Opinion Piece: Business NSW CEO Daniel Hunter

**Daniel Hunter is available for media interviews. Contact: 0429 993 822**

It started off in 1927 as a NSW child endowment scheme to supplement the minimum wage.

Although discontinued by NSW, payroll tax was revived and turned into a national scheme during WWII – and was only supposed to be a temporary measure.

But instead of becoming a distant memory, payroll tax has grown up into a bureaucratic monster that is eating our state’s small and medium businesses.

Ninety-eight years on from when this scheme first started, this tax is now taking more than $12.3 billion (2023-24) from NSW businesses. That number is set to grow to $16.5 billion in 2028-29.

Almost seven in ten businesses told Business NSW recently that payroll tax has prevented them from employing staff.

The tax disproportionately impacts small and medium-sized businesses - the backbone of the NSW economy - by creating an artificial ceiling on workforce expansion.

Young and unskilled workers suffer the most.

With youth unemployment in NSW sitting at 9.2 per cent as of July 2025, it’s clear that businesses are being deterred from taking on new employees.

State tax reform is in the NSW Government’s remit. However, any significant change requires cooperation and support from the Federal Government.

Former Premier Dominic Perrottet learned this the hard way when he attempted to reform stamp duty.

The Federal Government provides no immediate incentives for state governments that cut taxes. This leaves state governments unable to take bold action, even when the economic case for reform is overwhelming.

Business NSW is calling for a comprehensive review of payroll tax as part of a broader federal-state financial reform agenda.

This is something that should be central at the Economic Reform Round Table talks in Canberra today and tomorrow.

If the major parties were serious about supporting small and medium business – as they claimed they were during the Federal Election campaign – then they would commit to comprehensive tax reform.

In the absence of this, Business NSW is advocating for several urgent payroll tax adjustments in NSW.

First, we must reduce the payroll tax rate from 5.45 per cent to below 5 per cent, increase the payroll tax threshold to at least $1.5 million to ease the burden on businesses and index payroll tax annually to CPI to prevent bracket creep.

If indexed to the Wage Price Index (WPI) since 2020, the threshold would be $1.38m in 2024 terms, rather than the current $1.2m, and if indexed to some award wages, it would be closer to $1.49m.

The NSW Government should also introduce a regional payroll tax rate in line with Victoria (1.21 per cent) to ensure NSW businesses remain competitive with other states, especially on the borders.

These changes would provide immediate relief to businesses, stimulate regional job creation, and help modernise the state’s economic framework.

If these changes were coupled with the passing of the Workers Compensation Legislation Amendment Bill 2025 – which is currently before NSW Parliament – we would see a massive economic and productivity boost in our state.

The justification for payroll tax no longer exists.

Australia’s modern social security system ensures that those in need receive support, yet businesses are still penalised for hiring workers.

Governments continue to rely on this tax simply because it is lucrative, despite overwhelming evidence that it discourages employment and stifles economic activity.

Payroll tax is always a concern for Port Macquarie based disability provider WEmpower, for example.

Company owner Rashid Mahbub said if there was a reduction in payroll tax, they would be able to invest more in staff training and productivity boosting measures such as Artificial Intelligence and improving their internal customer management systems.

“Our competitors who have less staff are at a greater advantage because they have less overheads as a result of payroll tax,” he said.

Excel Logistics owner Kieran Tanner told us recently any reduction in payroll tax “would help offsetting the increasing costs in power and insurance”.

The business community has made its position clear: payroll tax reform is long overdue.

NSW businesses should not be punished for hiring staff, investing in technology, or expanding their operations.

It is time for the NSW and Federal Governments to work together to create a modern, fairer tax system that supports growth rather than stifling it.
  
About Business NSW

Formerly the NSW Business Chamber, Business NSW is the peak policy and advocacy body which has been representing businesses in NSW since 1826. We represent almost 50,000 businesses.

MEDIA CONTACT: BEN PIKE – 0429 993 822