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What is the mental health and wellbeing surcharge?

The mental health and wellbeing surcharge (surcharge) is a payroll tax surcharge that is intended to provide additional funding for Victoria’s mental health system.

The surcharge commences from 1 January 2022 and is payable on Victorian taxable wages paid or payable from 1 January 2022 by an employer or a group of employers.

Read more about the surcharge

Who pays the surcharge?

Customers must pay the surcharge if they pay Victorian taxable wages and their Australian wages exceed the first annual threshold of $10 million or the first monthly threshold of $833,333.

Customers must also pay an additional surcharge if they pay Victorian taxable wages and their Australian wages exceed the second annual threshold of $100 million or the second monthly threshold of $8,333,333.

For groups, these Australian wage thresholds apply at the group level.

The annual Australian wage thresholds are adjusted proportionately for customers who employ for less than a full financial year. In respect of the period from 1 January 2022 to 30 June 2022 (transitional period), the respective annual Australian wage thresholds are $5 million and $50 million.

Wages that are subject to Victorian payroll tax will also be subject to the surcharge and any wages exempt from payroll tax (such as wages paid or payable to an employee who is taking primary or secondary caregiver leave or who is absent from work to volunteer as a firefighter or respond to other emergencies) will also be exempt from the surcharge.

How much is the surcharge?

The surcharge is 0.5% of Victorian taxable wages over $10 million and an additional 0.5% of Victorian taxable wages over $100 million.

For groups, these thresholds apply at the group level and are claimed by the designated group employer (DGE).

The annual thresholds are adjusted proportionately for customers who employ for less than the full financial year or if they are also liable to pay wages in another Australian jurisdiction.

For the transitional period, the respective annual thresholds are $5 million and $50 million.

How are the annual thresholds adjusted for customers who employ for less than the full financial year?

If a customer employs for less than the full financial year, then the annual thresholds are adjusted by the ratio of the number of days they employed during the financial year to the total number of days in the financial year.

Example 1

During the 2022-23 financial year (365 days in total), Company A was a Victorian-only employer and employed from 1 July 2022 until 15 February 2023, which is a total of 230 days. Accordingly, the relevant annual thresholds are as follows:

First annual threshold: $10,000,000 × (230 ÷ 365) = $6,301,369.86

Second annual threshold: $100,000,000 × (230 ÷ 365) = $63,013,698.63

How are the thresholds adjusted for customers who also employ interstate?

If a customer also employs in other Australian jurisdictions for a financial year, then the annual thresholds are adjusted by the ratio of the total Victorian taxable wages to total Australian wages.

Example 2

Company B employed for the entire 2022-23 financial year, and paid $80 million in wages in Victoria and $70 million in wages in New South Wales. Accordingly, the relevant annual thresholds are as follows:

First annual threshold: $10,000,000 × ($80,000,000 ÷ ($80,000,000 + $70,000,000)) = $5,333,333.33

Second annual threshold: $100,000,000 × ($80,000,000 ÷ ($80,000,000 + $70,000,000)) = $53,333,333.33

If a customer also employs in other Australian jurisdictions for a financial year, then the monthly thresholds are adjusted by the ratio of the estimated annual Victorian taxable wages to estimated annual Australian wages.

Example 3

Company C estimated that in 2022-23 it would pay $50 million in wages in Victoria and $60 million in wages in New South Wales. Accordingly, the relevant monthly thresholds are as follows:

First monthly threshold: $833,333 × ($50,000,000 ÷ ($50,000,000 + $60,000,000)) = $378,787.73

Second monthly threshold: $8,333,333 × ($50,000,000 ÷ ($50,000,000 + $60,000,000)) = $3,787,877.27

What are the registration and lodgement requirements?

Customers do not need to separately register or lodge separate returns for the surcharge. Their payroll tax registration and returns in PTX Express will also be used for the surcharge.

How do monthly and annual liabilities reconcile?

Non-group employers and DGEs must pay the surcharge for a given month on any Victorian taxable wages which exceed the first monthly threshold. They must also pay the additional surcharge for a given month on any Victorian taxable wages which exceed the second monthly threshold. When they lodge their annual reconciliation, their annual Victorian taxable wages which exceed the annual thresholds are reconciled against payments made during the financial year, and any shortfall is owing or overpayment refunded (the same as for payroll tax).

