Payroll Tax

What is payroll tax?

In simple terms, payroll tax is a tax on total wages paid by employers to their employees.

Payroll tax is not a federal tax. Each state and territory in Australia has its legislation governing payroll tax. This means that the specifics of payroll tax can differ between states.

While there have been discussions and initiatives towards payroll tax harmonization in Australia, complete uniformity across all states and territories has not yet been achieved. Each jurisdiction still maintains its own payroll tax legislation and sets its own thresholds and rates, resulting in some variations and complexities for businesses operating nationally.

QLD Payroll Tax

QLD payroll tax is a state-based tax imposed on employers in QLD for the wages they pay to their employees. The legislation governing QLD payroll tax is the Payroll Tax Act 1971.

In Queensland, payroll tax applies to businesses with an annual taxable wage bill above a threshold set by the state government. The threshold is currently $1.3 million per annum.

  • The applicability of QLD payroll tax is based on a business’s annual taxable wage bill.
  • If a business’s annual taxable wages exceed this threshold, it must pay payroll tax in QLD.
  • Businesses must assess their annual wage bill to determine if they meet the threshold and are subject to payroll tax.
  • Businesses under the threshold are not required to pay payroll tax in QLD.

QLD payroll tax rate

The QLD payroll tax rate is:

  • 4.75% for employers or groups of employers who pay $6.5 million or less in Australian taxable wages
  • 4.95% for employers or groups of employers who pay more than $6.5 million in Australian taxable wages.

To calculate the amount of payroll tax you owe, you need to determine your annual taxable wages and apply the tax rate. However, it’s important to note that there are certain exemptions and deductions available that can reduce your taxable wages.

Mental health levy

From 1 January 2023, a mental health levy was introduced to fund mental health and associated services. The levy applies to:

  • employers and groups of employers who pay more than $10 million in annual Australian taxable wages
  • annual Queensland taxable wages.

The mental health levy thresholds are based on annual Australian taxable wages. The levy is then applied proportionately to Queensland taxable wages that exceed the thresholds.

The thresholds are adjusted if you:

  • are a member of a group
  • pay interstate wages
  • are only liable for the levy for part of the financial year.
Australian taxable wages
(annual)
Levy rate (applied to Qld taxable wages exceeding the thresholds)
Up to $10 million Nil
More than $10 million (primary threshold) 0.25% (primary rate)
More than $100 million
(additional threshold)
0.25% (primary rate) + 0.5% (additional rate)

QLD Payroll Tax exemptions and deductions

  1. Exemptions
  • QLD payroll tax exempts wages paid to apprentices and trainees, supporting businesses investing in skill development.
  • Certain wages paid to employees with disabilities are exempt from payroll tax, promoting inclusive employment practices.
  • QLD payroll tax offers exemptions for wages paid to employees involved in charitable activities, encouraging community engagement and support.
  • Some industries, such as agriculture, primary production, and mining, may qualify for exemptions on certain wages to promote growth and competitiveness.
  1. Deductions
  • Businesses can claim deductions for wages paid to employees on parental leave, recognizing the importance of supporting working parents.
  • Deductions can be claimed for wages paid to employees on long service leave, acknowledging the significance of employee loyalty and rewarding long-term service.

Registration and reporting

An employer must register for payroll tax within 7 days after the end of the month in which the employer:

  • pays more than $25,000 a week in Australian taxable wages; or
  • becomes a member of a group that together pays more than $25,000 a week in Australian taxable wages.

Businesses may be grouped and treated as one unit for payroll tax if they are related or connected. One business, the designated group employer (DGE), claims any deduction entitlement on behalf of the whole group.

The DGE and all group members must lodge separate returns.

Employers can apply for an exclusion from grouping for payroll tax.

Once an employer meets the criteria for liability under QLD payroll tax, it is essential to complete the registration process with the Office of State Revenue (OSR). The registration involves providing relevant business information, such as the business name, address, ABN (Australian Business Number), and contact details. Following successful registration, the OSR will issue the business a unique payroll tax registration number.

Registered businesses must report their payroll tax liabilities to the OSR regularly. The reporting frequency depends on the business size, with larger businesses generally required to report monthly and smaller businesses having the option of reporting annually. During the reporting process, businesses must accurately report their total taxable wages and calculate the corresponding payroll tax liability based on the current tax rate. Reporting can be done electronically through the OSR’s online portal.

In QLD, the due date for payroll tax lodgment and payment is typically the 21st of the following month. However, specific due dates may vary, so businesses should consult the OSR website or seek professional advice to ensure compliance. Timely and accurate reporting is essential to avoid penalties or interest charges.

QLD Payroll Tax key dates and deadlines

While specific due dates may vary, the following provides a general overview of the key dates and deadlines:

  1. Monthly Reporting
  • Due Date: Generally, the 21st day of the following month.
  • Monthly reporting is typically required for larger businesses.
  1. Annual Reporting
  • Due Date: Varies based on the financial year.
  • Smaller businesses may have the option to report on an annual basis.
  1. Annual Reconciliation
  • Due Date: Varies, typically between July and August.
  • The annual reconciliation requires businesses to reconcile their total taxable wages for the financial year and make any necessary adjustments.
  1. Payment Due Dates
  • Due Date: Generally, the same as the reporting due dates.
  • Payroll tax payment is due on or before the reporting due dates.

Businesses need to review and confirm the specific due dates and deadlines applicable to their situation. The Office of State Revenue (OSR) provides detailed information on the dates and timelines on its official website.

Audits and penalties

The OSR conducts regular audits to ensure businesses comply with payroll tax obligations. Maintaining accurate records and having proper systems in place to support your payroll tax calculations is important.

Penalties and interest charges may apply if errors or discrepancies are found during an audit. Engaging the services of a qualified tax professional can help minimize the risk of non-compliance and ensure you are meeting your obligations.

  1. Audits
    The Office of State Revenue (OSR) in Queensland has the authority to conduct audits to ensure compliance with payroll tax obligations. These audits are carried out to verify that businesses accurately report their taxable wages and correctly calculate their payroll tax liabilities. The primary purpose of audits is to maintain fairness and equity in the payroll tax system.

