Payroll tax hike
Seventeen-thousand WA businesses will be slugged an extra $481 million in payroll tax over the next three years as the Barnett Government tries to plug a gaping royalty revenue hole that has sent the State Budget plunging to a record deficit.
Recurrent spending will exceed revenue by $1.3 billion in 2014-15 and a further $900 million in 2015-16, according to a mid-year Budget update that included $1.3 billion of savings over four years through a new policy to replace old, highly-paid public servants with younger, cheaper ones.
The Government also hopes to save $85 million on information technology by slashing spending by 15 per cent starting this year.
Premier Colin Barnett argued the projected $1.3 billion Budget deficit — the first in WA in 15 years and a turnaround from a projected surplus in May’s Budget of $150 million — was unavoidable because of a 40 per cent fall in the iron ore price in six months and a corresponding $1.8 billion fall in royalty revenue to State coffers in 2014-15 and $7 billion over four years.
“Can I say that under no circumstance could this deficit have been avoided, ” Mr Barnett said.
“It was completely beyond the control of the State and totally unanticipated.”
Opposition Leader Mark McGowan said there were no excuses for the Government’s “failures” of financial management. “The Government was warned over the past six years of the volatility of the iron ore price and not to rely upon it in the way that they have, ” he said.
“Instead, they ignored every single warning. They spent like drunken sailors and we’re now in the position we are in with a debt unheard of by WA standards and a deficit that is the biggest ever in the history of WA.”
The business community was dismayed by payroll tax threshold changes. Under the changes, 17,000 businesses with payrolls of more than $800,000, or about 10 employees, will pay more from July 1 because of a “gradual diminishing” of the payroll tax exemption threshold.
The impact is biggest for about 5000 companies with payrolls of more than $7.5 million, which will pay an extra $44,000.
Smaller payroll taxpayers will pay upwards of $2750 in 2016-17.
As part of changes, the Government has deferred for a year an election promise to raise the payroll tax-free threshold from $800,000 to $850,000 but Mr Barnett denied this was a broken promise.
Chamber of Commerce and Industry chief economist John Nicolaou said the changes would hurt small and medium-sized businesses and further harm business confidence, without making much difference to the State’s bottom line.
“It’s a tax on growth and really it’s a tax on small business overall, ” he said.
“The danger is the Government is chasing rats and mice rather than looking at bigger reforms that are needed to really transform the Budget.”
Treasurer Mike Nahan announced a new “workforce renewal policy” that involves 40 per cent of the salary of a public servant who retires or resigns being harvested by Treasury as savings. Agencies will retain only 60 per cent of that salary.
WA has the greatest proportion of public servants aged over 55 in Australia and Dr Nahan said the intention was to make the public service younger but also to reduce the number of public servants classified level 6 or above.
Level 6 employees are paid between $94,000 and $104,000 a year and have grown from about one-fifth of the public service in 2008-9 to one-third in 2013-14.
The policy will be different for certain “frontline” jobs including teachers, nurses, police and emergency services, where only 10 per cent of salaries will be clawed back.
Community and Public Sector Union WA secretary Toni Walkington said public servants were already struggling under the impact of rounds of cuts and efficiency measures.
“The Government expect people to swallow their spin that this will be an opportunity for young people but it is just another cut to public services, ” she said.
“There are no job opportunities or careers in a shrinking sector.”
© The West Australian
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