Another 115 Canberra businesses will be exempt from payroll tax from July 1 as the ACT government takes its first steps to major tax reform, according to Chief Minister Katy Gallagher.

Next month's territory budget will contain the cut with the threshold for the tax being raised from payrolls of $1.5 million to $1.75 million. Treasury analysts calculate the move could generate up to 575 new private sector jobs.

Ms Gallagher told a meeting of the ACT Chamber of Commerce last night the higher threshold - where firms will not pay any payroll tax on the first $1.75 million of their wages bills - will lead to 1865 businesses getting reductions in their payroll tax in 2012-2013.

The Chief Minister told several hundred business leaders gathered at the National Convention Centre last night the strategy was aimed at making the ACT Australia's most competitive payroll tax regime for small and medium-sized outfits.

''This will give the ACT the highest payroll tax threshold in the country,'' Ms Gallagher said.

''It will also make the ACT the lowest taxing jurisdiction for businesses with payrolls of up to $4.7 million.''

The business community in Canberra has been calling for payroll tax reform for some time.

ACT Chamber of Commerce chief executive Chris Peters said the tax reform meant ACT's business sector would be more competitive. He also said it would encourage local businesses to keep growing.

''Businesses can now plan that as of July 1 the payroll tax regime will change in their favour,'' Mr Peters said.

''It will also mean that we've got a great opportunity to attract other businesses to Canberra.

''We'll move from being middle of the field to being the most small-business friendly payroll tax regime in Australia.''

According to the Chief Minister's office, the move will take the total payroll tax from about $330 million in 2011-2012 to about $323 million in 2012-2013 but she did not say where savings would be found to pay for the $7 million tax break.

''Under the new strategy, about 115 Canberra businesses that currently pay payroll tax will no longer do so,'' Ms Gallagher said.

''The new strategy will allow those businesses to employ up to an extra five workers before paying payroll tax, creating the conditions that will allow 575 people to be employed by the private sector.

''Additionally, 1865 businesses will get a tax cut.''

A ''root and branch'' review of the territory's taxation regime by former treasurer Ted Quinlan is to be published on Monday. Ms Gallagher said the government would continue to try to provide an atmosphere that allowed the small and medium sector to grow.