Payroll Tax

July 10, 2024

Kathryn Hamilton

What is it?

Yes – another tax…

It is a state/territory tax . Not all businesses have to pay payroll tax. You must pay when your total Australian wages are over the tax-free threshold for your relevant state or territory. Thresholds and tax rates vary between states and territories. As we are based in Victoria, I am going to focus on the Victoria thresholds and tax rates.

In Victoria, the State Revenue Office (SRO) collects and manages payroll tax and there is a different rate depending on where your business is located.

Who needs to pay payroll tax?

From the 1^st of July 2024 you must register for and pay payroll tax if:

• you pay wages in Victoria,
  

and if any of the following apply:

• Your total Australian wages exceed $75,000 a month (the Victorian general exemption level).
• Your total Australian wages exceed $900,000 over the full financial year. This is adjusted if you are not an employer for a full financial year
• Your total Australian wages are grouped with other businesses and the combined Australian wages of the group exceed the Victorian general exemption level of $75,000 a month.

What is the rate?

The payroll tax rate is 4.85% except for regional Victorian employers. You are a regional Victorian employer if you are paying at least 85% of your wages to regional employees. The regional payroll tax rate is 1.2125% .

To see if your business is considered regional, please refer to the below link with a list of the regional councils:

https://www.sro.vic.gov.au/regional-victoria

What are considered wages?

Payments (considered wages) to employees engaged on a permanent, temporary or casual basis are always subject to payroll tax.

Wages are defined as and include:

• wages,
• remuneration,
• salaries,
• allowances,
• commissions,
• bonuses,
• employer (pre-tax) superannuation contributions such as:
  • superannuation guarantee payments,
  • salary sacrifice contributions,
  • the value of non-monetary contributions, and
  • superannuation contributions to defined benefit funds
• fringe benefits,
• the value of shares and options granted to employees, directors, former directors and some contractors,
• payments to some contractors,
• payments by employment agencies arising from employment agency contracts,
• remuneration paid by a company to a company director, and
• employment termination payments and accrued leave.

Are there exemptions?

Some wages are exempt from payroll tax. These include:

• Primary and secondary caregiver leave (formerly adoption and maternity parental leave).
• Commonwealth paid parental leave.
• Contributions to redundancy benefit schemes.
• Wages paid to employees absent from work to volunteer as firefighters or respond to other emergencies.
• Wages paid to a person while on military leave as a member of the Defence Forces.
• Bone fide redundancy or early retirement payments.
• Wages paid from non-profit group training organisations. From 1 July 2018, this also includes for-profit group training organisations.

For a full list please refer to the below link:

https://www.sro.vic.gov.au/checklist-taxable-or-exempt-items

What about payments to contractors?

Payments to contractors are, in certain circumstances, taken to be wages.

The payroll tax contractor provisions are intended to tax payments to contractors who “predominantly provide labour services and work exclusively or primarily for one principal” in a financial year.

Payments under these contracts are deemed to be wages (excluding GST). The business who engages the contractor is deemed to be an employer who is liable for payroll tax on those wages.

It is important to remember that the contractor provisions apply regardless of whether the contractor provides services via a company, trust, partnership or as a sole trader.

That is a lot of information – can I come to you to do it?

Yes – GTP is here to help with any questions. We can talk you through the process.

A few things to remember:

• Failure to register for, report or pay your payroll taxes could result in a number of penalties, up to and including a fee of 75% of the amount owing — as well as possible prosecution.
• Knowing how much you pay in taxes for payroll will also give you insight into the financial health of your business — and into the true cost of hiring new employees.
• If you’ve already registered and are closing your business, don’t forget to let us or the SRO know.