If a group’s estimated Australian wages for a financial year exceed the first annual threshold, the ordinary members for that group must pay the surcharge each month on all their Victorian taxable wages. If a group’s estimated Australian wages for a financial year exceed the second annual threshold, the ordinary members for that group must also pay the additional surcharge each month on all their Victorian taxable wages. When the group members lodge their annual reconciliations, their annual group Victorian taxable wages which exceed the annual thresholds are reconciled against payments made during the financial year, and any shortfall is owing or overpayment refunded (the same as for payroll tax).

How is the monthly surcharge calculated?

Victorian-only non-group employers and DGEs of Victorian-only groups

For Victorian-only non-group employers, and DGEs of Victorian-only groups, with monthly taxable wages (group wages) between the first and second monthly thresholds, their monthly surcharge is calculated as follows:

(Monthly taxable wages – $833,333) × 0.5%

Example 4

A non-group employer pays wages only in Victoria. Its taxable wages for January 2022 are $1 million. The amount of surcharge payable for January is ($1,000,000 – $833,333) × 0.5% = $833.33

For Victorian-only non-group employers, and DGEs of Victorian-only groups, with monthly taxable wages (group wages) above the second monthly threshold, their monthly surcharge (inclusive of the ordinary surcharge and the additional surcharge) is calculated as follows:

(Monthly taxable wages × 1%) – $45,833

Example 5

A non-group employer pays wages only in Victoria. Its taxable wages for January 2022 are $10 million. The amount of surcharge payable for January is ($10,000,000 × 1%) – $45,833 = $54,167

This formula is a mathematical simplification of calculating the surcharge at 0.5% of Victorian taxable wages over $833,333 and an additional 0.5% of Victorian taxable wages over $8,333,333.

Using the longer two-step method:

  • Step 1: (monthly taxable wages – $833,333) × 0.5% i.e. ($10,000,000 – $833,333) x 0.5% = $45,833.33
  • Step 2: (monthly taxable wages – $8,333,333) × 0.5% i.e. ($10,000,000 – $8,333,333) x 0.5% = $8,833.33
  • The total surcharge payable is $45,833.35 + $8,333.35 = $54,166.66

Non-group employers and DGEs of groups with Victorian and interstate wages

For non-group employers with Victorian and interstate wages, and designated group members of groups with Victorian and interstate wages, with estimated annual Australian wages between the first and second annual thresholds, the monthly surcharge amount is calculated as follows:

(Monthly Victorian taxable wages - (estimated annual Victorian taxable wages × $833,333) ÷ estimated annual Australian wages) × 0.5%

Example 6

A non-group employer pays wages in Victoria and in another jurisdiction. The estimated Victorian taxable wages for the 2022-23 financial year are $6 million and the estimated Australian wages are $8 million.

The Victorian taxable wages for January 2023 are $980,000. The amount of surcharge payable for January is ($980,000 - ($6,000,000 × $833,333) ÷ $8,000,000) × 0.5% = $1,775

For non-group employers with Victorian and interstate wages, and designated group members of groups with Victorian and interstate wages, with estimated annual Australian wages above the second annual threshold, the monthly surcharge amount (inclusive of the ordinary surcharge and the additional surcharge) is calculated as follows:

(Monthly Victorian taxable wages × 1%) − ((((estimated annual Victorian taxable wages × $833,333) + (estimated annual Victorian taxable wages × $8,333,333)) ÷ estimated annual Australian wages) × 0.5%)

This formula is a mathematical simplification, which takes into account the adjustments to the monthly thresholds reflecting the ratio of the total Victorian taxable wages to total Australian wages, and calculates the surcharge at 0.5% of Victorian taxable wages over the adjusted first monthly threshold and an additional 0.5% of Victorian taxable wages over the adjusted second monthly threshold.

Ordinary members of groups (with or without interstate wages)

For ordinary members of groups (with or without interstate wages), with estimated annual group wages between the first and second annual thresholds, their monthly surcharge is calculated as follows:

Monthly taxable Victorian wages × 0.5%

For ordinary members of groups (with or without interstate wages), with estimated annual group wages above the second annual threshold, their monthly surcharge (inclusive of the ordinary surcharge and the additional surcharge) is calculated as follows:

Monthly taxable Victorian wages × 1%

How is the surcharge calculated for the transitional period (1 January 2022 to 30 June 2022)?