During an audit, the OSR may request relevant documents and records related to payrolls, such as payroll registers, employment contracts, timesheets, and financial statements. They may also interview key personnel involved in payroll processes. The audit process is designed to assess the accuracy and completeness of payroll tax reporting and identify any non-compliance.

  1. Penalties
    Non-compliance with QLD payroll tax obligations can result in penalties and interest charges. The OSR has the authority to impose penalties to encourage businesses to fulfil their obligations and deter tax evasion. The specific penalties and interest rates may vary, but they are generally calculated based on the amount of unpaid tax and the period of non-compliance.

Common penalties for payroll tax non-compliance can include the following:

  • Failure To Register: A penalty for not registering for payroll tax when required may be imposed.
  • Late Lodgment: Failing to lodge payroll tax returns by the due date can result in penalties.
  • Underpayment Or Non-Payment Of Payroll Tax: Businesses that fail to pay the correct amount of payroll tax, intentionally or unintentionally, may face penalties.
  • False Or Misleading Statements: Providing false or misleading information in relation to payroll tax can lead to penalties.

Businesses need to understand their payroll tax obligations, maintain accurate records, and meet reporting and payment deadlines to minimize the risk of penalties. Businesses can often rectify unintentional errors or mistakes by voluntarily disclosing the error to the OSR and paying any outstanding tax, potentially reducing or waiving penalties.

Businesses facing payroll tax audits or penalties are encouraged to seek professional advice and cooperate fully with the OSR. By demonstrating a commitment to compliance and rectifying any non-compliance, businesses can mitigate the impact of penalties and maintain a positive relationship with the OSR.

QLD Payroll tax grouping

Payroll tax grouping, or group employer provisions, is used in QLD payroll tax to treat related businesses as a single entity for payroll tax assessment. It aims to prevent businesses from avoiding payroll tax liabilities by splitting their operations into multiple entities.

Under the payroll tax grouping provisions, businesses that are considered related or connected may be grouped, and their wages aggregated for payroll tax calculation. This means that the combined wages of all grouped entities are taken into account when determining whether the threshold for payroll tax liability has been exceeded.

In QLD, the grouping provisions apply when there is a relationship of control or common control between entities. This can include situations where there is a controlling interest in one entity by another or where multiple entities are under common control or management.

Grouping ensures businesses cannot artificially reduce payroll tax liability by dividing their workforce or operations among multiple entities. Treating related entities as a single unit intends to maintain fairness and equity in the payroll tax system.

It’s important for businesses to understand the rules and criteria for payroll tax grouping in QLD. The Office of State Revenue (OSR) provides guidelines and information on when grouping provisions apply and how they are implemented. Businesses that are part of a group are required to report their combined wages and fulfil their payroll tax obligations accordingly.

Businesses should consult with tax professionals or the OSR to determine whether they are subject to payroll tax grouping and to ensure compliance with the relevant regulations. Adhering to the grouping provisions helps businesses avoid penalties and maintain compliance with payroll tax requirements in QLD.

NSW Payroll Tax

NSW Payroll Tax Thresholds

In NSW, payroll tax applies to all remunerations given to employees, which include salaries, wages, commissions, bonuses, and allowances. Additionally, it covers employer contributions like superannuation, fringe benefits, and certain contractor payments, unless specific exemptions apply. The tax is imposed when the total payments exceed the payroll tax threshold, which is set annually by the state government. 

NSW Payroll Tax thresholds

Understanding the thresholds and rates for payroll tax is vital for any business operating in New South Wales (NSW), as these figures determine the tax liabilities based on the total wages paid to employees. 

Current Threshold for the 2024 Fiscal Year 

For the fiscal year running from 1 July 2023 to 30 June 2024, the payroll tax threshold in NSW is set at $1.2 million. This threshold represents the amount of total Australian wages a business can pay before payroll tax is levied. It is calculated on an annual basis but can also be broken down into a monthly threshold of $100,000.  

This means if an employer’s total monthly wage bill exceeds $100,000, they are required to register for and pay payroll tax on the excess amount at the applicable rate. 

NSW Payroll Tax Rates

The payroll tax rate for the 2024 fiscal year is 5.45%. This rate is applied to the amount of wages that exceeds the threshold.  

For instance, if a business has a monthly wage bill of $150,000, they will be liable for payroll tax on $50,000 (the amount that exceeds the $100,000 monthly threshold) at the 5.45% rate. This rate has been designed to balance the tax burden on businesses while providing essential revenue to fund state services. 

This increase in thresholds over recent years reflects the government’s response to economic pressures and the business climate, aiming to alleviate some tax burdens from smaller businesses while still ensuring sufficient revenue generation for state funded services. The tax rate, similarly, has seen adjustments. The stability of the rate at 5.45% in recent years aims to provide businesses with predictability in their financial planning. 

These adjustments are indicative of NSW’s approach to supporting businesses while balancing the need for tax revenue to fund essential state services. The evolution of these rates and thresholds demonstrates the state’s commitment to fostering a business friendly environment amidst changing economic landscapes. 

What are the Criteria for Businesses That Must Register for Payroll Tax 

Registration for payroll tax is mandatory for businesses if their total Australian wages exceed the payroll tax threshold, which for the 2024 fiscal year is set at $1.2 million annually, or $100,000 monthly. This includes wages paid to employees, along with other compensations such as allowances, superannuation contributions, bonuses, and commissions. 

Additionally, businesses that are part of a group are treated as a single entity for the purposes of payroll tax. This means that the total wages paid by all entities within the group are aggregated to determine if they exceed the threshold.  

If the combined total does surpass the threshold, then each entity in the group must register for payroll tax, regardless of whether individual entities on their own would not meet the threshold. 

