Payroll tax hikes ‘not a smart move’

20 September, 2017

MAK Water CEO Andy Byk says the impact of payroll tax increases announced in the state budget this month would be felt by his business, which designs, builds and services water treatment plans across the country and is based in Malaga.

“Payroll tax will have an impact on our business; it will cost us more to employee people. It’s a negative tax and it doesn’t make sense to be taxing employers for providing jobs, in my perspective, and to be increasing that makes even less sense,” Byk says.

The progressive payroll tax scale will be implemented from July 1, 2018, and will see employers with payrolls between $100 million and $1.5 billion pay a higher tax rate of 6 per cent on the proportion of their payroll above $100 million.

Businesses with a payroll exceeding $1.5 billion will also pay a higher tax rate of 6.5 per cent on the proportion of their payroll above $1.5 billion.

“It’s not a smart move to drive, expand and grow businesses in WA,” says Byk, a mechanical engineer, MBA holder and Harvard Business School Advanced Management Program graduate.

“We are going to have to recoup those costs back by increasing our prices or reducing the amount of labour we put into products so. We either charge more, make less profit or we potentially make a loss. That’s the economics of the discussion.

Byk says the company, which employs 50 people, could face a double hit if the proposed gold levy impacts miners.

From January 1, 2018, a tiered royalty rate will be introduced that will see the royalty rate for gold increase to 3.75 per cent when the price of gold is over $1200/ounce, up from 2.5 per cent.

The rate will remain 2.5 per cent when the price is under $1,200/ounce. In addition, the current exemption for the first 2500 ounces of gold produced each year will be removed from July 1, 2018 for miners who produce more than that per year.

“The gold industry in the last 18 months or so has picked up, which is obviously why the Government has targeted them for extra tax,” Byk says.

“We’re involved with probably a dozen or so gold mining companies dotted around WA and it’s nice at the moment to see that they are expanding and growing.

“What happens to them as a result of increasing tax rates in gold mining is their business, but potentially it will have an impact on us; if the projects are marginally feasible now, they might become not feasible and therefore they won’t be proceeding.”

► Find out how the changes to payroll tax will impact your business – view CCI’s Payroll Tax Calculator now.