Mr DULUK (Waite) (17:47): I also rise to make a contribution ahead of the dinner break to this very important piece of legislation, the Payroll Tax (Exemption for Small Business) Amendment Bill 2018. I thought I might go through the main points of the bill first. It is a very important bill. It sets out our long-term agenda to reform business taxation in South Australia, which is so important and will always be the mantra of a Liberal government.
I have been a member of the Liberal Party for quite a few years. At almost every meeting I have ever been involved with or any policy discussion I have participated in, whether it be at a branch level, in the community or talking to small business, there is a desire for small business operators in South Australia not to be burdened by payroll tax. It does not matter which business it is.
The Hon. V.A. Chapman: And get rid of the Labor government.
Mr DULUK: Indeed. It does not matter where the business is, who the business operator is or what field of commerce they undertake, every single one of them, every man and woman lets us know that payroll tax is a burden on their business, a burden on employment, a burden on reinvestment and a burden on their ability to reinject capital into their business, which is so important for them to stay viable. Through this legislation, this government will ensure that from 1 January 2019 businesses in South Australia with annual taxable payrolls below $1.5 million will no longer be liable for payroll tax.
Businesses with annual taxable wages over $1.5 million will continue to receive a deduction of up to $600,000 from their taxable wages, consistent with the existing tax-free threshold. This allows a bit of scoping and movement in that scale. To smooth the transition to a standard rate of payroll tax, businesses with taxable wages between $1.5 million and $1.7 million will pay a tax rate that increases proportionately from zero per cent to at $1.5 million to 4.95 per cent at $1.7 million in taxable wages.
The benefit of this change is expected to see some 3,600 South Australian businesses reducing their payroll tax, which is so important, with individual businesses saving around $44,000 per annum. It is estimated that 3,200 of these businesses will be exempt from payroll tax, and 400 will receive a reduction in their payroll tax responsibility. We believe that these changes will remove a major disincentive for businesses and will create more jobs, employing more people. It is so important that this government is bringing on this legislation.
I am heartened that it is being supported by members opposite. It is good to see that in opposition, on their road to Damascus, the Leader of the Opposition is doing his listening post tour around South Australia. I am not sure if he has been to the Deputy Premier's electorate yet; he certainly has not been to mine. When he comes to my electorate—
Ms Bettison: He's been to mine.
Mr DULUK: He has gone to the member for Ramsay's electorate—no surprises there. But, when he does come to my electorate to meet with my small business operators—and I am really looking forward to when he does—they will actually say, 'Thank you, Leader of the Opposition, for getting on board with the government's changes in relation to payroll tax,' and quite a lot of our other initiatives.
South Australia is a transitioning economy, and one that is reliant on small and medium sized businesses. There is no doubt about it: we are a small business state. We do not have the large corporations, we do not have large—
The Hon. V.A. Chapman: We used to until Labor got in.
Mr DULUK: Up until 2002, we had quite a lot more ASX listed companies than we do today, but it is the reality that we live in. You can only play the cards that you have been dealt, and we want to increase our hand. We want to ensure that the cards South Australians are dealt are full houses and royal flushes, not a seven of spades—
The Hon. V.A. Chapman: Or jokers.
Mr DULUK: Not jokers. That is why we are bringing in this legislation. It does not matter if you are the IGA in Cleve or Jacobs Tyres and More in Blackwood, which is one of my very good local small business operators. South Australians like supporting locals, and that is why it is important that the government supports local businesses, just as South Australians do. This payroll tax reform is our measure to ensure that we do not hold back economic growth.
As I said, the government's plan to increase the existing threshold from $600,000 to $1.5 million is an important reform to ensure employing people is not a burden to those who create so much of our economy. We want more South Australians employed and more small businesses in our economy. Reform is vital to ensure we change the direction of this state. Labor repeatedly used state taxation to grow the size of government and pursue, in my view, an agenda which does not sit well with me.
When you are a high-taxing, high-spending government, you squeeze out private capital and private investment. By squeezing out private capital and private investment, you are actually squeezing out new opportunities for jobs, growth, and that investment that is so often driven by private enterprise. It is not government that drives innovation: it is private enterprise. However, these days are no more, and I am looking forward to living in a state where private industry can come to South Australia, and South Australia can be known as a low-cost jurisdiction.
South Australia was historically a low-cost jurisdiction. During the Playford era of government in South Australia, we were a low-cost jurisdiction with low energy costs, low input and affordable housing. That was a huge opportunity for businesses to come, as did the businesses of that generation and of the heavy manufacturing industry of the fifties and sixties. Companies like Westinghouse, Holden and Kelvinator and others that used to line Port Road saw South Australia as a low-cost jurisdiction.