Victorian-only employers and groups

For Victorian-only employers and groups with taxable wages between the first and second thresholds for the period from 1 January 2022 to 30 June 2022, their surcharge for the period from 1 January 2022 to 30 June 2022 is calculated as follows:

(Taxable wages for period – $5,000,000) × 0.5%

Example 7

A non-group employer pays wages only in Victoria. Its taxable wages for the period 1 January 2022 to 30 June 2022 are $6 million. The amount of surcharge payable for the period is ($6,000,000 – $5,000,000) × 0.5% = $5,000

For Victorian-only employers and groups with taxable wages above the second threshold for the period from 1 January 2022 to 30 June 2022, their surcharge (inclusive of the ordinary surcharge and the additional surcharge) for the period from 1 January 2022 to 30 June 2022 is calculated as follows:

(Taxable wages for period × 1%) − $275,000

This formula is a mathematical simplification of calculating the surcharge at 0.5% of Victorian taxable wages over $5 million and an additional 0.5% of Victorian taxable wages over $50 million.

Employers and groups with Victorian and interstate wages

For employers and groups with Victorian and interstate wages, with Australian wages between the first and second thresholds for the period from 1 January 2022 to 30 June 2022, their surcharge for the period from 1 January 2022 to 30 June 2022 is calculated as follows:

(Victorian taxable wages for period - ((Victorian taxable wages for period × $5,000,000) ÷ Australian wages for period)) × 0.5%

Example 8

A non-group employer pays wages in Victoria and in another jurisdiction. Its Victorian taxable wages for the period January to June 2022 are $4 million and the Australian wages for the period are $8 million. The amount of surcharge payable for the period is ($4,000,000 − (($4,000,000 × $5,000,000) ÷ $8,000,000)) × 0.5% = $7,500

For employers and groups with Victorian and interstate wages, with Australian wages above the second Australian wage threshold for the period from 1 January 2022 to 30 June 2022, their surcharge (inclusive of the ordinary surcharge and the additional surcharge) for the period from 1 January 2022 to 30 June 2022 is calculated as follows:

(Victorian taxable wages for period × 1%) − ((((Victorian taxable wages for period × $5,000,000) + (Victorian taxable wages for period × $50,000,000)) ÷ Australian wages for period) × 0.5%)

This formula is a mathematical simplification, which takes into account the adjustments to the thresholds reflecting the ratio of the total Victorian taxable wages to total Australian wages, and calculates the surcharge at 0.5% of Victorian taxable wages over adjusted first threshold and an additional 0.5% of Victorian taxable wages over the adjusted second threshold.

How is the annual surcharge calculated from 1 July 2022?

Victorian-only employers and groups

For Victorian-only employers and groups with taxable wages between the first and second annual thresholds, their annual surcharge is calculated as follows:

(Annual taxable wages – $10,000,000) × 0.5%

For Victorian-only employers and groups with taxable wages above the second annual threshold, their annual surcharge (inclusive of the ordinary surcharge and the additional surcharge) is calculated as follows:

(Annual taxable wages × 1%) − $550,000

This formula is a mathematical simplification of calculating the surcharge at 0.5% of Victorian taxable wages over $10 million and an additional 0.5% of Victorian taxable wages over $100 million.

Employers and groups with Victorian and interstate wages

For employers and groups with Victorian and interstate wages, with annual Australian wages between the first and second annual Australian wage thresholds, their annual surcharge (inclusive of the ordinary surcharge and the additional surcharge) is calculated as follows:

(Annual Victorian taxable wages - ((Annual Victorian taxable wages × $10,000,000) ÷ Annual Australian wages)) × 0.5%

For non-group employers and groups with Victorian and interstate wages, with annual Australian wages above the second annual Australian wage threshold, their annual surcharge (inclusive of the ordinary surcharge and the additional surcharge) is calculated as follows:

(Annual Victorian taxable wages × 1%) − ((((Annual Victorian taxable wages × $10,000,000) + (Annual Victorian taxable wages × $100,000,000)) ÷ annual Australian wages) × 0.5%)

This formula is a mathematical simplification, which takes into account the adjustments to the annual thresholds reflecting the ratio of the total Victorian taxable wages to total Australian wages, and calculates the surcharge at 0.5% of Victorian taxable wages over the adjusted first annual threshold and an additional 0.5% of Victorian taxable wages over the adjusted second annual threshold.

Last modified: 28 September 2021
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