2018 may go down as ‘The Year of Payroll Tax’. As we updated you earlier in the year, most states and territories made significant changes to payroll tax, to the benefit of many businesses. A political move with state elections looming? Not for us to draw those conclusions. But as this somewhat landmark year for tax draws to an end, we thought we’d give you an overview of payroll tax across the country. Providing you with an opportunity to see how your state measures up and as a reminder to action changes in your business to optimise the benefits available.
Threshold or Rate?
This could resemble many ongoing dilemmas. Is it better to have lower payroll tax rates or a lower threshold? This would depend on individual businesses, but in comparing payroll tax from state to state, you need to consider both elements together to draw a fair comparison.
Queensland: Competitive
In Queensland the changes announced by the Treasurer earlier this year weren’t as dramatic as some other states, but still offer benefits to those employing apprentices and trainees. The rebate on payroll tax for wages paid to apprentices and trainees has been increased to 50% and extended to 30 June 2019.
For all other wages and payments to contractors subject to payroll tax, the rate of payroll tax in Queensland for this financial year is 4.75% and the threshold $1.1 million. Overall, Queenslanders enjoy a very competitive rate but a higher threshold than NSW and Victoria.
NSW: Progressive
Significant changes were announced by the NSW Treasurer in the May budget, especially in regard to the payroll tax threshold. For the 2018-2019 financial year, the threshold rose to $850,000 and will further increase to $900,000 in 2019-20, to $950,000 in 2020-21 and then to $1million in the 2021-22 financial year. Still short of Queensland, but at a current rate of 5.75%, NSW businesses can look forward to increased benefits into the future.
NSW also conducted an enquiry into payroll tax. The outcome, as we reported in November, all 12 recommendations of the NSW Productivity Commission would be implemented. Read our article on LinkedIn for further details.
ACT: High-end
The ACT is the perfect example of what I mentioned at the outset about considering threshold and rates together. At 6.85% the ACT has the highest rate of payroll tax in Australia. But this is balanced by their high threshold of $2m.
Consider these elements together and it is very attractive, especially to small business.
Victoria: Viable
From 1 July 2018, the Victorian Government reduced the rate of payroll tax from 3.65% to 2.425% for regional businesses. A reduction which makes an escape to the country a very viable consideration.
For other businesses, the rate was kept on hold at 4.85% with a threshold of $650,000. Well short of their northern neighbours.
South Australia: Sensible
Across the border in South Australia, changes to payroll tax were implemented to meet the election promises of the new Marshall Government. The most notable was the exemption of businesses with a taxable payroll of up to $1.5 million from 1 January 2019 and a phasing-in plan to include payrolls up to $1.7 million.
So this is a significant increase in the threshold from $650,000 to $1.5 million.
The rate varies, depending on your payroll, from a very low 2.5% to a still competitive, 4.95%
Tasmania: Tempting
In the state budget, the Tasmanian Treasurer announced a number of measures including reducing the rate of payroll tax to 4% for wages between $1.25 million and $2 million. In addition, the payroll tax rebate scheme for apprentices and trainees was extended to 30 June 2021, in key areas.
To tempt businesses to move to the Apple Isle, a 3 year payroll tax exemption is also on offer. Read our article for more details.
For this financial year, the payroll tax is 4% and threshold $1.25 million. But, the threshold increases markedly to 6.1% for businesses with a payroll tax applicable wages bill of over $2 million. Tempers the temptation somewhat.
Western Australia: Complex
Comparing payroll tax in WA with other states requires a little more consideration, due to their tiered system. The rate is scaled from 5.5% to 6.5% with a threshold of $850,000. But the tax free threshold phases out after your payroll reaches $7.5m.
Northern Territory: Reasonable
As we reported earlier in the year, the Northern Territory implemented a number of conditional payroll tax exemptions. These apply for NT resident employees, starting new jobs from 1 May 2018 to 20 June 2020. Taken in conjunction with other measures in the Local Employment Package, these exemptions may offer relief to some businesses.
In the NT, the relatively high payroll tax rate of 5.5% is balanced against a comparatively high threshold $1.5m to offer a competitive package.
2018 Wrap
So that’s our wrap of payroll tax for this calendar year. But not the ‘last-call’ for businesses wanting advice on how they can best optimise the payroll tax package in their state. If you’re still to review your payroll tax in the light of the changes in your state, please don’t hesitate to call Peter Tobin at Tobin Partners on 0438 001 809 for a confidential discussion. Alternatively, email me directly with your queries.
By Peter Tobin, Tobin Partners Lawyers
Tobin Partners is one of only a few legal firms in Australia which specialises in payroll tax.
Principal, Peter Tobin has practised law for over 30 years with a background predominantly in commercial, company, property and revenue law and litigation in all courts including the High Court of Australia. In recent years he has specialised in payroll tax.