Steps to Register for Payroll Tax in NSW 

Registering for payroll tax in NSW is a straightforward process that can be completed online. Here’s how businesses can do it: 

  • Determine Eligibility: First, the business must determine if total wage payment exceeds the threshold for the fiscal year. 
  • Gather Required Information: Before starting the registration process, gather all necessary information including Australian Business Number (ABN), business contact details, and wage details. 
  • Access the Online Portal: Go to the Revenue NSW website and access the online registration portal for payroll tax. 
  • Complete the Application: Fill in the required fields in the application form. This includes providing details about the business and estimated monthly wages. 
  • Submit the Form: After reviewing the information, submit the registration form online. 
  • Receive Confirmation: Once the registration is processed, a confirmation along with a unique payroll tax number and details on how to comply with filing and payment processes is received. 

Group Registrations 

For businesses that are part of a group, the registration process involves declaring their group status. A group can consist of multiple businesses under common ownership, control, or association. When registering, each member of the group needs to disclose the group relationship and provide information about the other members. 

The principal group employer, typically the business within the group with the highest Australian wages, may be nominated to undertake certain responsibilities on behalf of the group, such as lodging consolidated returns or making payments. However, each member of the group must still register individually and is liable for their share of the payroll tax based on the group’s total Australian wages. 

Calculating Payroll Tax in NSW

In NSW, payroll tax is applied to a broad range of wage components. These include: 

  • Salaries: The basic remuneration paid to employees. 
  • Superannuation Contributions: Employer contributions to pension funds. 
  • Allowances: Various allowances provided to employees, such as car, travel, or meal allowances. 
  • Bonuses and Commissions: Performance related payments. 
  • Fringe Benefits: Benefits provided to employees that are not in the form of money, such as company cars for personal use. 

These components collectively form the taxable wages base on which payroll tax is calculated. It is essential for businesses to understand which components are taxable to accurately determine their payroll tax liabilities. 

Calculation of the Monthly Threshold 

The monthly threshold is not a fixed amount but is calculated based on the number of days in each specific month. This approach ensures fairness, adjusting for shorter or longer months. The formula used to calculate the monthly threshold is as follows: 

Monthly Threshold = (Number of days in the month/Number of days in the financial year)×Annual Threshold 

This calculation means that for months with 31 days, the threshold will be slightly higher, and for shorter months like February, it will be lower. 

 

Days in the Month  Threshold 
29  $95,082 
30  $98,361 
31  $101,639 

 

This table clearly displays how the payroll tax threshold varies with the different numbers of days in each month for the 2023-24 financial year in New South Wales. 

Example of Monthly Payroll Tax Calculation 

Here is an example to illustrate how the monthly payroll tax is calculated: 

Step 1: Calculate the Monthly Threshold 

For a month with 31 days: Monthly Threshold = (31/366)×1,200,000 = $101,639 

Step 2: Calculate the Taxable Wages for the Month 

If a business pays $150,000 in wages for a 31 day month 

Step 3: Determine the Excess Wages 

Excess wages = Total monthly wages – Monthly threshold 

Excess wages = $150,000 – $101,639 = $48,361 

Step 4: Apply the Payroll Tax Rate 

Payroll tax = Excess wages × Tax rate 

Payroll tax = $48,361 × 5.45% = $2,635.67 

This example shows that the business would need to pay $2,635.67 in payroll tax for that particular month, calculated based on the specific days in the month and the annual threshold. 

Businesses need to perform this calculation each month, adjusting the monthly threshold according to the number of days in each month to ensure accurate and compliant payroll tax payments. 

Monthly and Annual Obligations 

Regular compliance involves both monthly returns and an annual reconciliation process, which are critical in maintaining accurate tax records. 

Monthly Returns and Due Dates 

Employers are required to calculate and pay payroll tax on a monthly basis if their wages exceed the monthly threshold. The due date for these payments is the 7th day of the following month, or the next business day if the 7th falls on a weekend or public holiday. Employers must also submit a monthly return detailing the wages paid during the month and the tax calculated on those wages. 

Annual Reconciliation and Its Importance 

At the end of each financial year, employers must complete an annual reconciliation. This process involves reviewing the total wages paid throughout the year and ensuring that the correct amount of payroll tax has been paid. 

The annual reconciliation is due by July 28 each year. It serves as a crucial check to ensure that monthly payments have been accurate and that the employer is fully compliant with payroll tax regulations. 

Penalties for Late Payments and Non Compliance 

Failure to meet payroll tax obligations on time can result in significant penalties and interest charges. If monthly or annual payments are submitted after the due date, Revenue NSW may impose penalties to discourage late payment and encourage compliance.  

Additionally, inaccuracies in reported wages or failure to register for payroll tax when required can lead to further financial penalties, making it imperative for businesses to manage their payroll tax obligations carefully. 

Relief Measures and Rebates for Payroll Tax in NSW 

Businesses in New South Wales can access various payroll tax rebates and relief measures, especially those introduced to mitigate the impact of economic challenges like the COVID19 pandemic. 

Payroll Tax Rebates Available in NSW 

NSW offers payroll tax rebates to encourage businesses to hire certain categories of employees, such as apprentices and trainees. These rebates allow businesses to reduce the amount of payroll tax they are required to pay by claiming back a portion of the wages paid to these employees.  

Specifically, wages paid to approved apprentices and new entrant trainees who are recognised by Training Services NSW are eligible for these rebates. This initiative is designed to support the training and development of the workforce within the state. 

Record Keeping Requirements for Payroll Tax in NSW 

Maintaining accurate payroll records is a legal requirement for businesses in NSW and plays a critical role in ensuring compliance with payroll tax regulations. 

Businesses must keep comprehensive records of all payments to employees, including wages, salaries, bonuses, allowances, and superannuation contributions. These records should include detailed information about the nature of the payments and the employees receiving them. Additionally, any adjustments or corrections to payroll calculations must also be documented. 

The law requires that all payroll records be kept for a minimum of five years. This period allows for sufficient time should any audits or reviews be conducted by tax authorities. The duration is counted from the last entry made in each record, ensuring that all documents are available for reference or verification for the full statutory period. 