There is an opportunity in a new, modern era for South Australia to once again become a low-cost jurisdiction. Our reform of payroll tax makes us one of the most competitive payroll tax jurisdictions in the nation. This can only be a good thing in creating competitive tension within the federation. We have seen the Queensland example where, 20 or 30 years ago, governments made decisions to make Queensland an attractive place to invest. I read in the Weekend Australian that by 2050 Brisbane is going to become a mega city on the eastern seaboard as Australia continues to grow.
Thirty years ago, South Australia was bigger than Brisbane. So, in the 60 years to 2050, they will become a mega city on the eastern seaboard, with the investment that that will attract, while we will still be playing catch-up. We have had 16 years of hard Labor and now we are going to have 16 years of fantastic Liberal government, but that still will not be enough to get to where we should be, namely, at parity.
By providing this exemption in terms of payroll tax, the Marshall Liberal government will be removing a major disincentive to businesses, creating more jobs and employing more people, as well as making South Australia a much more attractive place to invest in and grow businesses. With this important reform, sole traders and small businesses will have the confidence to grow and reinvest in their businesses. Why should we tax a small business operator for employing honest, hardworking South Australians?
We need to stop kicking our small businesses in the guts. I am really happy that one of these reforms will actually remove the payroll tax payable on apprentices, which the Labor government refused to remove at any time when they were in charge of the treasury bench. In that instance, we had a proprietor taking on an apprentice whose wage was subject to a payroll tax. What a disincentive that is to bring on a young person to create a skill in a workshop: 'Come on board, but we are going to tax you. We are going to tax you for taking on an apprentice.'
We know how hard apprenticeships are at the moment, so this is a very good benefit. This measure and our reform measures will benefit thousands of small businesses with payrolls of up to $1.5 million, as I said, as well as giving confidence to more than 130,000 microbusinesses and sole traders to create more jobs, knowing that they will not be hit with extra tax as soon as they employ additional South Australians. I think that is really important to note.
These reforms are not just about existing businesses that pay payroll tax, those between the $600,000 and $1.5 million threshold; they are about the tens of thousands of microbusinesses—the mum-and-dad businesses—that are maybe only turning over under $1 million. Maybe their payroll tax threshold is $100,000 this year because they are employing a couple of people, and then, as the business grows, they get up to $0.5 million in the payroll tax threshold. That means you have mum and dad and maybe an admin person doing the books for three days a week.
You might bring on another sales rep, and all of a sudden you are creeping over the $600,000 payroll threshold and saying, 'How do I make sure that I can continue to provide a good service to my client base without all of a sudden being kicked into that threshold where I need to start paying tax back to the government?' This happens for no other reason than that you have been a successful small business operator.
So the microbusinesses are actually the ones that will really benefit from this change in policy setting. This reform will remove the payroll tax burden for businesses employing an average of 25 employees, unleashing the growth potential of many of the fastest growing enterprises in our economy. It is businesses with under 25 employees that are, statistically, in the fastest growing segment.
South Australia's $1.2 billion annual payroll tax take remains one of the most uncompetitive in the nation. The tax-free threshold on payroll was the lowest in the nation under Labor, and it came along with a complex regime for calculating liabilities. In budget after budget, groups like Business SA, of course the then Liberal opposition and other industry groups would come to the government and say, 'Can you reform the payroll tax?' and at no point was there any desire by the former Labor government to amend and reform.
The member for Ramsay sat there in cabinet, and I would be keen to see if she ever put up a submission to the treasurer to reform payroll tax, because I know she is a big supporter of small business. I know she would have been one of the champions, but the ideologues opposite saw no reason to amend the most uncompetitive and complex regime of penalising employers in this state. The Liberal reform will reduce the payroll tax paid by small and some medium businesses by an estimated $44.5 million per year, incentivising them to create thousands of extra jobs for South Australians.
Importantly, this reform will deliver broad-based changes to the state's economic settings by improving our competitiveness and investment attractiveness, rather than attempting to pick winners amongst individual businesses. After 16 years of a stagnant economy, reform in how South Australians employ and do business is critical to ensuring that our state can move forward to a lower unemployment rate and to being a more prosperous state.
Sitting suspended from 18:00 to 19:30.
Mr DULUK: Picking up from where I was, these reforms are so important because we are continuing the legacy of what we said we would do in opposition and delivering on our promises. We are fixing up 16 years of Labor mess, incompetence and a lack of understanding of small business, and that is what we want. The people of South Australia want a government that understands them and understands their needs, and they know they will not get that from those opposite; they will only get that from us on this side because we understand small business. The Liberal Party will always be the party of small business and we will always look after those who employ and those who want to create a more prosperous state.
