The Chamber renewed its push for payroll tax reform following Monday’s Fair Work Commission’s decision to increase the minimum wage, which will grant a pay rise of approximately $33 a week for affected full-time employees.

It’s estimated that one in five workers will receive more money under the move from 1 July, as the Fair Work Commission attempts to deal with the rising cost of living thanks to inflation.

The 3.75 per cent pay hike is below the 5 per cent the peak union body ACTU was calling for, but the peak body for business interests in South Australia – SA Business Chamber – said the raise would be too much for some employers to manage.

“When you add the mandatory increase in superannuation of 0.5 per cent for the new financial year, businesses will face a total increase of 4.25 per cent,” SA Business Chamber CEO Andrew Kay said.

He said the Chamber supported reasonable and sustainable pay increases but a hike higher than inflation posed a challenge to economic recovery efforts.

“The decision by the Fair Work Commission will make it significantly harder to bring inflation back within the Reserve Bank of Australia’s target range and comes on the back of last year’s 5.75 per cent increase,” he said.

Kay said that the move would push more South Australian businesses over the payroll tax threshold, and renewed calls for the state government to reform payroll tax.

Earlier this year, Chamber called on the state government to reform payroll tax which is paid by employers. Businesses with a payroll of between $1.5 million and $1.7 million are currently liable to pay a payroll tax at a rate of between zero and 4.95 per cent. Any business with a payroll above $1.7 million is charged at a 4.95 per cent rate.

“When the reward for creating jobs, saving a struggling business or adding to the complexity of the state’s economy is a large tax bill, the problems with this tax are clear,” Kay then said.

The Chamber recommended lifting the payroll tax threshold from $1.5 million to $2.1 million, which would give South Australia the most competitive threshold in the nation.

After Monday’s minimum wage hike, Kay said many business would “find themselves subject to payroll tax for the first time come July 1”.

“Our calls for changes to the payroll tax threshold are now even more urgent. Without this reform, the combined impact of wage increases, and additional payroll tax will push many businesses to the brink,” he said.

“Businesses that can pass costs to consumers will have no choice but to do so following the Fair Work Commission’s decision.

“At a time when operators are already struggling with the costs of doing business, without payroll tax reform, I fear this could be the final nail in the coffin for many.”

But economic think tank CEDA said the minimum wage rise would help lower-income households, and would not push up inflation or place upward pressure on interest rates.

CEDA chief economist Cassandra Winzar said the key to reconciling low inflation with solid wage growth was strong productivity growth.

“The Fair Work Commission’s decision to raise the minimum wage and all modern award minimum wage rates by 3.75 per cent should not materially affect the outlook for wages and inflation,” she said.

“This decision is important to help lower income households who are doing it toughest in the current cost-of-living crisis.

“We continue to expect the Reserve Bank of Australia will not lower the cash rate until early 2025.”