The small business guide to payroll tax
Payroll tax is a state-based tax imposed on businesses that employ staff in Australia. New businesses often overlook that payroll tax is required if their annual wages and salaries exceed a certain threshold. State governments use payroll tax to fund services such as local health care, education, and infrastructure. In this guide, we'll explain how to register and lodge payroll tax and the various requirements for each state.
Payroll tax was introduced progressively by governments to raise revenue for public services and infrastructure. Payroll tax is calculated by taking the total wages paid by an employer each month and applying the nominated tax rate. Payroll tax is geared towards larger businesses and is typically only payable by firms with a payroll above $750,000 to $1,000,000 per annum. The payroll tax rate varies from state to state, so it's essential to know your tax rate and how to calculate it.
If you forecast that your business will exceed your state payroll tax threshold, you must register with the state revenue office. Here are the steps to register for, calculate and lodge payroll tax in Australia:
- Register for payroll tax: Contact the relevant state or territory government revenue office to register for payroll tax. You'll need to complete an online application and provide information about the business, such as ABN and contact details.
- Calculate payroll tax: Employers can calculate their tax liability by adding the total wages and salaries paid to employees in a given month. This amount is then compared to that state's payroll tax threshold.
- Lodge payroll tax: Employers must lodge a tax return with the relevant state or territory government revenue office. This typically involves providing information about the business's payroll tax liability, including the total wages and salaries paid to employees and any payroll tax paid during the financial year.
- Payroll tax is due: Payroll tax is typically due seven days after the month ends. Employers should check with the relevant state government revenue office to determine the specific due dates for their area.
- Payroll tax threshold: The threshold for payroll tax varies depending on the state or territory. Employers should check with the relevant government revenue office to determine the rules for their state.
- Tools for payroll tax: Employers can use tools such as online calculators and software and professional services such as accountants to help calculate and lodge payroll tax.
Paying payroll tax is important because it is a legally required tax that funds various state and territory government services, such as health care, education and infrastructure. Non-compliance with payroll tax laws can result in penalties and fines, which can be costly for a business. Each state has their own requirements around payroll tax:
The payroll tax rate in Victoria is 4.85% as of 2023. This rate applies to an employer's total wages and salaries in a financial year above a certain threshold. The threshold for payroll tax in Victoria is currently $700,000, which means that if an employer's total wages and salaries paid to employees are below $700,000, they will not be required to pay payroll tax. You must register with the State Revenue Office for payroll tax if you expect to exceed $700,000 in annual wages. Each monthly payment or nil return is due within seven days after the end of each month.
The payroll tax rate in NSW is currently 5.45%, and the threshold for payroll tax is $1.3 million. This means that if an employer's total wages and salaries paid to employees are below $1.3 million for a financial year, they will not be required to pay payroll tax. To register for payroll tax, you can contact the NSW Office of State Revenue and lodge an application. Payroll tax must be lodged within seven days of the month ending in NSW.
As of 2023, all businesses employing in Queensland must pay payroll tax. The payroll tax rate in Queensland is 4.75% for businesses that have annual wages of less than $6.5 million. For businesses spending over $6.5 million, the rate is 4.95%. Discounts may apply to people operating businesses in regional areas. You can register for payroll via the Queensland Treasury site. Payroll tax payments are due seven days after the end of the reporting period.
The payroll tax rate applies to businesses in Tasmania paying annual wages of over $1.25 million. For businesses paying $1.25 - $2.0 million in wages, the tax rate is 4%. For wages over $2.0 million, the tax rate is 6.1%. You can check with the Tasmanian State Revenue Office for the most up-to-date information and to comply with the payroll tax laws and regulations. Payroll tax returns in Tasmania must be lodged by the 7th day of the following month.
The threshold for payroll tax in South Australia (SA) is $1.5 million per annum. This means that if an employer's total wages and salaries paid to employees are below $1.5 million for a financial year, they will not be required to pay payroll tax. For those paying between $1.5 - $1.7 million in wages, there is a variable tax rate of 0% to 4.95%. Any salaries over $1.7 million result in a standard 4.95% tax rate. You can register for payroll tax in SA on the Revenue SA portal. Seven days after the end of the month, your payroll tax return must be submitted in SA.
Businesses in Western Australia (WA) only need to pay payroll tax if their wages exceed $1 million in a financial year. If your business generates more than $1 million but less than $7.5 million in wages, the tax rate is 5.5%. You can register for payroll tax at the WA Government website. In WA, you have seven days after the month ends to lodge your payroll tax details.
It's important to note that this information is current as of 2023, and laws and regulations are subject to change, so it's always a good idea to check with the relevant government agency or consult with a tax professional to confirm the most up-to-date information.
Payroll Tax FAQs
What is Payroll Tax?
Payroll Tax is a state-based tax on wages an employer pays its employees. It is designed to fund state government services and infrastructure.
Who needs to pay Payroll Tax?
Employers who pay wages above a certain threshold in a particular state or territory are generally required to pay Payroll Tax. The threshold varies between states and territories, so checking the requirements in your state or territory is essential.
What wages are subject to Payroll Tax?
Generally, any employee wages are subject to Payroll Tax, including salary, wages, bonuses, commissions, allowances, and superannuation contributions.
How is Payroll Tax calculated?
Payroll Tax is calculated as a percentage of the total wages paid by an employer to its employees in a particular state or territory. The rate varies between states and territories, so it's important to check the requirements in your state or territory.
When is Payroll Tax due?
The due date for Payroll Tax varies between states and territories. Generally, Payroll Tax is scheduled on a monthly or quarterly basis, depending on the employer's size and the wages paid.
What are the consequences of not paying Payroll Tax on time?
Failure to pay Payroll Tax on time can result in penalties and interest charges. The ATO takes compliance with Payroll Tax requirements seriously and expects employers to meet their obligations.
Are there any exemptions or concessions for Payroll Tax?
Some states and territories offer exemptions or concessions for specific employers or industries. For example, some states benefit small businesses or employers who hire apprentices or trainees. It's important to check the requirements in your state or territory to see if you are eligible for any exemptions or concessions.
Payroll tax is an important aspect of running a business in Australia as it helps fund essential government services such as healthcare and education. To register for payroll tax, businesses must determine if they meet the threshold for payroll tax liability, which is set at around $1 million for most states. Once registered, businesses are responsible for calculating and paying payroll tax on time. To ensure compliance, keeping accurate employee salary and wage records is essential. By following these steps, businesses can ensure they meet their payroll tax obligations and stay compliant.