Western Australia’s new Labor government has turned to big business in its bid to repair the state’s diabolical finances, imposing a payroll tax levy on large corporations, while gold miners will be hit with higher royalties.
For five years starting on July 1, employers with a nation-wide payroll between $100 million and $1.5 billion will be taxed at a rate of six per cent, up from 5.5 per cent.
Those with a payroll exceeding $1.5 billion will be taxed at a rate of 6.5 per cent.
The increases are expected to trim $435 million from net debt over the forward estimates and affect 1200 business or 0.5 per cent of the state’s corporate world.
“I understand fully they’re not going to appreciate it,” Treasurer Ben Wyatt told reporters.
The Business Council warned the levy could make larger companies reconsider creating new jobs in WA, while the gold royalty rate hike would undermine investor confidence in the state and erode its competitive edge.
The royalty changes are expected to shave $392 million off total net debt, which is projected to peak at an eye-watering $43.7 billion in 2019/20.
That compares to $41.1 billion in February’s pre-election financial projections statement.
The state’s books are tipped to finally return to surplus in 2020/21 after a $3.039 billion deficit this financial year, which is roughly in line with the PFPS estimate.
Premier Mark McGowan reiterated his government had inherited the worst set of books in the state’s history and had to make tough decisions.
“It hasn’t been easy – we always knew it wouldn’t be,” Mr McGowan said.
The premier said he wanted to protect struggling families, which had already been slugged an almost $440 per year increase in utilities and other fees in June’s mini-budget, and small-to-medium enterprises.
Mr McGowan said he was confident the right balance had been struck – but still apologised to gold producers and corporate giants.
“It is not fair to leave the task of fixing the mess just to everyday West Australians,” he said.
“It’s only fair we ask the state’s largest companies and largest industries to help recover the huge revenue hits to our budget.
“I acknowledge that for large corporations and gold miners, we will be forced to breach the commitments we made before the state election. We are sorry about that.”
Opposition Leader Mike Nahan described it as a “budget of betrayal”, saying Labor broke election promises to reduce debt and not increase taxes, add new taxes or cut frontline services.
“One of the key themes of the McGowan government was to be a job-creating premier … payroll tax is a tax on jobs,” Dr Nahan said.
“He has failed his own clearly set KPIs.”
Mr Wyatt, Australia’s first Aboriginal treasurer, said he was determined to meet the surplus target, but noted the mining royalty-dependent and GST-deprived state was vulnerable to dramatic revenue stream changes.
He said he expected WA’s credit rating would remain the same.