What is payroll tax and does my business need to pay it?
Payroll tax is a state and territory- based tax imposed on employers that is calculated on the amount of wages paid.
The separate payroll tax laws in each state and territory are harmonised, meaning they are largely the same.
Mathews Tax Lawyers provides payroll tax advice and associated legal consulting services. We can help you to resolve your payroll tax issues no matter what state or territory you are in.
When is payroll tax payable?
Payroll tax is payable when an employer, or a group of employers, pay “taxable wages” that exceed a threshold amount in a financial year.
What are taxable wages?
“Taxable wages” include:
● salaries and wages;
● bonuses and most allowances;
● employer superannuation contributions;
● fringe benefits paid or given to employees;
● eligible termination payments; and
● payments to non-employee contractors who mainly provide labour services when they are paid under a “relevant contract” (there are several exemptions which exclude certain contractor arrangements from the definition of “relevant contract”).
This last category of taxable wages – payments to contractors, is an area where many businesses can create a liability for payroll tax without even being aware of it.
Employers are required to self-assess their liability for payroll tax and register for payroll tax with the relevant state or territory revenue office.
There are penalties if you fail to register for payroll tax when you should have, or if you fail to lodge payroll tax returns.
If you pay wages above the relevant state or territory threshold, you may have a liability to pay payroll tax, subject to any available exemption or concession.
What are the payroll tax thresholds and rates of tax?
The rate of payroll tax and the threshold amount varies between states and territories, as the
following table shows:
|State/Territory||Rate %||Annual threshold|
[Current as at 27 January 2022]
Other payroll tax services
Other payroll tax issues we assist business clients with and provide payroll tax advice on include:
● Payroll tax reviews and audits
● Voluntary disclosures for under payment or overpayment of payroll tax
● Objections to payroll tax assessments
● Claiming payroll tax exemptions
● Payroll tax disputes and litigation
If you have multiple businesses then you will also need to be aware of Payroll Tax Grouping
Grouping employers for payroll tax
The payroll tax laws in each state and territory deem certain employers to be “grouped” as though they were one employer for payroll tax purposes. This can lead to many business groups, especially those growing quickly and with an increasing wages bill, unknowingly exceeding the payroll tax threshold and becoming liable for payroll tax.
The grouping laws are complex and far reaching. For more information about payroll tax grouping, read our article “Payroll tax and grouping“.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.