"Insidious" payroll tax crippling regional employment as drought bites processing sector

Livestock production is plummeting as the state’s herd declines and so, too, is throughput at the processing end –  a situation which will get markedly worse as breeders rebuild.

Add factors like spiraling energy costs, ridiculous red tape and a tax on employment  –  no wonder the jobs outlook for country areas looks bleak.

Statistics back up these fears with a 21 per cent rise in the number of cows and heifers processed year on year.  Meat and Livestock Australia say the female share of slaughter is at drought levels, 53.7 per cent in June – the highest since July 2014.

When the rains return and grass starts to grow the killing will stop. Processors like Andrew McDonald, Bindaree Beef, says throughput at the Inverell abattoir is forecast to plummet by 30 per cent. 

“Is it in anyone’s interest to reassemble the beef processing sector with just a couple of surviving and capable players?” asks Mr McDonald, whose father John resurrected the Inverell abattoir and helped return the regional city to its feet.

That was 23 years ago and in that time the NSW government has pocketed $70,000 a week in Bindaree payroll tax – a money grab described as insidious by Grove Juice grower and processor Dick Estens, who pays the same amount each year to the state as a result of employing people on his orange orchard at Moree.

“All that this tax is doing is forcing us to invest heavily in robotics and artificial intelligence, which will only reduce employment,” says Mr Estens, “That way governments can do a really good job of building more welfare.”

Bob Wheeldon, chair of the regional lobby group  “restofnsw” calls payroll tax “perverse” in the sense that it discourages employment.

His organisation has been advocating for it’s reduction or abolition in regional areas, particularly along the Murray River border where Victorian businesses on one side pay less than half, at 2.45 per cent, versus 5.45 per cent in NSW.

“How about some hard policy on this?” he asks of government.

Meanwhile, Queensland charges almost as much as NSW, not quite, but their thresholds are a couple hundred thousand dollars higher and that helps.

“Diversification of employment in regional areas dominated by agriculture is critical if communities are to remain resilient to drought,” says Mr Wheeldon. 

For Chris Cummins at Cowra’s Breakout River Meats there are actually more pressing concerns than payroll tax – like power prices.

“Even if there was a two year suspension of payroll tax in the bush to help out in this drought those savings would not even cover the cost of our increased power bill,” he says.

“We’ve been forced to undertake gas efficiencies and yet we still need back up generators in case we run out of power because governments were too stupid to realise that there would always be a need for base load electricity.”

Mr Estens at Moree is also frustrated by high power prices and recalls the bitter memory of paying $500 a month for electricity when he was first setting up his drip irrigated orchards – yet was slugged with $5000 a month in network fees.

Roger Fletcher, Fletchers international at Dubbo predicts a lot more pain to come for everyone associated with the land in this drought.

“With stock being offloaded in the dry there will be no income next year and producers will have to borrow more,” he says. “They will be going backwards.

“What would you expect us, as processors, to do?” Mr Fletcher asks. “Employ our people, pay our customers … because the minute we drop out it will be like a house of cards collapsing.

“We need to be there when the job turns around. That’s the best we can do for Dubbo,” says Mr Fletcher. “We need to stay in business.

“But what government can do is to introduce rapid tax deductions for hay sheds and silos so as a producer enterprises can better prepare for drought.

“If we can depreciate capital cost more quickly we will likely commission more buildings, cut more pollution, and create better production so we can compete around the world,” he says. “We’ve got to look forward.”

In response the NSW Government says it has made payroll tax relief for business a priority since winning government in 2011.

Deputy Premier John Barilaro said in a statement: “As a former small business owner myself, I have never liked the idea of taxing businesses that create employment opportunities for others, which is why I have long advocated for reductions to payroll tax.

“The Government’s latest policy, announced in the 2018/19 budget, is putting up to $881 million back in the pockets of small and regional businesses.

“The 2018/19 budget included immediate relief, raising the threshold of payroll tax to $850,000 this year.

“By 2021-22 businesses with a payroll up to $1 million a year will save up to $881 million collectively over the next four years.”

Meanwhile, the Office of the Small Business Commissioner is on the ground working with businesses and the Australian tax Office to defer goods and services tax and business activity statements on a case-by-case basis.

“Since the last budget we’ve also announced drought relief packages totalling $1 billion for NSW farmers, which will help support our farmers and stimulate local regional economies,” said Mr Barilaro.

Meanwhile Nationals in Canberra are this week tinkering with an idea put forward by NSW Senator John Williams and Member for New England Barnaby Joyce to subsidise NSW payroll tax losses through money saved by government, should tax reform fail to get through federal parliament.

“We will know more next week,” said a spokesman from Mr Williams office in Canberra.