It’s Time to Move State Government Taxes from the Profit and Loss to the Balance Sheet

Australian businesses are being crippled by state government taxes—WorkCover, payroll tax, and other levies that keep piling on. These costs are not just "operating expenses"; they are obstacles that businesses have to finance indefinitely. It’s time we stop accepting this as normal.?

The truth is, state government taxes are so large and burdensome that many businesses can no longer absorb them in their profit and loss. Our clients are feeling the pinch and struggling to keep up with these never-ending financial demands while trying to stay competitive. Inflation is already a battle, but state taxes are adding fuel to the fire, and it’s not sustainable.

Payroll Tax and WorkCover: The Silent Business Killers

Once you cross the payroll tax threshold—and with inflation, it’s not hard to do—it feels like you’re in a never-ending loop of payments to the state government. For smaller businesses, the burden of WorkCover and payroll tax grinds them down year after year, making it impossible to stay afloat, let alone grow. And yet, these aren’t taxes that provide value to the businesses—they are costs of simply existing.?

What we’re seeing is outrageous. Businesses are forced to treat these taxes as overhead, eating away at margins and forcing them to inflate quotes just to break even. It seems utterly wrong that Australian businesses are shouldering these massive costs while trying to deliver value to their clients.

Time to Get Transparent with Your Clients

Here’s what we’re advising our clients: be upfront with your costs. When you write a quote or issue an invoice, show the client what they are really paying for. Present your price for the product or service, then add GST, WorkCover, payroll tax, and any other state government taxes separately.

This approach does two things:

It highlights the true value of the service you’re providing. By isolating state taxes, you make it clear that these additional costs are imposed by outside forces.

It educates the business's clients. They see firsthand how much of what they’re paying is going straight to the state government. In business-to-business relationships, transparency can foster understanding and trust.

We’ve already seen positive feedback from clients who are implementing this strategy. By separating out taxes like GST, WorkCover, and payroll tax, they’re able to show their clients what is really driving up costs—and it’s not the service provider.

State Government Greed: The Root of Australia’s Inflation Problem

Let me be clear: state government greed is fueling inflation. While politicians point fingers at global markets or federal policies, the reality is that these ever-increasing state taxes are pushing up the costs of doing business. It’s wasteful, it’s inefficient, and it’s a direct contributor to the rising prices we’re seeing across the country.

The waste at the state level is mind-boggling, and the federal government does little to rein them in. This isn't just an inconvenience for businesses; it's an existential threat. We cannot keep paying for state governments to bloat their budgets while businesses struggle to keep the lights on.

Finding a Way Forward for Australian Businesses

For Australian businesses to survive this onslaught, we need to think outside the box. This is why we’re advising our clients to change the way they present quotes and invoices. Treat state taxes like WorkCover and payroll tax as items that would normally belong on a balance sheet, not buried within operating costs that distort the true value of your services.?

Of course, from an accounting perspective, these are still profit-and-loss items, but the shift in mindset is what matters. By clearly separating these state-imposed costs, businesses are starting to see the benefits. Clients can better understand where their money is going and appreciate the value the business is bringing. This transparency is key to maintaining relationships in an increasingly strained economic climate.

The Role of Accountants: Innovate to Help Clients Survive

As accountants, we’re under siege. But it’s still our job to find creative solutions to help clients survive and thrive. The solution isn’t always in the numbers; sometimes it’s in how we present those numbers. By clearly separating out the costs that businesses have no control over—like state taxes—we’re helping our clients gain clarity and transparency in their operations, and in turn, helping them stay competitive in an unforgiving marketplace.

To wrap up, here’s a list of current state government taxes that plague Australian businesses, many of which make survival feel like an uphill battle:

WorkCover Premiums: Industry-based, heavy, and unavoidable.

Payroll Tax: Once you hit the threshold, it’s a yearly burden.

Land Tax and Stamp Duties: Further costs that squeeze margins.

The list goes on. But it’s time for businesses to fight back with transparency and refuse to let these taxes eat away at their survival.

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And for those who don’t know about all the state taxes

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Australian businesses pay various state and territory government taxes, which vary depending on the location, the size of the business, and the nature of its activities. Here’s an overview of the main state and territory taxes, including WorkCover (workers' compensation insurance), payroll tax, and other business-related taxes:

1. WorkCover (Workers' Compensation Insurance)

Workers’ compensation, commonly known as WorkCover, is a state-based insurance scheme that covers employees for injuries sustained at work. Premiums for WorkCover vary across states and industries, and the amount a business pays depends on:

• Industry risk classification: High-risk industries like construction or manufacturing tend to pay higher premiums than low-risk industries like retail or office-based businesses.
• Wages paid: Premiums are calculated as a percentage of the total wages paid to employees.
• Claim history: Businesses with higher claims may have higher premiums.

