What is payroll tax?

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Taxation
By
John Liston
John Liston
Director | Adviser
April 28, 2020
minute read

How to ensure your business meets its payroll tax obligations

Payroll tax is a self-assessed tax that businesses pay, which is calculated based on the total amount you spend on employee wages. It covers a variety of benefits and payments you make to your employees, and is assessed as an accumulated sum.

To receive your state’s full tax-free threshold, your business must have employed staff or contractors for the full current financial year, and only within one state or territory.

Payroll tax includes:

  • Employee wages (including PAYG) and contractor payments
  • Leave payments
  • Superannuation
  • Bonuses, commissions, allowances, and fringe benefits
  • Remuneration for company directors (if applicable)
  • Employee termination payments

Liston Newton Advisory is here to help you keep your business on track, and ensure you meet your payroll tax obligations. Contact us today to speak to a business tax expert.

When do I lodge payroll tax?

Not all business are required to pay payroll tax.

The amount of payroll tax you’re required to pay differs from state to state, but there is always a set threshold that governs when you state paying this tax.

As an employer who pays wages or benefits as per the above list, you must register for payroll tax if your total Australian wages meet or exceed your state’s threshold.

Depending on which state you live in it can be lodged either monthly, quarterly, or annually, and you lodge it directly with your state’s revenue office.

What is the payroll tax threshold in my state?

State

Threshold

Tax rate

VIC

  • $54,166 (monthly)
  • $650,000 (annually)

4.85%, or 2.425% for regional employers

NSW

  • $65,205 (28-day month)
  • $69,863 (30-day month)
  • $72,192 (31-day month)
  • $950,000 (annually)

5.45%

ACT

  • $166,666.66 (monthly)
  • $2 million (annually)

6.85%

QLD

  • $25,000 (weekly)
  • $108,333 (monthly)
  • $1.3 million (annually)

4.75%

NT

  • $125,000 (monthly)
  • $1.5 million (annually)

5.5%

WA

  • $79,166 (monthly)
  • $950,000 (annually)

5.5%, with $950,000—$7.5 million receiving a diminishing threshold

SA

  • $125,000 (monthly)
  • $1.5 million (annually)

Variable from 0% to 4.95%

TAS

  • $95,890 (28-day month)
  • $102,740 (30-day month)
  • $106,164 (31-day month)
  • $1.25 million (annually)

4%, but amounts over $2 million receive a subsequent rate of 6.1% and a 60% increase on monthly thresholds

How to register for payroll tax

If your combined wages, benefits, and other payments are set to reach your state’s threshold, then you’re required to register for payroll tax.

Payroll tax is based on a self-assessment so speak to your business tax adviser if you’re unsure of your calculations. It's important to note that payroll tax is audited regularly, so you must pay close attention to avoid coming under scrutiny from your state’s revenue office.

To apply for payroll tax, you need to supply:

  1. Your business ABN
  2. Total amount of wages paid in the state/s in which your business operates, across all businesses (if applicable)
  3. An estimate for the following year’s combined wages

Example of payroll tax (in Victoria)

Gary runs an equipment hire business with four employees. Each employee is on $67,500, plus 9.5% superannuation. His employees clock in, clock out, and don’t travel, so no extra allowances or fringe benefits are required.

Gary himself earns an annual salary of $130,000, plus putting 9.5% aside in super.

In total his payable wages are $36,500 monthly, and $438,000 annually. This means that Gary isn’t required to pay payroll tax.

Payroll tax for businesses that operate in more than one state

Payroll tax is assessed on the total amount of the wages and benefits you pay, Australia-wide. If you operate a business in more than one state, your business is assessed on the total sum of all of those wages.

The full amount you pay is then assessed in each state your business operates from, meaning you may be liable to pay payroll tax in more than one state.

Your business tax adviser can guide you on the best course of action.

Example

Gary expands his business to Tasmania, and takes on three new staff at $67,500 a year plus 9.5% super, and a store manager on $85,000 a year plus 9.5% super.

Gary is now paying ~$62,734 in wages monthly, and $752,812.50 annually.

As such, he now exceeds the threshold for payroll tax in Victoria, and is required to pay 4.85% tax on his wages. In Tasmania, his annual wages are below the $1.25 million threshold, so he is not required to apply for payroll tax in Tasmania.

What if I am involved in more than one business?

You may own another business, or demonstrate substantial ownership or management relations across more than one business. If so, your payroll tax obligations are assessed against the combined total wages you pay, across all your businesses.

As in the above example, if the wages you pay across all your businesses exceed your relevant state’s threshold, you’re required to register for payroll tax in that state. Upon registering you must state that you own, or are substantially involved with, more than one business, or you’re part of a business group.

In a business group, only one member of the group is able to claim their state’s tax-free threshold. Each remaining member must pay a flat tax rate.

If you register for payroll tax as a single business, but become involved with or purchase another business later, you can apply to change your status to your state’s revenue office.

Get business tax support and ensure you meet your payroll tax obligations

As a small business you may not meet the payroll tax threshold. But your business might grow, and you might take on more employees.

When you do, it's important that you make an accurate self-assessment of your payable wages and benefits, to ensure you lodge your payroll tax correctly, and on time.

Liston Newton Advisory business tax experts are available to help you keep track of your payroll tax obligations. Contact us today to ensure your business continues to meet its requirements.

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