Keeping payroll records for the required duration is crucial not only for compliance with tax laws but also for resolving any discrepancies during tax assessments and audits. These records serve as proof of the business’s adherence to tax regulations and can protect against legal consequences and penalties for non compliance. 

VIC Payroll Tax

Victoria Payroll Tax Threshold

Businesses operating in Victoria must register for payroll tax if their total wages exceed the prescribed monthly threshold. This registration is mandatory once the employer’s wage bill reaches this limit, not just at the end of the financial year, ensuring timely compliance throughout the operational year. 

The threshold for payroll tax in Victoria for 1 July 2023 to 30 June 2024 is set at $700,000 annually, which breaks down to a monthly threshold of approximately $58,333. This means that any business with a wage expense exceeding this monthly figure should consider themselves within the purview of payroll tax obligations. 

The payroll tax year aligns with the financial year, running from July 1 to June 30 of the following year. Businesses are required to calculate their total payroll for this period to determine if they meet the threshold for tax liability. 

Victoria Payroll Tax Rates

  • Standard Payroll Tax Rate 

In Victoria, the standard rate of payroll tax is 4.85%. This rate applies to the total wages paid by a business that exceeds the tax free threshold. 

  • Special Rate for Regional Victorian Employers 

To encourage businesses to operate out of regional areas and support local economies, the Victorian government offers a reduced payroll tax rate to regional employers. This rate is significantly lower at 1.2125%, which applies under specific conditions designed to support regional development. 

  • Circumstances Under Which Different Rates Apply 

Different payroll tax rates apply based on the location of the employees and the total amount of wages paid. The standard rate applies universally across metropolitan Melbourne, while the special rate is designated for employers who pay wages to employees based in regional Victoria. These rates aim to balance the economic growth across different areas of the state, fostering broader economic participation and development. 

Victoria Payroll Tax Surcharges

In Victoria, businesses that are liable for payroll tax and have substantial payroll expenses across Australia may also be subject to additional payroll tax surcharges. These surcharges come into play when a business’s Australian wages exceed $10 million annually, with a corresponding monthly threshold of $833,333. 

Specific Payroll Tax Surcharges 

  • Mental Health and Wellbeing Surcharge: This surcharge was introduced on January 1, 2022, as part of Victoria’s commitment to funding mental health services. It targets businesses with significant payroll investments, reflecting the state’s strategy to support health initiatives through contributions from financially capable enterprises. 
  • COVID19 Debt Temporary Payroll Tax Surcharge: Starting from July 1, 2023, and set to last for a decade until June 30, 2033, this surcharge is designed to help the state recover from the financial impact of the COVID19 pandemic. It applies to businesses with large payroll sizes, assisting in mitigating the economic strain incurred during the health crisis. 

Calculation of Surcharges 

The calculation of both surcharges follows the same principle: 

  • Businesses with a national payroll exceeding $10 million but less than $100 million are required to pay an additional combined surcharge of 1% on their Victorian taxable wages. 
  • For those with a national payroll over $100 million, the surcharge rate doubles to a combined 2%. 

These surcharges are specifically levied on the portion of wages paid in Victoria, above these significant payroll thresholds, ensuring that only the businesses with the largest economic footprints contribute to these state wide recovery and support measures. 

Annual Reconciliation and Payment 

The process of annual reconciliation involves businesses reviewing their payroll records to ensure that the total payroll tax paid throughout the financial year accurately reflects their total wage payments. This process is crucial as it allows both the business and the tax authorities to confirm that the correct amount of payroll tax has been paid. It involves submitting detailed wage information to the State Revenue Office (SRO) of Victoria, ensuring compliance and accuracy in tax reporting. 

Monthly Self Assessment and Payment Deadlines 

Businesses are required to perform a monthly self assessment of their payroll to determine if they owe any payroll tax for the month. If their monthly wages exceed the threshold, they must calculate the tax due and make a payment to the SRO.  

These payments are typically due by the seventh day of the following month, ensuring that payroll tax obligations are met regularly and consistently throughout the year. This method helps in managing cash flows more effectively and ensures that businesses do not face a large annual tax burden unexpectedly. 

Exemptions and Special Considerations 

Victoria Payroll Tax Exemptions 

In Victoria, certain types of wages and payments are exempt from payroll tax. These include: 

  • Primary caregiver leave and secondary caregiver leave, previously known as adoption and maternity parental leave. 
  • Payments under the Commonwealth’s paid parental leave programme. 
  • Contributions made to schemes that benefit employees in case of redundancy. 
  • Compensation for employees who take time off to volunteer as firefighters or for other emergency response activities. 
  • Salary payments to individuals on leave from work serving in the Defence Forces. 
  • Payments related to bona fide redundancy or early retirement scenarios. 
  • Wages issued by non profit group training organisations, and, effective from July 1, 2018, this exemption has been extended to include for profit group training organisations. 

Special Provisions for Certain Types of Employers 

Payroll tax exemptions in Victoria offer relief to a variety of organisations, recognising the special nature of their work and its societal benefits. Below are key groups and circumstances where payroll tax does not apply, helping to support the efforts of these entities in their service to the community. 

  • Non profit organisations focused primarily on charitable, benevolent, philanthropic, or patriotic activities are exempt from payroll tax, excluding schools and educational bodies. This exemption applies when wages are paid to employees exclusively engaged in these noble activities, though organisations involved in commercial operations may face restrictions. 
  • Public benevolent institutions are exempt from payroll tax if their employees are solely doing benevolent work. 
  • Religious institutions qualify for payroll tax exemptions for wages paid to individuals solely performing religious duties. 
  • Non profit non government schools providing education up to the secondary level are exempt, but starting July 1, 2024, only those schools declared exempt by the Minister for Education will continue to enjoy this benefit. 
  • Healthcare service providers such as public hospitals, non profit hospitals, denominational hospitals, public health services, registered community health centres, multi purpose services, ambulance services, and the Victorian Institute of Forensic Mental Health are exempt when paying wages for work typically associated with healthcare services. 
  • Municipalities are generally exempt from payroll tax, except for wages related to specific business activities like supplying water or electricity. 
  • State school councils as defined by the Education and Training Reform Act 2006 are exempt from payroll tax. 
  • Approved group training organisations (GTOs) do not have to pay payroll tax on wages paid to new apprentice entrants who are on hired to host clients, covering both apprentices and trainees under their programmes. 

