capital Territory, Mr Ken Miller. He said, "Holbrook must feel crushed." Why did he express that sentiment? He stated:
… the four by two house framing industry (three- to four-bedroom brick veneer home) was in a slump and as a result the timber has been piling up at Holbrook and at Tumbarumba.
Why is the industry in a slump? Purely because of this State Government's policies when it comes to development and the construction of housing. We find that the approvals for dwellings are at their lowest point since Australian Bureau of Statistics figures were collected. That is the problem that then filters through to businesses, such as the Hyne mill at Holbrook. That is the problem confronted by businesses in country regions.
I find it laughable that the Minister would announce that New South Wales is open for business, but he had the hide to stand in this House and proclaim that only this morning. He had the hide to tell us that this Government has reduced payroll tax in "certain areas". Clearly, discrimination is alive and well in New South Wales, discrimination that chooses particular areas of interest to the Government and excludes those areas where it has no hope of succeeding. Perhaps it is in aid of preferences, perhaps it is in aid of gaining votes, that this Government is motivated to introduce selective payroll tax. Clearly, when it comes to places such as Holbrook and Culcairn it has no interest in creating a climate for encouraging developers, or encouraging businesses to remain afloat and employ people. After all, that is one of the jobs for this Government. Let me quote the words of a developer, who clearly states what I believe to be the case in regional New South Wales. The developer said:
New South Wales is stuffed for developers.
Referring to legislation being considered by the Government that would allow developers to build on environmentally sensitive land, he said:
I see little hope that this legislation will eventuate.
The point I want to make here is that New South Wales certainly is stuffed for developers. I made the point earlier this year in speeches in this place that the message being sent out by this Government is that New South Wales is, in fact, closed for business when it comes to looking at operations such as the residential retirement village in the town of Henty in the Riverina, which lies midway between Albury and Wagga Wagga. The Government effectively opposed that development, and opposed it in such a fashion that it took the form of vilification of those who had been involved in attempting to assist that development in the town of Henty.
First in the firing line were, of course, the developers, but close behind them came the Greater Hume Shire Council. The fact that the local people wanted to see a $14.6 million development in their town, the fact that it would create up to 90 jobs and the fact that it would house the older generation who had grown up in the Henty and Riverina region and allow them to settle close to their families, contacts and community of interest, was not of the slightest interest to this Government. This Government was interested purely in retaining its preferences with the Greens and making sure that no development would occur on rural land, even when this was not particularly environmentally sensitive land, given that it was a commercial golf course.
The developer in question took the issue to the Land and Environment Court, and I am very pleased to say that commonsense prevailed and this issue was settled in favour of the development with costs awarded against the Government. The point I make here is that when the Government claims that New South Wales is open for business—whether it is the Minister for Primary Industries and Minister for Natural Resources, the Attorney General or the Minister for the Environment—its actions are wholeheartedly opposed to promoting development in country areas. So, it is little wonder that they oppose this bill, which seeks to raise the threshold for payroll tax. The message clearly coming through is that this Government does not support country regions because it has no incentives to create and encourage development, and it certainly is not looking at extending its discriminatory approach when it comes to payroll tax. I urge honourable members to search their consciences and to put New South Wales back where it should be, at the top of the pile in Australia, and to vote for this payroll tax amendment supporting jobs and small business.
Mr STEVEN PRINGLE (Hawkesbury) [11.25 a.m.]: It is a pleasure to support the bill introduced by the honourable member for Southern Highlands, a bill that will obviously significantly benefit the people of New South Wales. Indeed, I believe this is one of the more important bills to come before the House during this session of Parliament and, quite frankly, every member on this side of the House is amazed that the Minister for Small Business has not expressed support for it. I point out that this State recently hosted Small Business Week when most members of this House were out supporting their local businesses and trying to encourage them to do more, to be more competitive and to create more sales. No doubt honourable members are aware of data from Australian Business Ltd [ABL] that indicates how badly this State is performing. This time last year ABL produced a Government report card on State competitiveness, and State competitiveness received a "D". The comment from ABL was:
Queensland outperforms NSW on every measure. High payroll tax and Workers Compensation premiums are hurting small business. … Need to increase funding for key infrastructure. Work on reducing business compliance burden needed.
I am sure that a "D" from ABL is hardly surprising to any member of this House. ABL also focused on payroll tax as an example of the overall cost facing businesses in New South Wales. It used the example of a 15-employee business spending $5,000 per month on rent and requiring three employee parking spaces. The company owned two cars, each worth $20,000, and a van valued at $50, 000, all of which were included in the calculations. ABL research demonstrated just how uncompetitive New South Wales is compared with Queensland. The sum total of State taxes and charges in New South Wales was $21,604 versus a mere $2,010 in Queensland—an unbelievable difference. That is why honourable members should support this bill. I remind honourable members that ABL provided these figures.
Earlier I referred to Small Business Week. I was fortunate to work for Miller's Turf Supplies, a small- to medium-size business. That company, which employs about 12 people, is very innovative. Greg Miller won the title of Young Australian Farmer of the Year and I am pleased to report that he is a Hawkesbury resident. At his 220-hectare business premises he grows a variety of different grasses including kikuyu and Sir Walter buffalo grass. He also produced a new grass that needs very little water and is salt tolerant. He is in the business of exporting turf to Malaysia and to other Australian States. He is working very hard to generate jobs and income for the people of the Hawkesbury and for the people of New South Wales, but his competitiveness is severely hampered by this Government's payroll tax. That payroll tax makes him uncompetitive in some areas as against the Queensland system. It is difficult to believe that the Minister for Small Business is opposed to this bill. The honourable member for Southern Highlands got it right, and I commend her actions today. I suggest that all honourable members should support the bill in order to make a difference, and so that New South Wales regains its competitiveness and its position as the premier State in the nation.
Debate adjourned on motion by Mr Tony Stewart.
Pursuant to sessional orders business interrupted.
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