It’s important to know whether your business needs to pay payroll tax because your business might be closer to the payment threshold than you think. Payroll tax is different in each state and territory and as a result, it can be complicated to assess when you have staff in multiple locations around Australia. Payroll tax can be further complicated if you operate your business through various group structures or use certain contractors. This article will explain the concept of payroll tax and help you understand when your business needs to pay it.

What is Payroll Tax?

Payroll tax is a tax that is assessed on an employee’s wages. Not every business has to pay payroll tax. You only have to pay it if your total wages exceed your state or territory’s tax-free threshold amount set out below.

Payroll tax is generally lodged and paid monthly to your state or territory’s Revenue Office. You should also check with the Revenue Office if your business qualifies for a payroll tax exemption.

Does My Business Have to Pay Payroll Tax, and if so, How Much Do I Pay?

State Payroll Tax Thresholds Payroll Tax Rate
New South Wales NSW businesses must pay payroll tax if the total wages that you have paid meet the following thresholds:

  • $750,000 (annually);
  • $57,534 (28 day month);
  • $61,644 (30 day month); or
  • $63,699 (31 day month).
5.45%.
Victoria Victorian businesses must pay payroll tax if the total wages that you have paid meet the following thresholds:

  • $625,000 (annually); or
  • $52,084 (monthly).
4.85% or 3.65% for regional employers.
Queensland Queensland businesses must pay payroll tax if the total wages that you have paid meet the following thresholds:

  • $1,100,000 (annually); or
  • $91,666 (monthly).
4.75%
Western Australia WA businesses must pay payroll tax if the total wages that you have paid meet the following thresholds:

  • $850,000 (annually); or
  • $70,833 (monthly).

The amount of tax you need to pay increases between $850,000 and $7.5 million.

5.5%
Australian Capital Territory ACT businesses must pay payroll tax if the total wages paid meet the following thresholds:

  • $2,000,000 (annually); or
  • $166,666.66 (monthly).
6.85%
Tasmania Tasmanian businesses must pay payroll tax if the total wages paid meet the following thresholds:

  • $1,250,000 (annually);
  • $95,890 (28 day month);
  • $102,740 (30 day month); or
  • $106,164 (31 day month).
6.1%.
Northern Territory NT businesses must pay payroll tax if the total wages paid meet the following thresholds:

  • $1,500,000 (annually); or
  • $125,000 (monthly).
5.5%
South Australia SA businesses must pay payroll tax if the total wages paid meet the following thresholds:

  • $600,000 (annually); or
  • $50,000 (monthly).
Between 2.5% to 4.95% depending on total wages paid for that financial year.

Note: this information is current as of August 2018. Please consult www.payrolltax.gov.au to check that the threshold amounts have not changed.

What Wages Are Liable for Payroll Tax?

The following payments and benefits attract payroll tax. If these together exceed your state or territory’s payroll tax threshold, you are liable to pay payroll tax:

  • employee wages (including PAYG);
  • contractor payments;
  • company directors’ remuneration;
  • superannuation;
  • most allowances;
  • fringe benefits;
  • bonuses and commissions; and
  • termination payments.

What if I Have Employees in More Than One State?

In summary, you must register in each state or territory where you operate or employ people once your total Australian wages exceed the state or territory payroll threshold amounts.

A full tax-free threshold is only available to employers who:

  • have employed staff for the entire financial year; and
  • do not have employees in another state or territory.

The threshold is reduced if you employ people in more than one state or territory. Employers are required to register when their Australia-wide wage payments exceed the relevant state or territory’s payroll tax threshold. Because total national wages are combined, you might be required to pay payroll tax, even when wages in a particular state or territory are below the relevant threshold for that state or territory. Registration is required in all states or territories.

For example: your business has offices in NSW and QLD. You pay $1 million in wages in NSW and $1 million in wages in QLD for the full financial year. Your total Australian wages are $2 million. The QLD wages you pay are below the payroll threshold of $1.1 million, but as the total Australian wages exceed the threshold, you are required to register for payroll tax in QLD.

Am I Part of a ‘Group of Employers’ for Payroll Tax?

Wages across different businesses that have a substantial ownership or management link between them may be combined to calculate payroll tax.

You might be considered a ‘group of employers’ for payroll tax purposes if any of the below apply:

  • the group is defined as a ‘related bodies corporate’. For example, your business is a holding company or subsidiary of another company;
  • you use the same employees between the businesses;
  • the same person or the same group of people control at least two businesses; or
  • a body has a direct, indirect or aggregate controlling interest in the businesses.

Where group wages exceed the relevant payroll tax threshold, you may need to pay payroll tax, even if a particular body by itself is below the threshold.

I Am Part of a ‘Group of Employers’, What Does This Mean for Me?

When you register for payroll tax, you must state that you are part of a group. If you become part of a group after registering for payroll tax, you can change your status with the Revenue Office.

Registration is required when the group’s total Australian wages exceed the payroll threshold in one of the states or territories you employ in.

When employers are grouped, you must nominate one business as the Designated Group Employer for each state or territory they employ in. This employer does not need to be the same for each state and territory.

Do I Have to Pay Payroll Tax as an Employment Agent?

You may be liable for payroll tax if:

  • You have obtained and paid an individual worker to supply services to a client;
  • The client did not employ the worker;
  • You paid or will pay the worker for these services; or
  • You are entitled to receive payment from the client for the period when they are receiving services from the worker.

Do I Have to Pay Payroll Tax to my Contractors?

If the contractor is a one-person business that works mainly for your business, they are considered an employee for payroll tax services, even if they are not considered employees for other purposes. Therefore, you must pay payroll tax on payments that you make to them. However, there are some exceptions. If you are in doubt, contact your state or territory’s Revenue Office.

How Do I Register for Payroll Tax?

You will need the following information:

  • your ABN;
  • total Australian wages for the current financial year;
  • wages paid in each state or territory the business operates in;
  • an estimate of next year’s wages; and
  • if your business is part of a group, you will need the group’s total Australian and state or territory-based wages.

Each state and territory has its own application process – please refer to your state or territory’s Revenue Office website for details.

Key Takeaways

It’s important to know if and when you need to pay payroll tax, to avoid fines and a headache. It is important to remember that:

  • even if you don’t have many staff in a particular state or territory, you still might have to pay payroll tax if the total national wages you pay exceeds the threshold amount;
  • there are different types of payments that are classified as ‘wages’. Therefore, some employment benefits like company cars and mobile phones might push you over the threshold; and
  • if you’re not sure whether your group of businesses is a ‘group of employers’ for payroll tax purposes – seek advice sooner rather than later.

If you have any questions about whether you need to pay payroll taxes or any other issues, you can contact LegalVision’s tax lawyers on 1300 544 755 or fill out the form on this page.

Anna Leacock
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