Here’s a general range of WorkCover premium rates in some Australian states:

• Victoria (WorkSafe Victoria): Premiums typically range between 1.27% and 2.56% of total wages, depending on the industry and claim history.
• New South Wales (icare): Premiums generally range between 1.4% and 7.5% of total wages, with a lower rate for safer industries and a higher rate for high-risk industries.
• Queensland (WorkCover Queensland): The average premium rate is 1.23% of total wages, but it varies based on the specific industry and claims experience.
• Western Australia (WorkCover WA): Premiums can range from 0.8% to 9%, depending on the industry.

Note: Employers are required to hold workers' compensation insurance, and the premium calculation may differ slightly across states.

2. Payroll Tax

Payroll tax is a state tax on wages paid by an employer to its employees when the total payroll exceeds a certain threshold. The rate and threshold vary between states.

• Victoria: Payroll tax rate: 4.85% on wages exceeding $700,000. Regional employers benefit from a reduced rate of 1.2125% in some areas.
• New South Wales: Payroll tax rate: 5.45% on wages exceeding $1.2 million.
• Queensland: Payroll tax rate: 4.75% on wages exceeding $1.3 million. A higher rate of 4.95% applies to businesses with wages over $6.5 million.
• Western Australia: Payroll tax rate: 5.5% on wages exceeding $1 million.
• South Australia: Payroll tax rate: 4.95% on wages exceeding $1.5 million.
• Tasmania: Payroll tax rate: 4% on wages exceeding $700,000.
• ACT: Payroll tax rate: 6.85% on wages exceeding $2 million.
• Northern Territory: Payroll tax rate: 5.5% on wages exceeding $1.5 million.

3. Land Tax

Land tax is a state tax levied on the value of land owned by a business (excluding the primary residence in most cases). The rate depends on the total value of the taxable land, and each state has different thresholds and tax rates.

• Victoria: Land tax is payable on land holdings valued at $300,000 or more, with rates starting at 0.2% and scaling up to 2.25% for land valued over $3 million.
• New South Wales: Land tax is payable on land valued at $969,000 or more, with rates starting at 1.6% and increasing to 2% on land over $5.925 million.
• Queensland: Land tax is payable on land valued over $600,000 for companies and $350,000 for individuals, with rates starting at 1% and scaling up to 2.25%.
• Western Australia: Land tax is payable on land valued over $300,000, with rates starting at 0.25% and increasing up to 2.67% for land over $11 million.

4. Stamp Duty (Transfer Duty)

Stamp duty, also known as transfer duty, is levied on various transactions, including property transfers, vehicle registrations, and insurance policies.

• Property Transfer Duty: This tax is payable when purchasing real estate or business assets, and rates vary by state and the value of the transaction. In Victoria, the duty on property can range from 1.4% to 5.5%, depending on the value of the property. In New South Wales, the duty ranges from 1.25% to 5.5%.
• Motor Vehicle Duty: When registering or transferring the ownership of a motor vehicle, stamp duty applies. The rate typically depends on the value of the vehicle and the state. For example, in Victoria, motor vehicle duty is $8.40 per $200 of market value for cars valued under $69,152, and higher for luxury vehicles.
• Insurance Duty: State governments also impose stamp duty on various types of insurance, such as life insurance, home insurance, and car insurance. For example, in New South Wales, the insurance duty for general insurance is 9% of the premium.

5. Other State Taxes and Levies

• Fire Services Levy: In some states like Victoria, businesses that hold property or home insurance must pay a fire services levy to fund fire services. This levy is usually embedded in the insurance premium.
• Motor Vehicle Registration Fees: Businesses that operate commercial vehicles or fleets must pay registration fees, which vary depending on the type of vehicle and the state.

Summary of Major State Taxes

Tax

Rate/Threshold (Varies by State)

WorkCover (Workers' Compensation)

Ranges from 0.8% to 9% of wages, depending on the state and industry.

Payroll Tax

Thresholds range from $700,000 to $2 million, with rates from 4% to 6.85%.

Land Tax

Levied on land valued over $300,000 to $1 million, rates ranging from 0.2% to 2.67%.

Stamp Duty (Property Transfer Duty)

Ranges from 1.25% to 5.5% of property value, depending on the state.

Motor Vehicle Duty

Ranges from $8.40 per $200 of vehicle value, with variations for luxury vehicles and specific state rates.

Insurance Duty

Typically 9% of insurance premiums in most states, but can vary depending on the type of insurance.

Conclusion

The specific amount a business pays in state taxes depends on various factors, including the location of the business, the size of its payroll, the value of its land and assets, and the industry it operates in. It’s essential for businesses to be aware of the differing rules and rates across states and territories to ensure compliance and proper budgeting for tax obligations.

Would you like more detailed information on specific state taxes for your location, or assistance in reviewing how these taxes impact your business?