Different Payroll Taxes by NSW Coalition v NSW Labor

Since November 2016, the Australian Childcare Alliance (ACA) NSW had been agitating the NSW Coalition Government as well as the NSW Labor Opposition for help with payroll tax relief.

Given the majority of childcare providers in NSW are family-owned small businesses, such payroll tax relief can significantly help with operational viability (especially for those in childcare oversupply affected areas) as well as provide downward pressures on childcare fees.

A fair reduction or removal of payroll tax for those childcare providers whose payroll is up to $2m would also create a more level-playing field with other childcare providers who do not pay any payroll taxes at all.

NSW Coalition decides to reduce payroll tax

Back in June 2018, the NSW Coalition Government announced that it would raise the payroll tax threshold from $750,000 to $850,000 beginning 1 July 2018 to one million dollars by 30 June 2022. It is estimated that this change could potentially help up to 900 childcare services (or 16.7% of all services) across New South Wales.

But NSW Labor has another plan for payroll tax

In anticipation of the NSW state election on 23 March 2019, NSW Labor announced in December 2018 that if elected, it will discontinue the Liberal/National Government’s increases in payroll tax threshold beyond $850,000.

Its rationale is that NSW Labor does not believe a future NSW Labor Government can afford those reductions in revenue. And so it intends to hold onto the recently revised payroll tax threshold of $850,000 and promised to reconsider increasing the threshold at a later date.

What does that mean for the family-owned small business approved providers?

ACA NSW estimates that there are 1,727 not-for-profit ECEC services that are exempt from contributing payroll taxes estimated to be $52,478,363 annually to the NSW Government. Yet 2,240 family-owned small business childcare operators pay an estimated $69,161,440 each year in NSW payroll taxes.

With this uneven playing field, ACA NSW has always been concerned that such NSW Government impost on these family-owned small business childcare services are also in effect adding costs that ultimately parents must pay.

What could a future NSW Government do to help?

As all childcare service providers are recognised as educational services, they do not attract the Goods and Services Tax nor land tax. So why is the NSW Payroll Tax applied on some and not on all?

ACA NSW has been asking the NSW Government and the NSW Opposition to consider applying an exemption of the NSW Payroll Tax for all entitles with a payroll of up to $2m.  However, as this ask is unlikely to come to fruition in the neighbouring future, what could we ask for?

One suggestion is for ACA NSW to ask the NSW Coalition and NSW Opposition for their consideration of using the $69m in NSW Payroll Taxes collected per year to pay for the difference of the cost of a degree qualified teacher and a diploma qualified teacher/educator.

ACA NSW welcomes your feedback/suggestions/comments about how else can a future NSW Government assist all early childhood education and care service providers.