The West Australian Liberal Party's payroll tax pledge does not go far enough in easing pressure on companies and fails to recognise strong wages growth, the state's main business lobby group says.
Treasurer Troy Buswell told a business forum with opposition treasury spokesman Ben Wyatt on Tuesday that the threshold would be lifted from $750,000, where it has sat for some 10 years, if the Liberals retained power.
Mr Buswell said the increase would occur progressively, with the threshold rising to $800,000 in 2014/15 and $850,000 in 2016/17.
He said the first move would shave about $30 million from the annual state budget. The revenue hit would be $60 million per year after the threshold was raised for a second time.
The pledge comes a day after WA Labor ruled out payroll tax reform, drawing the ire of the state's Chamber of Commerce and Industry (CCIWA), which described the decision as hugely disappointing.
Small businesses have pushed for the threshold to be doubled to $1.5 million, arguing the payroll tax is a sizeable impost that stops them hiring more staff.
Mr Buswell said such a move would cost the state government $1.2 billion over a four-year term, which was not affordable given WA's rising debt.
Some would be disappointed with the Liberal plan, but it was better than WA Labor's position, he said.
"I think it's an important first step ... and is stark contrast to Mark McGowan and Labor, who claim to understand the pressure payroll tax puts business under but do nothing to address it," he said.
The state could also not afford to lift the threshold sooner.
"The timing, I think, reflects the fiscal challenges that we face and indeed how tight things are in terms of managing competing interests," he said.
"We have to strike a sensible balance."
CCIWA chief economist John Nicolaou said it was pleasing the Liberals recognised payroll tax was a significant issue for businesses, but Tuesday's pledge would allow a company to hire only one extra staff member.
Over a three-year roll-out, the benefit would be wiped out by wages growth, Mr Nicolaou said.
Mr Wyatt said Labor hadn't matched the commitment because of high debt and ongoing demands for new infrastructure.
"To debt-fund a tax cut at this point would be an irresponsible thing to do," he said.
Mr Wyatt would not commit to reintroducing a cap on state debt if Labor won the March 9 poll, with the incumbent Liberals projected to exceed the previously hallowed $20 billion ceiling on borrowings.
He was "favourable" to the idea, though.
A Labor government would need to get debt under control before paying it off, Mr Wyatt said.
WA has become increasingly reliant on payroll tax as its share of GST diminishes, with the tax take rising from nine per cent of the state's operating revenue to 13 per cent in the past ten years.