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Home Finance Economy 36,000 businesses to benefit from NSW reduced payroll tax expenses

36,000 businesses to benefit from NSW reduced payroll tax expenses

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The NSW government 2020-21 budget has revealed the state’s payroll tax threshold will increase from $1 million to $1.2 million benefiting 36,000 businesses.

The payroll tax rate will drop to 4.85 per cent from 5.45 per cent backdated to 1 July 2020. This is a temporary payroll tax rate decrease for FY2020-21 and FY2021-22.

NSW Treasurer Dominic Perrottet said that around 36,000 businesses will save on average $34,000 for the next two years due to this measure.  

“We’re making it easier to do business and letting the entrepreneurial spirit of our state soar, with less red tape and cutting $2.4 billion in payroll tax, and we are deepening our industrial capacity, supporting strong local industry with a big global outlook,” said Treasurer Perrottet.

3,500 businesses will pay no payroll tax at all because of the increased payroll tax threshold.

Payroll tax has been the state’s largest source of taxation revenue, contributing one-third of the total. The state government has collected $9.78 billion payroll tax revenue in FY2019-2020.

The NSW government hope the measure relieves payroll taxes burden and will encourage small businesses to increase their headcounts and to help NSW economic recovery during post-recession.

Current NSW payroll tax rate is among the lowest, which is only 0.1 per cent higher than the lowest rate 4.75 per cent in Queensland.

However, the $1.2 million increased threshold is not the most competitive among all states, which is only higher than Victorian’s $650,000 and Western Australian’s $1 million. Tasmania and ACT both have $2 million payroll tax threshold.

Since 14 March 2020, NSW total number of payroll jobs has dropped by 2.6 per cent, according to the ABS’s weekly payroll jobs and wages in Australia released on 17 November.

Having a competitive payroll tax rate will increase the state’s employment for its lower hiring costs compare to other states. 

2020-21 NSW Budget released on 17 November 2020 is projected to have $16 billion deficit in the current financial year with $29 billion dedicated to COVID-19 stimulus package.


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Shengyin Li
Shengyin Li is an intern journalist at Dynamic Business with a background in the corporate accounting and finance. She is interested in renewable energy, geopolitics and Asian economy