Payroll tax is payable on wages paid to full time, part time or casual employees. If you engage contractors, you might also need to declare payments to them as they can be considered wages for payroll tax purposes.
The term ’wages’ includes gross wages, remuneration, salary, commissions, bonuses, leave, and leave loading paid to an employee.
It’s important that you consider a range of other payments when declaring wages for payroll tax purposes. Some of these are covered in greater detail within other videos in this series.
Allowances are generally taxable for payroll tax purposes. Some examples include:
- first aid allowance,
- overtime meal allowance,
- site allowance,
- laundry allowance.
Payment of an allowance is different to reimbursing an expense incurred by the employee, which is not taxable. Also note that there are exemptions for motor vehicle and accommodation allowances.
Payments to apprentices and trainees are taxable in Victoria, unless you re-employ an out of trade apprentice or trainee to complete their apprenticeship or traineeship.
Termination payments, including unused leave paid on termination attract payroll tax. Exceptions include any income tax free components of an early retirement scheme of genuine redundancy listed at Item D on the PAYG summary. Directors fees are taxable irrespective of whether they are paid to a working or non-working director, and irrespective of where they are paid to. A profit distribution paid to a director in their capacity as an owner of that business does not attract payroll tax.
The value of any fringe benefits you provide attracts payroll tax. You need to declare the type 1 and type 2 benefits grossed up by the type 2 gross up rate. It’s important that this is apportioned if you provide fringe benefits to employees in multiple states or territories.
All superannuation contributions are taxable, including superannuation guarantee charges, salary sacrifice into superannuation and top up payments into defined benefit funds. Be mindful of lump sum payments into director’s superannuation, particularly at the end of the financial year, as this can sometimes be missed.
Other payments include jury duty and the value of shares granted or vested under an employee share scheme.
If you have missed any of these payments during the year, you can use the annual reconciliation to correct this. Simply add them to the relevant fields in Payroll Tax Express and the system will reconcile the additional amounts against any payments made as part of lodging your monthly returns.