Page 369 - Week 02 - Tuesday, 4 March 2008

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Payroll Tax Amendment Bill 2007

Debate resumed from 6 December 2007, on motion by Mr Stanhope:

That this bill be agreed to in principle.

MR MULCAHY (Molonglo) (10.50): This bill seeks to harmonise the law on payroll tax across different jurisdictions to reduce the compliance costs for businesses that operate over several Australian jurisdictions. The bill does not seek to harmonise the rates and thresholds of payroll tax, which are still able to vary from state to state or territory to territory. This will allow the different governments of the various states and territories of Australia to adjust the tax rates and thresholds as required by revenue and other considerations. It will also allow tax competition, which goes some way to ensuring that individual jurisdictions do not become too tyrannical in their approach to taxation.

The purpose of this bill is to ensure that businesses operating in different jurisdictions face the same basic rules regarding payroll tax even if the rates and thresholds differ from place to place. I was fortunate to receive—and I appreciated it—a briefing on this bill from the Department of Treasury. They advised me that the change in revenue to the ACT government in this bill is expected to be negligible. Thus, we do not need to contemplate ancillary matters such as loss to revenue or surpluses or cuts to services in dealing with this bill.

The bill adjusts a few aspects of payroll tax in line with the operation in other states. This will ensure that businesses in those states do not have to learn a new set of laws and set up a new system of administration to operate in the ACT. It also ensures that ACT businesses will not have to learn a new set of laws and set up a new system of administration in order to expand their operations to other jurisdictions.

The bill exempts certain payments to employees from the calculation of payroll tax. In particular, certain payments to employees to reimburse them for costs incurred in the course of their work are exempted. These include payments for accommodation and payments for motor vehicle travel up to the amounts calculated under the formula in division 1A.3 of the bill. These exemptions seem to me to make a great deal of sense, as the payments affected are essentially reimbursements of expenses rather than genuine salary payments or diverted income arrangements. Indeed, it would not have been unreasonable to allow general exemption for reimbursed payments of all kinds. However, I am satisfied that the exemptions in this bill will cover those areas of greatest importance.

The bill also addresses the matter of exemption for payments for services performed in another country. This is an issue particularly prevalent in the ACT. The bill amends section 2D of the act to exempt employers from payroll tax on wages paid to employees for services performed in another jurisdiction or to employees who are in another jurisdiction for six months or more. This is a sensible amendment and will ensure that employers are subject to ACT taxation only in circumstances where their employees and the services performed by their employees have a sufficient connection with the ACT.

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