Payroll Tax on Contractor Payments 

Payments made to contractors can be classified as wages for payroll tax purposes under certain conditions. This classification occurs when an individual or organisation engages a contractor, effectively making them an employer, and therefore liable for payroll tax on payments deemed as wages.  

Contractors in this context include sub contractors, consultants, and outworkers. The relevant provisions apply irrespective of whether these contractors operate through a company, trust, partnership, or as a sole trader. 

Exemptions for Contractor Payments 

While payments to contractors are generally taxable, there are several exemptions that can apply to specific contracts. If any of these exemptions are applicable to a given contract, the payments under that contract are not considered taxable.  

Payroll Tax for Employment Agencies 

Employment agents are responsible for paying payroll tax on payments made under employment agency contracts. These contracts typically involve the agent on hiring a worker to a client. In such scenarios, neither the client nor the service provider (the worker) enters into any direct contractual agreement among themselves. 

In the context of payroll tax, an employment agency contract is an agreement through which an employment agent provides a service provider to work for a client. Here, the employment agent is deemed to be the employer, the on hired worker is considered an employee, and any payments made to the worker are treated as wages. 

Exclusions and Client Responsibility 

It’s important to note that if the arrangement between the service provider and the client evolves into or establishes a direct employment relationship, known as a placement arrangement, the client then assumes the role of employer for payroll tax purposes. In such cases, the employment agency contract does not apply, and the client is responsible for the payroll tax obligations. 

Furthermore, it is specified that employment agency contracts do not qualify for the contractor exemptions that might apply in other circumstances, ensuring a clear delineation in how payroll tax rules are applied to different contractual relationships. 

Recent Changes and Legislative Adjustments 

The Victorian government has announced an increase in the payroll tax free threshold to alleviate the tax burden on smaller businesses. Starting from July 2024, the threshold will be raised from $700,000 to $900,000, with a further increase to $1 million by July 2025.  

This measure is expected to benefit thousands of small businesses by reducing their tax liabilities and encouraging business growth and employment. 

Phase Out of the Tax Free Threshold for Larger Businesses 

Conversely, there is a planned phase out of the tax free threshold for larger businesses with substantial Australia wide wages. This adjustment aims to scale the payroll tax exemption based on the size of the business, where businesses with higher wage bills will progressively lose their entitlement to the tax free threshold. This phase out is structured to ensure that businesses with significant financial capabilities contribute more substantially to state revenue. 

Removal of Exemptions for High Fee Non Government Schools 

From July 2024, the Victorian government will remove the payroll tax exemption for high fee non government schools. This change is intended to standardise the treatment of all educational institutions under the payroll tax system.  

The top 15% of non government schools by fee level will lose their exemption, aligning them with government schools in terms of payroll tax obligations. This adjustment reflects an effort to ensure a fairer tax system and redistribute financial resources across the education sector. 

WA Payroll Tax

When employees work exclusively in one state or territory during a calendar month, payroll tax is due in that jurisdiction. For instance, if services are rendered only in Western Australia during a specific month, payroll tax for that period should be paid to Western Australia. 

Multiple Jurisdictions and International Services  

The determination of payroll tax liability for employees who provide services across multiple jurisdictions, including internationally, follows a series of tests outlined in Revenue Ruling PTA 039, which deals with Nexus Provisions. This guideline assists employers in understanding when to declare wages for payroll tax in Western Australia using a systematic approach: 

  • The employee’s principal place of residence. 
  • The location of the employer’s registered ABN or principal place of business. 
  • The location where the wages are paid. 
  • The primary location where the services were performed. 

International Assignments  

Wages for an employee working abroad are exempt from payroll tax in Western Australia if the overseas assignment lasts for more than six continuous months. This exemption includes the entire duration of the assignment, starting from the first day.  

However, if the assignment is shorter than six months, the wages are taxable in the Australian jurisdiction where they are paid or deemed payable. For these purposes, wages are considered paid in Western Australia if they are credited to a bank account or delivered to an address within the state. 

Offshore Services  

Wages related to services conducted offshore, beyond the territorial limits of any Australian state but not in a foreign country, are taxable in the jurisdiction where they are paid. This scenario typically includes workers on oil rigs, who are taxable in the jurisdiction of the wage payment unless the oil rig is physically located in another country. 

Payroll Tax Rates and Thresholds for 2024 

Starting from 1 July 2023, the applicable payroll tax rate in Western Australia is set at 5.5% for taxable wages disbursed by employers or employer groups. 

Employers or groups of employers whose annual taxable wages in Australia range between $1 million and $7.5 million are subject to a diminishing tax free threshold. This means the amount of wages exempt from payroll tax decreases as the total taxable wages approach $7.5 million.  

Adjustments to the threshold are possible if an employer does not pay wages throughout the entire financial year, joins a payroll group, or leaves one. This flexibility ensures the tax calculations accurately reflect changes in an employer’s operational status during the fiscal year. 

Employers with wages exceeding $7.5 million will not benefit from any tax free threshold, resulting in the payroll tax being applied to their entire wages.Top of Form 

Example: 

Consider an employer who pays monthly wages amounting to $92,000. Over the 2023-24 assessment year, this sums up to $1,104,000 in total wages. This figure surpasses the initial tax free threshold of $1 million. Consequently, the payroll tax calculated for this employer would be approximately $6,600 for the year.  

This calculation is derived from the formula: WA taxable wages minus the deductible amount multiplied by the tax rate. 

For a more precise calculation tailored to specific circumstances, employers can use the payroll tax calculator provided by the Western Australian government. This tool helps estimate the exact payroll tax liability based on monthly or annual wage figures. 

