A harmonised payroll tax system for NSW and Victoria
NSW and Victoria enacted virtually identical payroll tax legislation with effect from 1 July 2007. This change introduced consistent payroll tax rules across both states (although the rates and thresholds continue to differ). The harmonisation initiative involved Victoria changing certain payroll tax definitions to be consistent with NSW definitions and NSW changing certain definitions to be consistent with Victoria.
Under the Reducing the Regulatory Burden initiative, the Victorian Government made a commitment to measure changes in the administrative burden of Victorian regulation using the standard cost model (SCM). The SCM was developed by the Dutch Government to provide a consistent method for estimating the administrative costs imposed on business by government. Administrative costs are those costs incurred by firms to demonstrate compliance with state regulation or to allow the State Government to administer the regulation.
These costs include costs associated with familiarisation with the requirement, record keeping to meet the requirement and reporting, including inspection and enforcement of regulation.
This report outlines the estimated change in the administrative burden arising from the changes to Victorian payroll tax definitions, using the SCM. The report does not seek to assess all the benefits of harmonising payroll tax legislation. The SCM is designed to measure only one aspect of the impact of changes to regulation, being the change in the administrative burden, and does not seek to measure the benefit or cost of change in its totality.
The present analysis is the first time the SCM has been used in Victoria to measure the change in the administrative burden arising from harmonisation of legislation between two jurisdictions.
Overall, harmonisation is estimated to save Victorian businesses $1.5 million in administrative burden. Of the 19 data requirements associated with the harmonisation, eight resulted in administrative savings and two resulted in an increase in administrative costs. It was estimated that the remaining requirements would not have a material impact on the administrative burden.