We understand that grappling with the complexities of payroll tax can be overwhelming and, let's be honest, a tad dull. Here we hope to shed some light on the matter and make it as painless as possible.
First things first, what is payroll tax?
Payroll Tax is a State-based tax based on the wages paid to your employees in each State or Territory. The rules in each State/Territory are slightly different, but fundamentally if your annual wages are below a certain level (threshold), then you don’t need to pay Payroll Tax. When your wages do exceed the threshold, then Payroll Tax is payable.
What is included in “wages”?
The details below are not an exhaustive list of what payments are taxable or exempt, but it gives you an idea of the complexity and level of detail you need to be aware of so you correctly calculate your wages for Payroll Tax purposes.
Taxable wages include:
all salaries and wages paid to employees
allowances, bonuses and commissions
payments to contractors who are deemed as employees
The following payments are generally excluded from taxable wages:
defence force payments
termination payments, in certain circumstances
Contractors (individuals, not companies) are deemed as employees in certain circumstances, and the ATO website contains details on how to make the distinction. The important thing to note is that just because a contractor has an ABN, it does not automatically mean they are not considered an employee for Superannuation, Workers’ Compensation or Payroll Tax purposes.
Registering for payroll tax
It’s important to note that you don’t wait until the end of each financial year to see if your wages have exceeded the threshold. You need to be monitoring your wages on a monthly basis and must register for Payroll Tax within seven days of the month your wages first go over the monthly threshold (SA allows you to register when your wages “consistently exceed” the monthly threshold).
If you are a member of a “group” of employers for payroll tax purposes, then the total wages of the group determine whether or not you need to register for Payroll Tax.
These are the thresholds for the 2023/24 year:
What if I have employees in more than one State or Territory?
If you pay wages in more than one State or Territory, you must register in each of those States and Territories if your total taxable Australia-wide wages exceed the threshold in those States/Territories.
But don’t panic; you don’t pay tax in each State on the total Australia-wide wages; you pay tax based on wages paid in the particular State only. The requirement is just that you register in each State based on your Australia-wide wages.
For example, an employer’s annual taxable Australia-wide wages are $1,400,000, and their wages are as follows.
QLD - $600,000 (threshold $1,300,000) – you must register
NSW - $600,000 (threshold $1,200,000) – you must register
SA - $200,000 (threshold $1,500,000) – you do not need to register
How often do I have to pay Payroll Tax?
As usual, the rules are different in each State or Territory, but generally, you will need to lodge your return and pay Payroll Tax within seven days of the end of each month. Smaller employers may be required to lodge returns only half-yearly or yearly. Your return commonly contains high-level summary information on wages and superannuation paid.
At the end of each financial year, you then need to lodge an annual return. At this time, you provide more detailed information about your wages broken down into categories such as wages, allowances, bonuses, commissions, fringe benefits, superannuation and contractor payments.
Payroll Tax – Super – Workers Compensation
It’s important to understand the different wage components that are included and excluded for each of these three areas as it is different, and payments that are included in one area can be excluded in another. A good example would be allowances – tools, vehicle, and laundry allowances do not attract superannuation, but they are reportable for both Workers’ Compensation and Payroll Tax purposes.
Please make sure you check the regulations in your State or Territory to ensure you are correctly calculating your wages and paying Payroll Tax correctly. It’s ok to find payroll confusing, and it’s a good idea to seek professional assistance if you need any help.
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