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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

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.

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. 

For 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 annual Victorian taxable wages over $10 million (or $833,333 on a monthly basis), and
  • an additional 0.5% of Victorian taxable wages over $100 million (or $8,333,333 on a monthly basis).

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

The 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 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 I disclose my taxable wages for the transitional period?

In your annual reconciliation for the 2021-22 financial year, we will ask you to disclose your taxable wages for the full financial year. 

If you are liable to pay the surcharge, in your annual reconciliation we will also ask you to disclose your wages for the transitional period.

How do I disclose fringe benefits for the Transitional Period?

If you provide certain fringe benefits to your employees, you must disclose those fringe benefits in your taxable wages in your payroll tax returns. 

Find out more about disclosing fringe benefits

If you provide fringe benefits and are liable for the surcharge, in your 2021-22 annual reconciliation we will ask you to disclose your fringe benefits for both the financial year and for the transitional period. 

To correctly disclose your fringe benefits for the transitional period:

  • If you use the actual method, disclose the actual fringe benefits you provided for the transitional period grossed up by the type 2 gross up rate.
  • If you use the alternative method, disclose one half of the fringe benefits you declared in your Fringe Benefits Tax return for the year ending 31 March 2022 grossed up by the type 2 gross up rate.

Refer to Revenue Ruling PTA-003v2 for more information on methods of disclosing fringe benefits.

Do I have to pay the surcharge on a monthly basis?

Non-group employers

Victorian-only non-group employers:

  • are not liable to pay the surcharge for any month where their Victorian taxable wages do not exceed the first monthly threshold of $833,333
  • must pay the surcharge for any month where their Victorian taxable wages exceed the first monthly threshold of $833,333, and
  • must also pay the additional surcharge for any month where their Victorian taxable wages exceed the second monthly threshold of $8,333,333.

Non-group employers with Victorian and interstate wages:

  • If the employer’s estimated Australian wages for the financial year do not exceed the first annual threshold, the employer is not liable to pay the surcharge on a monthly basis for that financial year.
  • If the employer’s estimated Australian wages for the relevant financial year exceed the first annual threshold, the employer must pay the surcharge for any month in that financial year where their Victorian taxable wages exceed the adjusted first monthly threshold. 
  • If the employer’s estimated Australian wages for the relevant financial year exceed the second annual threshold, the employer must also pay the additional surcharge for any month in that financial year where their Victorian taxable wages exceed the adjusted second monthly threshold. 

Groups

DGEs of groups:

  • If the estimated group Australian wages for the financial year do not exceed the first annual threshold, the DGE is not liable to pay the surcharge on a monthly basis for that financial year.
  • If the estimated group Australian wages for the financial year exceed the first annual threshold, the DGE must pay the surcharge for any month where their own Victorian taxable wages exceed the relevant first monthly threshold.
  • If the estimated group Australian wages for the financial year exceed the second annual threshold, the DGE must also pay the additional surcharge for any month where their own Victorian taxable wages exceed the relevant second monthly threshold. 

Ordinary members of groups:

  • If the estimated group Australian wages for the financial year do not exceed the first annual threshold, the ordinary member is not liable to pay the surcharge on a monthly basis for that financial year.
  • If the estimated group Australian wages for the financial year exceed the first annual threshold, the ordinary member must pay the surcharge every month on all their Victorian taxable wages.
  • If the estimated group Australian wages for the financial year exceed the second annual threshold, the ordinary member must also pay the additional surcharge every month on all their own Victorian taxable wages. 
     

How do monthly and annual liabilities reconcile?

When non-group employers lodge their annual reconciliation, the surcharge payable on their annual Victorian taxable wages which exceed the annual thresholds is reconciled against payments made during the financial year, and any shortfall is owing or overpayment refunded (the same as for payroll tax).

When group members lodge their annual reconciliations, the surcharge payable on the annual group Victorian taxable wages which exceed the annual thresholds is 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 with monthly taxable wages between the first and second monthly thresholds, and DGEs of Victorian-only groups with estimated annual group wages between the first and second annual thresholds and monthly taxable wages above the first monthly threshold, 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 estimated annual group wages above the second annual threshold, 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 exceeding $833,333 and an additional 0.5% of Victorian taxable wages exceeding $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 DGEs of groups with Victorian and interstate wages, with estimated annual group 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 DGEs of groups with Victorian and interstate wages, with estimated annual group 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 exceeding the adjusted first monthly threshold and an additional 0.5% of Victorian taxable wages exceeding 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 exceeding $5 million and an additional 0.5% of Victorian taxable wages exceeding $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 exceeding the adjusted first threshold and an additional 0.5% of Victorian taxable wages exceeding 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 exceeding the adjusted first annual threshold and an additional 0.5% of Victorian taxable wages exceeding the adjusted second annual threshold.

Last modified: 1 July 2022
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