If your monthly wages bill reaches a certain amount, you will have to pay payroll tax
Employers do business in a variety of industries across Victoria every day. If you are one of them, and your wage bill goes above a certain threshold, you will have payroll tax obligations.
The annual reconciliation is due on 21 July 2017. No extensions for lodgement or payment can be granted.
Here are some important tips you should know if you pay wages.
1. Your wage bill determines your obligations
Payroll tax applies if you pay wages in Victoria and your Australian wages exceed the monthly threshold of $52,083.
2. You must register with us
Registering with us is a simple process and you’ll need your payroll records handy to help you. Penalties and interest may apply if you fail to register.
3. Paying is easy
Once registered, use our secure online system PTX Express to lodge a monthly return, pay your tax, complete your annual reconciliation, apply for a refund and update your records.
You, or your group of employers, pay this state tax if you pay wages in Victoria and your Australian wages exceed the monthly threshold of $52,083, and the annual threshold of $625,000 as of 1 July 2017.
The tax-free annual threshold will increase to $650,000 on 1 July 2018, with a monthly threshold of $54,166.
The annual threshold will be adjusted if you are not an employer for a full financial year.
Our payroll tax rate is 4.85 per cent except for regional Victorian employers. The rate of payroll tax for regional employers is 3.65 per cent.
Are you a regional employer?
Regional Victoria has the same meaning as it does for the First Home Owner Grant.
When do you pay?
If you are registered to lodge and pay on a monthly basis, you must submit your wage details every month, even if you do not have a payroll tax liability. Employers self-assess their liability on a monthly basis, and pay by the seventh day of the following month (or the next business day).
All employers must lodge an annual reconciliation by 21 July each year.
Wages are defined under the Payroll Tax Act 2007 (the Act) and include:
- Employer (pre-tax) superannuation contributions such as:
- Fringe benefits within the meaning of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBT Act),
- The value of shares and options granted to employees, directors, former directors and some contractors,
- Payments to some contractors,
- Payments by employment agencies arising from employment agency contracts,
- Remuneration paid by a company to company directors, and
- Employment termination payments and accrued leave
Payments (considered wages) to employees engaged on a permanent, temporary or casual basis are always subject to payroll tax.
Some wages are exempt from payroll tax. These include, but are not limited to:
- Adoption and maternity leave,
- Paid parental leave,
- Contributions to redundancy benefit schemes,
- Wages paid to employees absent from work to volunteer as firefighters or respond to other emergencies,
- Wages paid to a person while on military leave as a member of the Defence Forces, and
- Bone fide redundancy or early retirement payments
Wages taxable in Victoria
When an employee provides services wholly in Victoria, payroll tax is paid in Victoria on the wages of that employee.
Where the employee provides services in more than one Australian jurisdiction in a calendar month and/or partly overseas in a calendar month, a four-tiered test is used to determine a payroll tax liability.
This test uses the location of the employee’s principal place of residence as a starting point, and can take into account other factors related to the employer’s business.
- Non-profit organisations having as their whole or dominant purpose a charitable, benevolent, philanthropic or patriotic purpose (but not including a school, an educational institution, an educational company or an instrumentality of the state), for wages paid or payable to a person engaged exclusively in work of a religious, charitable, benevolent, philanthropic or patriotic nature for the institution or non-profit organisation (there are qualifications on exemptions available to organisations engaging in commercial activities),
- Public benevolent institutions, where persons are engaged exclusively in work of a public benevolent nature,
- Religious institutions, where persons are engaged exclusively in religious work of that institution,
- Non-profit non-government schools, where persons are providing education at or below secondary level,
- Healthcare service providers (i.e. public hospitals, non-profit hospital, denominational hospital, public health service, registered community health centre, multi-purpose service, ambulance service and the Victorian Institute of Forensic Mental Health) for wages paid for work ordinarily performed in connection with the conduct of the healthcare service provider,
- Municipalities, other than wages paid or payable in connection with specified business activities such as the supply of water or electricity,
- State school councils within the meaning of the Education and Training Reform Act 2006, and
- Approved not-for-profit group training organisations (GTO) for wages paid to a new entrant apprentice and trainee on-hired to the GTO’s host clients. These approved GTOs are exempt from payroll tax in respect of wages paid to those apprentices/trainees
Payments to contractors will be deemed wages and taxable in certain circumstances. The person or entity engaging the contractor is deemed to be an employer and is liable to payroll tax on those deemed wages.
“Contractors” include sub-contractors, consultants and outworkers. The provisions apply regardless of whether the contractor provides services via a company, trust, partnership or as a sole trader.
Several exemptions are allowed under the provisions, and if any one of the exemptions applies to a particular contract, the payments are not taxable. People on-hired under an employment agency contract are subject to different provisions.
Employment agents are liable for payroll tax on payments made under an employment agency contracts to “on-hire” a worker (service provider) to their client, and the client and service provider do not enter into any form of agreement between themselves.
Where there is an employment agency contract, the employment agent will be deemed to be an employer, the on-hired person an employee and payments made wages.
A contract includes an agreement, an arrangement and an undertaking. However, a contract is not an employment agency contract if it is, or results in the creation of, a contract of employment between the service provider and the client. This arrangement is typically known as a placement arrangement. In these circumstances, the client is liable for payroll tax as the employer.
Employment agency contracts are not eligible for the contractor exemptions.
Businesses may be grouped together and effectively treated as a single entity for payroll tax purposes.
A payroll tax group exists where:
- Corporations are related bodies corporate within the meaning of s50 of the Corporations Act 2001 (this situation is commonly known as a holding and subsidiary relationship),
- Employees are shared between businesses, or
- The same person has (or the same persons together have), a controlling interest in at least two businesses
- An entity has a controlling interest in a corporation
A company includes all bodies and associations (corporate and unincorporated) and partnerships.
A corporation has the same meaning as in s9 of the Corporations Act 2001 (Cth).
Effect of the grouping provisions
The grouping provisions have the effect of deeming businesses to be related and including these businesses in a group. The wages of these related businesses are then added together, and only one member of the group is entitled to claim the threshold amount.
Therefore in most cases, although each member of the group must register for payroll tax and lodge a separate return, the businesses which constitute the group are effectively treated as one entity and the calculation of their payroll tax liability is based on the group’s total wages.
Further, all members of the group (irrespective of whether or not they are employers) become jointly and severally liable for the debts of the group which are incurred while they are members of that group. This means that if one member defaults in the payment of tax, that amount may be recovered from any of the other group members.
You can also read our frequently asked questions.
AUSkey allows you to securely access and send business information to government online. It simplifies the way you can interact with government. You can use your AUSkey for a range of government online services.
By reducing the number of usernames and passwords you need, AUSkey gives you the ease and convenience of online access to help your business deal with government in a more efficient way.
A payroll tax customer will need to link (a one-off process) their AUSkey if they intend to use it for PTX Express or to lodge returns via SBR-enabled software. Visit the Australian Business Register for more information including how to register, set up and manage your AUSkey.
Payroll Tax Australia
All Australian states and territories have a payroll tax system, and have worked together to ensure our legislation is aligned (excluding rates and thresholds).
Registering for WorkSafe insurance
If you engage workers or contractors deemed to be workers and you pay, or expect to pay, more than the current threshold limit per year in rateable remuneration (as defined in the Workplace Injury Rehabilitation and Compensation Act 2013), or if you engage apprentices or trainees, you must register for WorkSafe insurance.
Please note there are differences between “wages” for payroll tax purposes and “remuneration” for WorkSafe insurance purposes.
Getting it right
Our priority is to help you pay the right amount of tax at the right time. Learn more about how we'll do this.