In a state full of agriculture and small business, the flow-on effects can be huge. With low prices for primary produce such as cereal crops and milk, payroll tax places a huge burden on the ability to generate a sustainable income for so many people. Being at the beck and call of nature is one thing; this government wants to ensure that all South Australian small businesses can flourish and focus on their output rather than on countless taxes. The Rann and Weatherill Labor governments spent the best part of the last 16 years crafting a stifling state tax regime that rips $4.5 billion from South Australian employers and consumers every single year.
In an economy that is reliant on small and medium businesses, we cannot expect employers to grow and create more jobs if government is constantly adding to their cost base, and especially to the cost of employing South Australians. I always keep coming back to this same theme: we understand that taxes such as payroll tax add to the cost base of doing business. We understand and believe that to help small businesses we need to do all that we can to remove that negative cost base.
Many small businesses are discouraged from employing an extra person if it means incurring extra tax liability and enduring the additional compliance costs that go along with it. In this period of stagnant wage growth, there would be no better way for government to boost wages and employment prospects for workers than to begin the gradual removal of payroll tax. On the one hand, this government is looking at removing gradually that burden of payroll tax and, on the other hand, we have legislation and we have a commitment to creating a productivity commission.
If we can increase the productivity of the people of South Australia through new policy initiatives from the productivity commission, as well as directly, from 1 January 2019, removing a payroll tax burden, on top of the fantastic achievements by the federal Coalition government in their personal taxation reform, I think we have a great opportunity in the coming months and years to really see a structural change in the nature of our business and taxation environment in South Australia, one that is generated towards growth. When we see growth in the economy, we will see a growth in wages for ordinary mum-and dad South Australians and Australians, and that can only be a good thing. A sensible way to do this would be to progressively increase the payroll tax threshold, and this is underway in South Australia.
As I said before, this will create competition within the federation and stimulate hiring and growth across Australia. It will simplify a tax system that is far too complicated and has been far too complicated for too many years.
I remember the days when I worked in accounting and then in banking for a big bank. In accounting, one of the big issues was payroll tax reconciliation at the end of each financial year and the compliance costs that went with that, and then the return to be lodged a couple of months after you worked out what your wage and compliance costs were going to be for any rebate as well.
Going forward, that is a compliance cost that South Australian businesses will not have to endure any more. That is a compliance cost that bookkeepers on a Friday leading up to 30 June will not have to do anymore, and they can spend their time adding value to their clients in a more efficient way, which is really important.
It is not just about a dollar figure that is the actual payroll tax levy but it is about the ability to remove red tape and regulation across the private sector. At a time when South Australia needs more jobs, greater investment and stronger growth, an uncompetitive payroll tax regime only serves to undermine confidence and make the situation harder for businesses to create jobs and employ more South Australians. South Australians need a simple tax system that is easy to understand and enticing for business. We need to tell Australia that we are open for business and that our economy has the ability to grow and thrive.
I was talking to the manager of the Torrens Arms Hotel on Friday at an electorate drinks with the member for Elder where we were talking to small businesses about what removing payroll tax is going to do. Sam McInnes was telling me that removing payroll tax on his business is going to go a long, long way to their employing more people, especially young people, in the hospitality sector. It is so important for young people to have jobs in the hospitality sector.
South Australia is a state abundant in smart and innovative businesses. We need to keep them here for others to learn from. How can we grow our state if small businesses have to leave due to high costs? We have certainly seen that over the preceding 16 years where jurisdictions, businesses and capital have been moving to lower cost jurisdictions across the federation. In the strong plan that we brought to the 2018 state election, the Liberal Party highlighted the need to keep young people here to build our future. Our future cannot be built from Sydney, Melbourne or Perth; it can only be built here in our streets, in our suburbs and in our towns. By letting businesses flourish, so can our state. We need to get out of the way of business and let them grow and build.
The previous Labor government failed to look after small business and failed to understand just how rising taxes affect them and, in turn, affect the whole state. This government is passionate about creating a better environment in which to live, work and play. Relieving the stress of payroll tax is just one way that this Liberal government can help our struggling small business sector prosper. After 100 days of solid governance, the Marshall Liberal government is committed to continuing to lower costs for all South Australians. Of course, from 1 July, several days ago, we saw a reduction in ESL bills and, in time, we are hopefully going to see councils come to the party, through our council rate-capping regime, and pass on savings to households in South Australia.
As the Minister for Energy and Mining reminded us in question time today, reforms to the energy market and our policy setting are also going to bring a saving of approximately $301 per year for the average South Australian energy bill. Together with savings on the ESL, savings on energy, savings on council rates through rate capping and savings for South Australians through payroll tax regime, we are listening and, more importantly, we are delivering. We are going to deliver a growth regime in South Australia that will see us become one of the best and most competitive places to live in the federation.