In summary, starting from 1 July 2023, the payroll tax structure is as follows: 

Annual Australian Taxable Wages  Tax Rate  Calculation of Tax Payable 

 

More than $1 million but less than $7.5 million 

 

 

5.5% 

 

WA taxable wages – deductible amount x tax rate 

 

$7.5 million or more 

 

 

5.5% 

 

WA taxable wages x tax rate 

This table simplifies the understanding of how payroll tax is calculated based on the annual taxable wages bracket.  

This structured approach ensures that the tax impact is appropriately scaled, supporting equitable financial obligations across different business scales in the state. 

Calculation of Payroll Tax Liability Based on Employer Type 

The payroll tax liability is calculated once an employer has declared their taxable wages. The specific method of calculation varies depending on the employer’s classification within the payroll tax framework. 

Types of Employers 

  • Local Non Group Employer  

This classification applies to employers who solely pay wages within Western Australia and are not part of any payroll tax group. These employers independently bear responsibility for their payroll tax without the influence of connected entities. 

  • Local Group Employer  

Employers falling into this category are part of a group where each member pays wages only within Western Australia. A Designated Group Employer (DGE) must be appointed for the group to centralise the payroll tax obligations in Western Australia. 

  • Interstate Non Group Employer 

These are employers who pay wages in Western Australia as well as in other Australian states or territories but are not part of a payroll tax group. Their tax calculations consider wages paid across different jurisdictions but are calculated independently of any group dynamics. 

  • Interstate Group Employer  

Such employers are part of a group where wages are paid both in Western Australia and in other states or territories. This category also requires the nomination of a DGE who oversees and consolidates payroll tax responsibilities for wages paid within Western Australia, coordinating with tax obligations in other regions. 

Each of these classifications highlights the nuanced approach to payroll tax liability, which takes into account both geographic and group related factors to ensure accurate and fair tax assessment. 

Payroll Tax Registration in Western Australia 

Businesses that pay wages in Western Australia or the Indian Ocean Territories must register for payroll tax through the Revenue Online system. Registration is required when the total Australian taxable wages exceed $83,333 in any single month.  

For businesses that are part of a group, the combined Australian taxable wages of all group members are considered in determining the registration requirement. 

Registration Deadline  

Employers should complete their registration within seven days following the month in which they first meet the payroll tax liability threshold. 

Cancellation of Registration  

Employers may cancel their payroll tax registration if they stop employing in Western Australia or the Indian Ocean Territories, or if their total annual Australian taxable wages drop below the annual threshold. Cancellations can be requested by submitting a web enquiry, providing the date employment ceased or the reason for cancellation such as business sale, disassociation from a group, or wages falling below the threshold. 

Exemptions from Registration  

Certain employers are exempt from registering for payroll tax. These include: 

  • Religious organisations. 
  • Specified public health service providers. 
  • Schools below tertiary level. 
  • Some government departments, including local governments. 
  • Public benevolent institutions and certain charitable bodies and organisations. 

For these exempt entities, the wages they pay are not assessable for payroll tax purposes, meaning they are not required to register for or pay payroll tax on these wages. This includes certain wages paid by charitable bodies and organisations, which may also qualify for exemptions based on specific criteria related to their operations and services. 

Filing Payroll Tax Returns in Western Australia 

Employers are obligated to lodge payroll tax returns monthly. The due date for each monthly return is the 7th day of the month following the period for which the return is being filed. For instance, the return for April is due by May 7th. Returns must be filed each month regardless of whether tax is due. 

Annual Reconciliation and Adjustments  

At the end of each financial year, employers must complete an annual reconciliation, which includes submitting any necessary adjustments to wage figures. This final return, along with the return for June, is due by July 21st. 

Frequency of Returns  

While payroll tax returns are typically lodged on a monthly basis, employers have the option to lodge quarterly or annually if their circumstances meet certain criteria: 

  • Monthly: For employers with an annual estimated liability of $150,000 or more. 
  • Quarterly and Annually: Employers with an annual estimated liability less than $150,000 can file quarterly, and those with less than $20,000 liability may file annually. In both cases, the due date remains 7 days after the period’s end for quarterly returns, and 21 days after the assessment year ends for annual returns. 

Regardless of the chosen frequency, the annual reconciliation, including the June return, must be submitted by July 21st following the end of the assessment year. 

Modifications to Returns  

Employers can update wage details for previously lodged returns using the Revenue Online (ROL) system. Modifications are permitted until the financial year in question has been reconciled. This allows employers to correct any discrepancies or errors in earlier submissions. 

Payroll Tax Exemptions in Western Australia 

In Western Australia, certain types of wages and payments are not subject to payroll tax. These include: 

  • Motor vehicle and accommodation allowances, particularly those for overnight accommodation provided to truck drivers. 
  • Payments related to maternity, parental, and adoption leave, including paid parental leave. 
  • Workers’ compensation payments. 
  • Some types of government subsidies or reimbursements. 
  • Certain profit and trust distributions, as well as loans considered income to the beneficiary or shareholder. 

Specific categories of employers may qualify for payroll tax exemptions. These employers include: 

  • Religious organisations. 
  • Certain providers of public health services. 
  • Government departments. 
  • Charitable bodies and organisations. 

Organisations falling into these categories need to apply for an exemption by contacting the relevant tax authority and providing documentation such as the organisation’s constitution and an outline of its nature, aims, and objectives. 

GST Related Exemptions  

Wage components that are directly attributable to the Goods and Services Tax (GST) are exempt from payroll tax. However, this exemption does not apply if the wages are associated with fringe benefits, which are taxable. 

Indigenous Wages Rebate in Western Australia 

Employers in Western Australia may be eligible for a Payroll Tax Rebate for Indigenous Wages under certain conditions. This rebate is applicable to wages paid to new Indigenous employees by employers, or groups of employers, whose total annual taxable wages do not exceed $15 million. 

For an employer to qualify for this rebate, they must be receiving a Commonwealth Indigenous Wages Subsidy for the employees in question. The rebate is applicable to wages paid within the first two years of the Indigenous employee’s commencement of employment with the employer. 

