Excessive revenue collection, bureaucratic obstruction and unnecessary red tape is stifling business growth, innovation, wages and jobs growth in NSW. Regional businesses in particular are suffering from both a high revenue take in the form of Stamp Duty, Payroll Tax & Land Tax and obstruction by NSW Government Departments.
Revenue NSW collected a total revenue of $29.4Bn in FY16/17 from these regressive and anti-business duties and taxes. In regional areas this revenue take is disproportionately more damaging to small businesses because of lower annual turnover and higher risks of lost income due to drought, fire and floods.
In the past 6 months many NSW regions have experienced all three disasters and businesses have reported significantly lower trading as a result. Consider the example of a small regional business that buys its own premises, employs new staff who relocate and commensurately increases its operation and payroll to over the current threshold of $900,000 pa.
Buying commercial premises the business pays between 3-5% stamp duty on the purchase. A modest building bought for $2m attracts stamp duty of approximately $95,000. The business will also pay ongoing Land Taxes at 1.7% of the land value – say $3,400 annually, CPI adjusted forever.
Key staff relocating to work in the business will purchase homes in the area at say $600,000 each and pay 3% or $18,000 each to Revenue NSW. In the event three families relocate the revenue take is a total of $54,000.
If the business is mildly successful and employs 15 people (including contractors) at an average salary of $80,000/pa then the overall payroll is $1,200,000. As this exceeds the threshold by $300,000 Revenue NSW collects 5.45% or $16,350 per year, every year after that.
A small business trying to grow its operation under the above theoretical but entirely possible scenario would pay Revenue NSW a collective total of $168,750. NSW Government policy on revenue collection, particularly in regional areas is punitive and regressive. Especially so when the culminative impact of the above taxes & duties are taken into consideration. Despite recent increases to payroll tax thresholds this remains a tax on employment and disincentive to create jobs.
A variety NSW State Government Agencies are well resourced to conduct bureaucratic obstruction by constantly generating a need for more compliance and the creation of red tape. NSW State Government public service had a total workforce of 330,000 in 2017. That equates to 1 public servant to every 14 people of working age in the state.
A good example is the NSW Planning system that adds to the cost of housing through delays caused by confusing and irrelevant regulations meant for city areas. The recent introduction of flawed mapping for coastal wetlands based on out of date aerial imagery has resulted in time delays and unnecessary costs for simple applications on building sites free of any vegetation.
In recent disturbing news NSW Environment Minister, Matt Keane has proposed stringent emissions rules for rail freight that will potentially shut down businesses, cost regional jobs, resulting in higher freight costs and more trucks on regional roads. A clear example of ill-conceived, ideologically driven policy causing a significant negative impact on regional businesses.
Revenue NSW who administer Land Tax have recently moved to enforce their own interpretation of how the “foreign investor” surcharge is levied. New rules now mean any land owned via trust deeds that do not specifically exclude foreign owners will be levied the surcharge even if there are no foreign owners. Many unsuspecting regional landowners who are Australian citizens will be charged hundreds of dollars in levies or face thousands of dollars in legal fees to amend trusts due to a concocted legal technicality.
The Berejiklian Coalition Government was given a mandate at the 2019 election to promote business and make NSW No.1 again. As part of this coalition the NSW Nationals have the responsibility of protecting the interests of regional voters many of whom work in primary industry and small business. High levels of state revenue collection, bureaucratic obstruction and red tape need to be remedied by this State Government immediately.