Payroll Tax – Is Your Business Over The Threshold?

Posted on November 28, 2016
by Glen Bower in Taxation Blogs
Home / Blogs / Payroll Tax – Is Your Business Over The Threshold?

Are you aware of the Payroll Tax obligations for businesses? If you own a business with taxable Australian wages exceeding the threshold for your relevant state, then it could apply to you.

Overlooking this tax could be a costly mistake, so we have listed the important information to understand Payroll Tax and work out if, or when, this applies to you.

What is Payroll Tax?

Payroll Tax is a self-assessed, State and Territory based tax imposed on businesses in Australia.

Whilst businesses employing staff within Australia are generally required to withhold PAYG tax from salaries & wages paid to their employees and remit the same to the Australian Taxation Office, Payroll Tax only applies to businesses with taxable Australian wages exceeding prevailing state-based thresholds.

Payroll Tax obligations are often misunderstood or overlooked by businesses with tax rates, thresholds and even registration requirements varying between States and Territories.

Rates and Thresholds

Payroll Tax is levied on businesses with taxable wages that exceed the thresholds applicable to the States or Territories in which the services of their employees (and in some cases contractors) are wholly performed, or alternatively where their employees are based if services are performed in more than one State or Territory. State revenue offices are responsible for regulating the registration, reporting and collection of Payroll Tax.

Payroll Tax rates and thresholds that currently apply for the financial year commencing 1 July 2016 are listed below:

State / Territory Rate Annual Wages Threshold
New South Wales 5.45% $750,000
Victoria 4.85% $575,000
Queensland 4.75% $1,100,000
South Australia 4.95% $600,000
Western Australia 5.50% $850,000
Tasmania 6.10% $1,250,000
ACT 6.85% $2,000,000
Northern Territory 5.50% $1,500,000

 

The definition of ‘taxable wages’ for the purpose of Payroll Tax is similar between the States and Territories and includes, but is not limited to, salaries and wages, superannuation contributions, commissions, bonuses, fringe benefits and most allowances. Payments to contractors can also be subject to Payroll Tax in some cases.

NSW Employers

As noted above, the Payroll Tax rate in NSW is currently 5.45% and the annual wages threshold is $750,000.

Registration for Payroll Tax in NSW is required within seven days after the month in which the total taxable Australian wages of a business with NSW employees first exceeds the following thresholds:

Days in Month Threshold
28 days $57,534
30 days $61,644
31 days $63,699

 

Payroll Tax is generally required to be reported and paid to the NSW Office of State Revenue on a monthly basis (with an annual reconciliation). However annual payments may be available to NSW employers with small liabilities (i.e. $12,000 per annum or less).

There are currently Payroll Tax incentives and rebates available to eligible NSW businesses under a scheme which aims to encourage the employment of new workers within NSW. Registration for the scheme is generally required within 90 days of the commencement of an eligible employment arrangement.

Importance of Understanding your Payroll Tax Obligations

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); and
  • 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).

Put your mind at ease and arrange an appointment with one of our experienced tax advisers if you are an employer and have any queries or concerns pertaining to your payroll tax obligations. Please contact BLG Business Advisers online or by calling (02) 4229 2211.

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