It is important to note that the eligibility requirements for this rebate, along with any related deadlines, are strictly enforced and cannot be modified or extended. This ensures that the rebate is accessed promptly and within the designated timeframe. 

Impact of Grouping on Payroll Tax 

When businesses are grouped for payroll tax purposes, the taxable wages of all businesses within the group are combined. This aggregate is used to determine the need for payroll tax registration and the actual tax liability of the group. Only one business within the group, designated as the Designated Group Employer (DGE), is entitled to claim the deductible amount for the entire financial year. 

Designation of the Group Employer  

The businesses within the group have the option to nominate a member as the DGE. If no nomination occurs, the tax authorities may appoint the DGE, typically choosing the business that contributes the highest proportion of wages in Western Australia. If a business is the sole member of its group employing within Western Australia, it automatically becomes the DGE for the group. 

Responsibilities and Liabilities  

Each group member must register for payroll tax independently and file separate returns. However, for the purpose of calculating payroll tax, all members are treated as a single entity based on their collective wages. This results in joint and several liabilities among the group members, meaning if one member fails to meet their tax obligations, the other members may be held responsible for the shortfall. 

Exclusions from Grouping  

There are circumstances where businesses might be eligible for exclusion from grouping: 

  • Employees utilised in a different business. 
  • Businesses under common control. 
  • Tracing interests in corporations. 
  • Smaller groups that are absorbed into a larger group setting. 

However, corporations cannot be excluded from their group if they are related to another corporation within the same group. 

Grouping in Professional Practises  

Professional practises may also be grouped if they share administrative services across two or more businesses, emphasising the breadth of criteria used to determine grouping for payroll tax purposes. 

SA Payroll Tax

Payroll Tax Registration Requirements South Australia 

In South Australia, employers need to register for payroll tax under certain conditions related to their total taxable wages across Australia. Employers whose taxable wages reach or exceed $1.5 million annually must register in South Australia. Additionally, any employer paying wages within South Australia is required to register if their weekly taxable wages throughout Australia surpass $28,846. 

For easier management, it is advised that employers register for payroll tax when their total taxable wages across Australia exceed $125,000 in any given month. This registration is particularly pertinent for employers who are part of a group, as the combined taxable wages of all group members are considered in determining the necessity to register. 

Payroll Tax Threshold for Registration 

Effective Date  Maximum Threshold (Per Annum) 
From 1 January 2019  $1,500,000 

 

The process for registering for payroll tax is conducted online through the designated payroll tax section on the relevant website. Once registered, employers must remit payroll tax by the seventh day of the month following one in which the wage threshold was exceeded. If registration is not completed when required, or if tax payments are delayed, the employer may incur interest and penalty charges on the unpaid tax. 

Cancellation of Payroll Tax Registration 

Organisations can cancel their payroll tax registration in South Australia under specific conditions: 

  • The organisation ceases to employ individuals in South Australia. 
  • If operating as a standalone company and the taxable wages fall below the nationwide threshold. 
  • If part of a group, and the collective taxable wages of the group fall below the national threshold. 

Changes in Employment Details 

Organisations that stop employing under one ABN and start under a new ABAN must take certain steps: 

  • The payroll tax registration associated with the old ABN must be cancelled. 
  • A new payroll tax registration must be filed for the new ABN. This can be done through the RevenueSA Online platform, where guidelines for registration are available. 

Procedures for Cancellation 

Payroll tax registration can be cancelled either during the annual reconciliation process or at any time during the financial year. 

Annual Reconciliation 

Organisations can cancel their registration effective on June 30th as part of completing their annual reconciliation on RevenueSA Online. If the reconciliation has been finalised, it must be modified and resubmitted to include the cancellation. 

During the Financial Year 

To cancel registration during the financial year, organisations must complete and submit the Request to cancel South Australian payroll tax registration form. This form requires details such as the Taxpayer Number (if known), ABN, ACN (if applicable), and the desired date for the cancellation of the payroll tax registration. 

How to Calculate Payroll Tax in South Australia? 

To determine payroll tax liability in South Australia, the following formula is used: 

Payroll Tax Payable = (Gross Taxable South Australian Wages−Deductions) × Tax Rate 

The tax rate applied can vary depending on several factors: 

  • Whether the employer is part of a group. 
  • The total taxable wages paid Australia wide. 

Tax Rates 

Gross Taxable Wages 

 

Tax Rate 

Does not exceed $1.5 million 

 

Nil (0%) 

Exceeds $1.5 million but not $1.7 million 

 

Variable (0% to 4.95%) 

Exceeds $1.7 million 

 

4.95% 

 

The specific tax rate applicable to an employer depends on the total Australian wages and is calculated on a group basis if the employer is part of a group. 

Estimation and Annual Reconciliation 

At the beginning of the financial year, employers estimate their annual taxable Australian wages, which determines an estimated payroll tax rate through RevenueSA Online. This rate is used to calculate monthly payroll tax liabilities. 

Annual Reconciliation: Every July, actual figures replace estimates to finalise the payroll tax rate for the previous year. During this process, any discrepancies between the estimated and actual payroll tax are adjusted. Overpayments result in refunds, whereas underpayments require additional payments. 

Employers are encouraged to periodically review their wage estimates throughout the year, especially if part of a group, to prevent discrepancies at the time of annual reconciliation and ensure accurate tax payments. 

Payroll Tax Deductions 

In South Australia, employers can subtract a deduction amount from the wages they pay before calculating the payroll tax. The maximum annual deduction an employer can claim is $600,000, which breaks down to $50,000 per month. 

Effective Date  Maximum Deduction Per Annum  Maximum Deduction Per Month 
From 1 July 2009  $600,000  $50,000 

 

Variables Influencing Deduction Amounts 

The amount of deduction an employer is eligible to claim can differ based on several factors: 

  • Whether the employer is part of a group or operates independently. 
  • The portion of the financial year during which the employer or the group has employees. 
  • The interstate wages paid by the employer or the group. 

