The vast majority of businesses in Australia employ staff and payroll is usually one of their largest expenses. Payroll Tax is imposed on wages that are exchanged from the employer to the worker, and is generally applied to the annual payroll of employers or a linked group of employers. The amount of tax that is payable varies and is determined on a state by state basis. There are issues that define the liability of the employer, and these may also be different amongst the various states and territories. These issues include:
• What makes up ‘wages’ in calculating Payroll Tax?
• What are the varying tax-exemption thresholds for wages?
• The rate of Payroll Tax used
Employers should usually lodge their Payroll Tax returns on a monthly basis. In all states, except for WA, it is compulsory to complete and lodge a reconciliation between the Payroll Tax paid and payable at the conclusion of every financial year.
The only case in which Payroll Tax is applicable is when the total of the employer’s taxable wages paid is more than the yearly wage threshold – if their total wage amount is lower than this threshold, they do not have to pay the tax. As soon as their total wages go above this amount, the full tax is applicable to the amount that exceeds the limit.
What makes up ‘wages’ in calculating Payroll Tax?
For payroll tax purposes, the term ‘wages’ means any wages, remuneration, salary, commissions, bonuses, or allowances paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to an employee.
Wages, remuneration and salary include any ordinary earnings, penalty rates, overtime and leave payments in relation to the provision of services to an employer.
The term wages also includes:
• payments to Crown officeholders of the state of NSW
• payments for labour under certain contracts (i.e. some contractor payments)
• apprentice and trainee wages
• directors’ fees
• commissions
• payments under an employment agency contract to a service provider
• grants of shares or options
• fringe benefits
• termination payments
• superannuation benefits.
NSW thresholds
• 28 days = $50,477
• 30 days = $54,082
• 31 days = $55,885
• From 1 July 2010 to 30 June 2011 the annual threshold is $658,000
Changes to NSW Payroll Tax rates for the 2010-11 financial year.
• The Payroll Tax rate of 5.65 per cent was reduced to 5.5 per cent in July 2010 and as of this year, has been reduced to 5.45 per cent.
• From 1 July 2010 the maternity and adoption leave exemption was extended to include paternity leave payments for up to 14 weeks.
• Employers, or a group of related businesses registered in NSW, whose total Australian wages exceed the current NSW monthly threshold, are required to pay NSW Payroll Tax.
Each monthly payment or ‘nil’ remittance is due seven days after the end of each month or the next business day if the seventh day is a weekend or public holiday (ie July payment is due by 8 August). The annual reconciliation and payment or ‘nil’ remittance is due by 21 July 2011.
Paid parental leave
The Commonwealth Government has recently announced details of a new paid parental leave scheme which began on 1 January 2011 and any payments made by an employer to eligible employees are not liable for NSW Payroll Tax.
Here at The Quinn Group our experienced team of accountants can help you with your business’ Payroll Tax issues as well as any other accounting queries. For more information submit an online enquiry. If you have received an OSR audit or questionnaire it is vital that you seek professional advice because it is important that all questions be answered accurately. Call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.
