If you're an employer in Victoria, it's important to know what counts as wages because payroll tax is based on these payments.
Wages are payments made to employees for the work they do. They can be made to:
- permanent employees
- temporary employees
- casual employees
- contractors (depending on the type of work they do and how they are paid).
Wage components
Wages include more than just a worker’s salary. They also cover:
- regular pay (hourly, weekly or monthly)
- bonuses and commissions
- leave payments, like annual leave or sick leave
- allowances such as meals, laundry or overtime
- superannuation contributions, including salary sacrifice
- fringe benefits, like a company car or free accommodation
- termination payments, such as unused leave
- directors’ fees, even if the director doesn’t work day-to-day
- shares or options given to employees as part of their pay.
Wages are defined in the Payroll Tax Act 2007.
Exempt wages and payments
Some payments are not counted as wages for payroll tax. For example, reimbursing an expense incurred, or motor vehicle and accommodation allowances.
There are also exempt wages, such as caregiver leave and Commonwealth paid parental leave. If you are unsure, check the A-Z list of taxable and exempt items.
Interstate wages and nexus provisions
If a business pays wages in Victoria and in other parts of Australia, it must include all those wages when calculating payroll tax. This means the business might not get the full tax-free amount in Victoria. It depends on how much of the total wages were paid in Victoria.
The nexus provisions help decide which state or territory the wages should be taxed in. These rules use a 4-step test based on where the employee lives, where they work and where the business is based. This makes sure payroll tax is only paid in one place for each employee.
For more detail, see interstate wages and nexus provisions.
Declare all taxable wages
Employers must report all taxable wages to us. This ensures the correct amount of payroll tax is paid. If something is missed, it can be corrected during the annual reconciliation which takes place in July each year.