Deduction Claims by Employer Type 

Non Group Employers: Employers who are not part of a group are entitled to claim the full deduction on their own. 

Group Employers: Within a group of employers, only the Designated Group Employer (DGE) has the authority to claim the deduction for the entire group. Other members of the group are generally not entitled to claim individual deductions. 

If the DGE does not use the entire deduction entitlement in a financial year, it can request to allocate the unused portion to other members of the group during the annual reconciliation process. This ensures that the group can maximise the use of the available deduction. 

Regulatory Requirements 

It is mandatory for any changes in group membership to be reported to RevenueSA in writing. RevenueSA will then provide guidance on how to adjust the deduction entitlements for the group based on the new membership structure. This ensures that the deduction allocations remain accurate and compliant with state regulations. 

Calculation of Deduction Entitlement 

Deduction for Employers Operating Solely in South Australia 

Full Financial Year Employment: Employers who operate throughout the entire financial year in South Australia are eligible to claim the full annual deduction of $600,000. This deduction is distributed monthly as $50,000. 

Partial Financial Year Employment: For employers who operate only part of the financial year in South Australia, the deduction is calculated proportionally.  

Deduction = (Number of Days Employing in SA/365)×Maximum Deduction 

Where: 

  • Number of Days Employing in SA is the total days the employer has active operations in South Australia within the financial year. 
  • Maximum Deduction is the total allowable annual deduction, typically $600,000. 

Deduction for Employers Operating in South Australia and Interstate 

Full Financial Year Employment: Employers who operate both in South Australia and interstate for the entire financial year can claim a deduction based on the proportion of their South Australian wages to their total Australian wide wages. The formula used is: 

(Taxable South Australian Wages / Taxable Australia Wide Wages) × Maximum Deduction 

This calculation ensures that the deduction reflects the relative portion of employment activity conducted within South Australia. 

Partial Financial Year Employment: For those operating in South Australia and interstate but only for part of the financial year, the deduction is calculated using a more complex formula that takes into account both the ratio of South Australian wages to total Australian wide wages and the proportion of the year they employed in South Australia. The formula is: 

(Taxable South Australian Wages/Taxable Australia Wide Wages) × (Maximum Deduction) × (No. of Days Employing in SA/365) 

Top of Form 

Taxable Wages in South Australia 

Taxable wages for payroll tax purposes in South Australia include earnings paid or due to an employee by an employer in any specific month, known as the relevant month, if the wages meet any of the following criteria: 

  • They are paid or payable within South Australia and are completely associated with services either fully or partly carried out within the state. 
  • The wages are paid or due within South Australia for that month and are entirely for services performed outside Australia, provided that the employee has worked for the employer within South Australia at some point during the preceding six months. 
  • If the wages are paid or due anywhere in Australia outside of South Australia, they are still taxable if they are solely for services that are entirely performed within South Australia. 
  • Wages paid or due outside of Australia are taxable if they pertain wholly to services primarily conducted within South Australia. 
  • Wages are also taxable if they do not fall under any exemptions specified under Division 9, Part 4 of the Payroll Tax Act 2009. 

These conditions ensure that payroll tax is levied on wages connected to work performed in South Australia, irrespective of where the wages are paid. 

Payroll Tax Exemptions and Non Taxable Payments 

Payments made under the Return to Work Act 2014 are generally not subject to payroll tax in South Australia. This includes compensation payments made by a ReturnToWorkSA exempt employer, and income maintenance payments limited to no more than two weeks’ wages.  

Furthermore, for self insurers, all compensation payments made in accordance with the Return to Work Act are exempt from payroll tax, regardless of the payment source. However, any compensation paid to incapacitated workers that exceeds the amounts prescribed by the Return to Work Act, often referred to as make up pay, is liable for payroll tax. 

Here’s a brief overview of other specific payment types and their liability status for payroll tax: 

  • Apprentices and Trainees: These payments are generally exempt from payroll tax. 
  • Community Development Programme: Payments under this programme are not liable for payroll tax. 
  • Defence Force Payment: Payments to Defence Force personnel are exempt. 
  • JobKeeper Payments: These payments are not liable for payroll tax. 
  • Maternity and Adoption Leave: These payments are typically exempt from payroll tax. 
  • Volunteer Emergency Workers: Payments to volunteer emergency workers are also exempt from payroll tax. 

These exemptions and non liable statuses help clarify which payments are subject to payroll tax, supporting employers in managing their payroll tax responsibilities more effectively. 

Payroll Tax Returns and Lodgement Dates 2024-2025 

There are two primary types of returns for payroll tax: 

  • Monthly Returns – Regular monthly submissions to account for payroll tax accrued in the preceding month. 
  • Annual Reconciliations – A comprehensive annual submission that reconciles the estimated tax paid monthly with the actual tax due for the fiscal year. 

Lodgement Dates for Monthly and Annual Returns 

Here are the specified lodgement dates for both monthly returns and annual reconciliations over the upcoming years, formatted into tables: 

Lodgement Dates for 2023-24 

Return  Due Date 
April 2024  Tuesday, 7 May 2024 
May 2024  Friday, 7 June 2024 
Annual Reconciliation 2023-24  Monday, 29 July 2024 

 

Lodgement Dates for 2024-25 

Return  Due Date 
July 2024  Wednesday, 7 August 2024 
August 2024  Monday, 9 September 2024 
September 2024  Tuesday, 8 October 2024 
October 2024  Thursday, 7 November 2024 
November 2024  Monday, 9 December 2024 
December 2024  Tuesday, 14 January 2025 
January 2025  Friday, 7 February 2025 
February 2025  Friday, 7 March 2025 
March 2025  Monday, 7 April 2025 
April 2025  Wednesday, 7 May 2025 
May 2025  Tuesday, 10 June 2025 
Annual Reconciliation 2024-25  Monday, 28 July 2025 

 

For both types of returns, if the due date falls on a weekend or public holiday, RevenueSA allows lodgement and payment on the next business day. This flexibility ensures compliance even when the deadline falls outside standard business hours. 

This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.