What is Payroll Tax?

Payroll tax is imposed by the Office of State Revenue (OSR) on an employer’s liable NSW wages minus any threshold entitlement. As the majority of entities employ staff, payroll is usually one of their largest expenses. It can be of either a weekly, fortnightly, or monthly nature. With regards to payroll, the employer must take out any PAYG withholding tax from the employees’ salaries/wages as applicable – this is submitted to the ATO.

Who is liable for Payroll Tax?

An individual employer or a group of employers may be liable for Payroll Tax if their total taxable wages throughout Australia, including NSW, exceeds $678,000 for the 2011–12 Payroll Tax year. If their wage payment 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 on the amount that exceeds the limit.

When is Payroll Tax returns lodged?

Employers should usually lodge their payroll tax returns on a monthly basis, and pay any tax they have outstanding to the appropriate taxation office within 7 days after the end of the month that the wages were paid in.

In all regions, 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 – 21st July (except for the Australian Capital Territory: 31st July). It is at this stage that the tax refund/payable is calculated.

When are payroll tax payments due?

Each monthly payment or ‘nil’ remittance is due seven days after the end of each month (ie August payment is due by 7 September) or the next business day if the seventh day is a weekend or public holiday. The annual reconciliation and payment, if applicable, is due by 21 July.

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 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.

The world of tax can be extremely complex and if obligations are not adhered to it can often become quite stressful, not to mention costly. The experienced team of Accountants, Lawyers and Tax agents at The Quinn Group are able to assist you with all tax and ATO related matters. For advice or more information contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.