RSM Australia

Western Australian State Budget Announcement

Tax Insights

A budget for Western Australians to be owned by Western Australians.

This was the line the State Treasurer used as he released his first State Budget in office.  

Predictably the Treasurer used this opportunity to express the State’s disappointment at WA’s distribution of GST receipts under the current distribution mechanism and the former Government’s expenditure record during the boom economic times. 

However, the Treasurer was reasonably upbeat about the State’s future growth prospects with an increase in full-time employment and job vacancies leading to forecast employment growth of 1.5% or 20,000 jobs in 2017-2018 and the emergence of the lithium industry which is set to double over the next two years.

Regardless of the Treasurer’s positive outlook, the State Government needs funds and big business is its primary target.

Increase in Payroll Tax

The Treasurer has announced a temporary increase in payroll tax rates for large businesses from 1 July 2018 to 30 June 2023 in which:New state budget for Western Australians

  • Taxpayers with Australia-wide payroll over $100 million will be subject to 6% payroll tax on the excess; and
  • Taxpayers with Australia-wide payroll over $1.5 billion will be subject to 6.5% payroll tax on the excess.

The Treasurer expects the payroll tax changes will raise $435 million over the forward estimates and notes that iron ore companies will be the biggest contributors of the additional payroll tax, making approximately 20% of the total additional payroll tax. This comes on top of a previous increases in the Pilbara Port charges by 17% from 1 July 2017 impacting the cost of large iron ore miners operating in the Pilbara.

This is a disappointing outcome for all large companies operating in Western Australia and may be an additional constraint on large employers considering new projects in Western Australia. This announcement will also put Western Australia at a disadvantage when compared to most other States where large businesses with mobile workforces could choose to relocate their workforce to a State with a more advantageous payroll tax regime.

Tiered Gold Royalty Rate

From 1 January 2018, Gold producers will be subject to a 3.75% royalty rate on the total royalty value, where the price of Gold is greater than $A1,200 per ounce. The royalty rate will remain at 2.5% where the price of Gold is $1,200 or less per ounce. New state budget for Western Australians

Gold prices have not traded at below $1,200 per ounce for some time and it is therefore likely that Western Australia’s gold producers will be subject to this 1.25% royalty increase on future production.

In addition to the above, from 1 July 2018, the exemption for the first 2,500 ounces of gold produced in a financial year will be removed, meaning that royalties will be payable on each ounce removed.  

Gold producers will not be happy with the proposed changes which will impose an extra burden on their production which cannot be passed on to the consumer.

4% Foreign Owner Duty Surcharge

From 1 January 2019, foreign individuals and entities acquiring residential property in Western Australia will be subject to an additional 4% Duty cost on the purchase of the property.

Foreign investors have been an easy target for increased taxes by all Governments in recent times and this Duty surcharge brings Western Australia into line with most other Australian states in imposing an additional duty cost on the purchase of residential property by foreign investors. 

For further information, please contact one of our tax experts.

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