FAQ

Frequently Asked Questions – Payroll Tax

This Section provides information about payroll tax. It includes answers to frequently asked questions on payroll tax. For more information please fill out our contact form or call Peter Tobin 0438 001 809.

1.

What is payroll tax?

Payroll tax is a State or Territory tax that is assessed on wages paid by employers. Payroll tax applies in all States and Territories of Australia.

2.

What’s included as wages?

Almost all payments made to employees are regarded as wages and include:

  • Penalty rates, overtime payments, long service leave, holiday pay, sick leave, piece work rates, study leave, bonuses and termination payments
  • Commissions
  • Superannuation including salary sacrifice arrangements and top-up lump sum contributions made by employers into superannuation
  • Most allowances such as clothing, tool, relocation and travel
  • Fringe benefits such as loans to employees, free trips away and club memberships
  • Employer contributions to employee share or option schemes
  • Directors’ fees

Some exemptions:

  • Wages paid to staff who are otherwise taking part in emergency operations with the SES or the Army Reserve but sick and recreational leave and long service leave are excluded from the exemption.
  • Paternity leave but only up to 14 weeks normal time or 28 weeks part-time
  • Accommodation allowances but only up to the exempt rate determined by the ATO
3.

What is the rate of payroll tax and do all businesses pay payroll tax?

The rate of payroll tax varies from State to State.

Read More Here: How Payroll Tax is Calculated in Australia

Not all businesses pay payroll tax. There are different threshold amounts that apply to each State and Territory.

Read More Here: How Payroll Tax is Calculated in Australia

4.

What is Grouping?

Several businesses can be grouped together for calculating payroll tax. The grouping provisions are very wide under the Payroll Tax legislation. Sometimes they apply very unfairly to businesses where someone can be deemed to be a worker who is not in fact the employer’s worker. Where two or more businesses are grouped together only one of them can take advantage of the threshold exemption.

5.

What about where I employ contractors?

Unfortunately, payments to some contractors can be included in the definition of “wages” under the legislation. And this might apply even though the contractor has their own ABN and invoices the business every month. Every case is different and you need to obtain specialist legal advice to work it out.

6.

How do you calculate payroll tax for employees who are based in, for example, the head office in one state but who work a percentage of their time inter-state?

Payroll tax is calculated on the total Australian wages paid by an employer. If all the wages are paid in one State then that State’s threshold and rate of tax would apply.

If the employee works less than a month interstate and doesn’t change his principal place of residence then his wages would be taxed in the jurisdiction where he would usually be employed.

However, where an employee might be sent interstate on a temporary assignment lasting a month or more and all his work is performed interstate then his wages would be taxed in the State where he is working.

Each State and Territory works under the Nexus Rules that were published on the 1st July 2009. There have also been Taxation Rulings on the topic.

For example you will find information at the following links:

7.

Under the Payroll Tax Act 1971, does “wages” include only those items that have physically been paid?

No, “wages” includes not just cash wages but also non-cash wages and third party payments and salary sacrifice amounts. Any reward for services by an employee are included as “wages’ whether or not they have been physically paid.

8.

Is there a better way to structure my business to minimise payroll tax?

There may be but you will need to obtain specialist legal advice because it is a complex area of the law and every business is different.