Historic Payroll Tax Cut To Back Small Business

Media Release | 25 October 2026

Basil Zempilas
Leader of the Opposition

Sandra Brewer
Shadow Treasurer

Tjorn Sibma
Shadow Finance Minister

Steve Martin
Shadow Small Business Minister
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The WA Liberals have announced a major payroll tax reform that will deliver permanent tax relief to approximately 14,500 Western Australian employers, helping businesses grow, invest and create more jobs.

A Liberal National Government will increase the payroll tax-free threshold from $1 million to $1.5 million, abolishing payroll tax for 3,500 businesses.

The $500,000 increase will be the largest single increase in the tax-free threshold in WA’s history, measured in dollar terms, and five times larger than any previous increase.

Eligible businesses with an annual payroll of $1.5 million will save approximately $31,700 every year, while businesses with payrolls up to $7.5 million will also benefit from lower payroll tax bills.

For a business with a $2 million annual payroll, the effective payroll tax rate will fall from 3.17 per cent to 1.72 per cent, below comparable rates in New South Wales, Victoria, Queensland and South Australia.

Opposition Leader Basil Zempilas said the policy would reward businesses for growing and employing more West Australians, rather than penalising them for their success.

“Small businesses are the backbone of our economy but they’re being squeezed by rising costs and an ever-increasing tax burden,” he said.

“Businesses tell us payroll tax is one of the biggest handbrakes on growth, with some even considering moving interstate or overseas. We will move Western Australia from one of the most expensive states for payroll tax to one of the most competitive for small and growing businesses.

“Under Labor, annual payroll tax collections have increased by almost 90 per cent, from $3.3 billion in 2017-18 to a record $6.2 billion last financial year.

“Labor collected an additional $385 million in payroll tax from WA businesses last year alone, yet the tax-free threshold hasn’t moved since 2020.

“Our reform will give something back to the businesses that drive our economy, removing 3,500 businesses from payroll tax altogether and delivering relief to thousands more.

“This is about backing businesses to grow, invest and employ more West Australians, instead of making it more expensive for them to succeed.”

The reform, estimated to cost $300 million annually, has the potential to generate billions in economic activity and support thousands of full-time jobs.

CCIWA research found businesses indicated they would direct 44 per cent of payroll tax savings towards employment and 37 per cent towards reinvestment.

Shadow Treasurer Sandra Brewer said the reform would give businesses greater capacity to invest in their workforce and operations.

“Payroll tax is a tax on employment that hits businesses precisely when they’re looking to expand and take on more staff,” she said.

“Since the threshold was last increased in 2020, rising wages have pushed more businesses into the payroll tax system, even without employing additional staff.

“That’s more money potentially available for pay rises, equipment and expansion - permanent structural reform that will boost investment and productivity.

“The Cook Labor Government’s economic agenda is simple: tax more and spend more. The Liberals offer a different direction - lower taxes and greater opportunities for Western Australians to prosper.”

Shadow Finance Minister Tjorn Sibma said the reform was affordable, responsible and long overdue.

“The Cook Government has become addicted to record tax revenues, treating businesses as an endless source of income rather than the engine room of our economy,” he said.

“At $300 million a year, this reform will cost $85 million less than the additional payroll tax Labor collected from WA businesses last financial year alone.

“This is sensible, targeted tax relief that will strengthen our economy while maintaining funding for essential services. After years of record government revenue, it’s time for businesses to get something back.”

Shadow Small Business Minister Steve Martin said the reform would provide long-overdue relief for small businesses struggling with rising operating costs.

“Small business owners are being squeezed from every direction - power bills, insurance and rents are all rising, and Labor keeps taking more in payroll tax,” he said.

“Under Labor, a business can be hit with a bigger payroll tax bill simply for giving existing employees a pay rise. That’s a tax system that punishes businesses for doing the right thing.

“For a small business saving more than $30,000 a year, that could mean another part-time employee, new equipment or the confidence to expand. Small businesses don’t need another temporary handout - they need permanent relief from the rising cost of doing business.”

Media contact: Graham Mason – 0419 194 792

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