Tall poppies face axe under WA State Budget

By Leon Mok - September 8, 2017

Today’s State Budget has targeted some of the green shoots in the WA economy, according to Pitcher Partners Managing Director Leon Mok, which could send the wrong message for businesses looking to grow and invest in the state.

Mr Mok took aim at three changes, the increase in the gold royalty, payroll tax and the new levy for foreign buyers, and said they could undermine the fragile recovery of the economy.

Commentary on the issues in more detail is provided below:

Gold Royalty Increases

An additional $392 million in royalty revenue will be raised with the introduction of a tiered royalty rate from 1 January 2018 and the scaling back of the gold royalty exemption.

Pitcher Partners Managing Director Leon Mok said gold had been one of the few positives for Western Australia’s struggling mining sector.

“It appears that tall poppy syndrome has once again hit,” he said.

“These royalty increases send mixed-messages to businesses and investors who will increasingly think that success equates to having the goal posts shifted and additional taxes being imposed.”

Payroll Tax Increases

The Government has announced that marginal pay roll tax rates of 6 per cent and 6.5 per cent will be introduced for WA’s bigger businesses, impacting payrolls above $100 million and $1.5 billion, respectively.

The rate rises represent between 0.5 and 1 per cent increase on the current flat 5.5 per cent pay roll tax.

Pitcher Partners Director Timothy Martino said the increase would hit some of WA’s most significant employers.

“The big end of town will be hit hard by this measure,” he said.

“Given the ongoing fragility of the Western Australian economy, increasing payroll tax seems a short-sighted move as some employers will be driven to fund the hike out of future salary increases for employees.

Duty Increases

A new 4% duty surcharge on purchases of residential property by foreigners will be introduced.

Pitcher Partners Director Timothy Martino said the move was similar to that introduced in the Eastern States, but the market conditions were vastly different.

“This measure is similar to one introduced in the Eastern States off the back of a hot housing market there, however with the current state of the WA market, you have to question whether this measure is just a blatant tax grab,” he said.

“Exemptions apply for some large developers so smaller players will bear the burden of this surcharge.”

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