Struggling universities hit out at payroll tax blow

Victoria’s universities have asked the state government to urgently explain why they are being asked to contribute to a $2.9 billion payroll tax increase to fund mental health services.

University of Melbourne Vice-Chancellor Duncan Maskell said the sector, which is still reeling from the loss of hundreds of millions of dollars in international student fees, was blindsided by the announcement in Thursday’s budget.

University of Melbourne Vice-Chancellor Professor Duncan Maskell has hit out at the payroll tax plan.

“Victorian vice-chancellors were surprised to learn that the payroll tax levy will apply to local universities given our charitable status and given we already spend a great deal of money doing so much work in mental health,” said Professor Maskell, who chairs the state’s vice-chancellors’ committee.

“We are seeking an urgent conversation with government to understand the rationale for this and to ensure that all relevant information is with the government prior to this policy being put before Parliament.”

The tax increase applies to businesses with a wage bill of more than $10 million nationally. Larger businesses with a payroll bill higher than $100 million will pay an even higher rate, with an additional 0.5 per cent on the share of wages paid in Victoria.

The hike means Monash and Melbourne universities will pay about $12 million more tax each year from 2022. RMIT will be taxed about $7 million more and Deakin about $5 million. La Trobe, Swinburne and Victoria universities will be taxed between $2 million and $3 million more.

Described as a “mental health levy” by the government, the initiative will raise $800 million a year over the next four years.

A government spokesperson on Friday did not say whether universities would be exempt from the tax increase or whether their request for a discussion would be granted.

“We’re proud supporters of our universities and have continued to back them above and beyond any other state government,” the spokesperson said.

“We’ve spent a lot of time and effort investing in universities during what we know has been a difficult time, all while the Commonwealth has done little to nothing.”

The Andrews government has spent the past two days defending its decision to impose the levy on businesses, arguing the cost of inaction on mental health would be far greater and that the affected 9000 companies were multinational corporations.

One business owner told The Age on Friday that the levy would make them reconsider hiring staff in Victoria. Another said the extra tax burden meant he would hire two fewer trainees.

Acting Premier James Merlino was in Bendigo yesterday morning to spruik the record $3.8 billion investment to fix the state’s “broken” mental health system.

“These are very targeted, appropriate, well thought-out revenue initiatives that impact less than 5 per cent of employers,” Mr Merlino said.

“Many of those are multinational companies. It is very targeted, and in terms of the benefit to businesses, right across the state of Victoria is massive. If we get this right, if we rebuild our mental health system, if we see a reduction in the level of need, it will mean billions to our economy.”

Former competition watchdog tsar Allan Fels, who is also a former chair of the National Mental Health Commission and commissioner of the inquiry into Victoria’s mental health system, has backed the levy being bankrolled by big business, saying mental health reform was a good investment that would pay off economically.

Professor Fels, whose daughter Isabella was diagnosed with schizophrenia in her 20s, says mental health has an extremely high cost which the Victorian government’s reforms would reduce over the next five to 10 years.

“According to the Productivity Commission, mental illness costs about 10 per cent of GDP,” said Professor Fels. “If there was a 25 per cent or likely much greater improvement due to the reforms, it would increase Victoria’s GDP by about 2 to 3 per cent which dwarfs the benefits of most conventional economic reforms such as taxes.“

He said targeting the levy at big business made sense because they would reap the benefits of better labour availability and better mental health in the workplace.

“Business gets a big pay-off over time.”

Brewer Paul Bowker, co-owner of Brick Lane Brewing, calculated the tax increase would cost his business about $80,000 – the wages of two trainees.

“On a business of our size, it has a disproportionate impact,” he said. “It can be the difference between employing a few more people or investing in new equipment to build a long-term sustainable business in Victoria.”

Adir Shiffman, chairman of ASX-listed sports technology company Catapult Group, which employs 400 staff globally and is headquartered in Melbourne, said looking at where to hire staff was a constant process of evaluation.

He said the payroll levy was “a gift” to other states and countries competing with Victoria for talent.

“Catapult has offices all around the world and whatever the attractiveness of hiring in Victoria was, it is now lessened,” he said.

“Every time we make a hire, we consider at least three or four locations to make that hire and this makes Victoria a less attractive place.”

Independent economist Saul Eslake said the government’s payroll tax rise was steep, but dismissed some business groups which claimed it was an inefficient tax on jobs.

“It’s nonsense to say it’s a ‘bad’ tax. It’s just a tax,” he said, adding that it had a similar impact on a business to GST, which business groups commonly argued should be raised.

He said it was clear that Victoria was worried about its debt level, which he described as the most parlous of any state. The state had also taken a different view to the Morrison government about the timing of budget repair, he said.

Treasurer Tim Pallas, who attended a business breakfast and lunch function on Friday, attempted to shift the blame to the federal government on his decision to hike the payroll tax for some businesses.

“At some stage, there was some discussions between the state of Victoria and the Commonwealth to discuss whether or not there was an appetite for the Commonwealth to [increase the Medicare levy],” Mr Pallas said.

“We got a problem and we need to address it. It’s a national problem and we need to figure out a national solution. Yes, we would’ve thought a Medicare levy type of arrangement would have been a better mechanism … but unfortunately we couldn’t get them to go along with that, so once again Victoria has gone it alone.”

In Victoria, businesses with a wages bill of greater than $650,000 pay a payroll tax of 4.85 per cent — or 2.425 per cent in regional Victoria, and 1.2125 per cent in bushfire-affected regions. In contrast, New South Wales’ threshold for payroll tax has been permanently lifted to $1.2 million, and the rate temporarily reduced from 5.45 to 4.85 per cent until next year.

The permanent increase to payroll tax in Victoria will apply to businesses with a wages bill of greater than $10 million, which will now be required to pay 5.35 per cent. Large corporations with a payroll tax of greater than $100 million will now pay 5.85 per cent.

Shadow treasurer Louise Staley doubled down on her criticism of the levy, saying it would “stigmatise” and “ghettoise” mental health.

“Mental health is a core government service,” she said. “It’s like hospitals, it’s like state schools, it’s like roads. They don’t have separate taxes in this state … We’re going to say forever and ever that mental health will be stigmatised and ghettoised with this tax.”

With Jewel Topsfield and Paul Sakkal

Start your day informed

Our Morning Edition newsletter is a curated guide to the most important and interesting stories, analysis and insights. Sign up here.

Most Viewed in Business

From our partners

Source: Read Full Article