The tax plight on Australian employers
UHY, the international accounting and consultancy network, has found that Australia risks losing its competitive advantage in the Asian region if employment taxes (or on-costs) are not kept in check.
The UHY conducted a global study in which it examined data from 29 countries across its international network, calculating the value of compulsory payments business makes on top of wages. These on-costs to employers in Australia include state-based payroll taxes, superannuation and workers compensation premiums.
UHY Haines Norton (Australia) Chairman, Michael Coughtrey said the study highlighted global differences as well as those within our own region, citing employers in New Zealand now paying US$1,341 (4.5% of gross salary) compared to US$4,485 (15% of gross salary) in Australia on a comparative employee salary.
Mr Coughtrey said global companies will always choose to locate regional business centres where the cost of doing business is most attractive.
“High employment costs to business, including on-costs like payroll taxes, put job creation, and global competitiveness at risk.
“While employers in New Zealand are only required to pay 3% to superannuation compared to our 9.5%, they are still very competitive as they have no payroll taxes, no capital gains taxes and lower company tax rates – all largely funded by a broad-based GST at 15%. By comparison, Australian businesses are paying more than triple in additional wage on-costs per employee.”
According to UHY G7 nations – notably Canada, the US and the UK – have comparatively low employment on-costs (ranging from 7-9% for low earners) while France and Italy’s costs remain high (at 43% and 39% respectively). This is despite Italy seeing one of the biggest falls of more than 25% since 2012.
Mr Coughtrey said any tax reforms put on the table in the lead up to the next Federal election need to take into account existing pressures on employers.
“The government must weigh up mandatory employment costs against the economic benefits they hope to achieve.”