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Payroll Tax for your Business - Updates and Next Steps

Payroll Tax in Australia is a crucial state tax that has a significant impact on numerous businesses. However, the self-assessment nature of this tax often leads to businesses unintentionally neglecting their obligation to register, mainly due to a lack of understanding or discussion.

The concept of payroll tax revolves around a state and territory-based tax system. Employers are required to pay this tax if their wages surpass the specified threshold. Interestingly, each state or territory has the authority to determine its own payroll tax threshold. Once an employer's wages cross this threshold, it becomes mandatory for them to self-register for payroll tax.

 

Payroll Tax Rates

The amount to be paid will depend on several things:

  • The business’s total ‘liable wages’ compared to the payroll tax threshold amount
  • The state or territory payroll tax rate
  • Any exemptions the employer is entitled to

What is included in ‘liable wages’?

The most common types of remuneration subject to payroll tax include:

1. Salaries, commissions, director fees, bonuses, allowances and any ordinary earnings, penalty rates, overtime and leave payments
2. Apprentice/trainee payments (depending on the state or territory)
3. Some payments to Contractors
4. Fringe benefits – all benefits subject to the Fringe Benefits Tax Assessment Act 1986
5. Superannuation contributions (including super guarantee and salary sacrifice)
6. Leave and termination payments (those declarable for income tax purposes)
7. The value of shares and options given to employees and directors.

2023 Financial Year Thresholds & Rates

Payments for Employees in:

Payroll Tax Threshold

Payroll Tax Rate

New South Wales

$1,200,000

5.45%

South Australia

$1,500,000

4.95%*

Victoria

$700,000

4.85**

Queensland

$1,300,000

4.75% for < $6.5 million in wages
4.95% for > $6.5 million in wages
(See note)

Northern Territory

$1,500,000

5.50%

Tasmania

$1,250,001

4.00% for < $2 million in wages
6.10% for > 2 million in wages

Western Australia

$1,000,000

     5.50% ***

Australian Capital Territory

$2,000,000

6.85%

*Variable amount of 0% to 4.95% between $1.5m - $1.7M, 4.95% thereafter
** Except for regional employers who pay 1.2125%
QLD Note: Regional employers may be entitled to a 1% discount on the rate until 30 June 2030
A mental health levy was introduced for employers (or groups) who pay > $10M in Australian annual wages. The rate varies between 0.25% & 0.30%
*** Calculation varies from $7.5 million & above

Each year, the rates are reviewed and updated where required. A monthly wage threshold is available per state to support the above annual rates.

Employee Exemptions

Certain payments made to employees are not subject to payroll tax, such as those related to Paid Parental Leave (PPL) through the Commonwealth Government scheme, reimbursed expenses, and tax-exampt redundancy payments.

Contractor Payments

Payments made to contractors may be subject to payroll tax, unless an exemption is met. It is important to understand what specific criteria must be met in order for a contractor arrangement to be exempt from payroll tax.

Registration, Lodgement and Payment Obligations

Registration for payroll tax is required in each state once your total monthly Australian wages exceeds the monthly threshold for that state.

Once registered, your reporting and payment obligations are monthly. At the end of the year an annual reconciliation is required to be lodged. For NSW, the lodgement and payment obligations are:

  • Monthly – 7 days after the end of the month
  • Annual –28thJuly

Other Payroll Tax Factors to Consider

Grouped Employers

Employers may be grouped for payroll tax purposes. This means their wages are added together and one payroll tax threshold applies. Grouping can occur when two employers have common control or common use of employees.

Threshold Entitlement – employees in multiple states or territories

If an employer has employees in different states, the threshold entitlement for each state is calculated on a proportional basis. For example, if 50% of your liable wages are in Sydney and 50% are in Melbourne, your threshold entitlement would be 50% of the NSW threshold and 50% of the VIC threshold.

What Are The Next Steps?

By now you should know whether you are liable for Payroll Tax. If you are and you haven’t yet registered then you can do that via Payroll Tax Australia.

However, even if you are not currently required to register for Payroll Tax, it is important for all businesses to understand, monitor and continually review their Payroll Tax obligations considering that:

  • Payroll tax thresholds are continually changing and vary between States and Territories
  • The definition of ‘taxable wages’ for Payroll Tax purposes has a wide application and is not restricted to salaries and wages paid to employees
  • Grouping rules can result in two or more businesses being entitled to only one Payroll Tax threshold (i.e. related companies, use of common employees, commonly controlled businesses etc)
  • Payroll Tax compliance programs of state revenue offices have increased within recent years with substantial penalties imposed for non-compliance (including penalty tax and interest)

It is really important you stay informed about these changes to avoid costly ramifications. If you need to discuss your situation in more detail then please don’t hesitate to talk with us. Our team at BLG Business Advisers are Wollongong Accountants who assist clients right across Australia and are here to support you.

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*Please note that the above information is general advice only. We recommend you seek advice from a specialist relevant to your personal situation. This information is relevant at the time of publishing and is subject to change*
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