NSW will cut taxes to save small businesses $881 million over the next four years in the Coalition's final budget before the state election.
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The Berejiklian government will lift the payroll tax threshold in Tuesday's budget from $750,000 to $1 million by 2021-22.
"If you've got more money back in your pocket as a business, that means you can bring on more staff, bring on more apprentices," Treasurer Dominic Perrottet said on Saturday.
Nearly 40,000 firms will save up to $5,450 each on payroll bills next financial year and up to $13,600 per business in 2021-22.
Ultimately 5000 companies won't face any payroll tax - saving them roughly $50 million in red tape costs on top of the tax relief, according to the NSW Business Chamber.
"A business with an annual payroll of around $750,000 can hire two extra young job seekers without being slugged by a tax penalty," chief executive Stephen Cartwright said.
Around 60 per cent of impacted companies are Sydney-based, but Mr Cartwright said firms in rural areas with high youth unemployment will feel the boost to their bottom line.
"Regional NSW has a higher relative share of businesses just over the payroll tax threshold," he said.
The measures will ease cost pressures for 'mum and dad' businesses feeling the brunt of rising energy prices, Mr Cartwright said.
Tender Gourmet Butchery manager Paul Brady welcomed the news, saying it'd help him to grow his 10-strong workforce in Sydney's North Ryde.
"The less burdens that we have when it comes to tax, the more opportunities we have for reinvesting in our business," he said.
Payroll tax is one of the state's biggest sources of revenue, making up about 11 per cent of overall government receipts.
The threshold will rise to $850,000 in 2018/19, and then in $50,000 increments for the following three years.
NSW voters go to the polls next March and Mr Perrottet said the changes will mean taxes have dropped for three years in a row to the tune of $4.2 billion.
Opposition Leader Luke Foley stressed the government is taking a modest step to address a bracket creep problem it created five years ago when it abolished payroll tax indexation.
"There's thousands more small businesses paying payroll tax today compared to 2013," the Labor leader said.
Australian Associated Press