What is payroll tax?
Payroll Tax is a State based tax calculated on wages paid or payable by an employer to its employees and “deemed” employees. All States and Territories are obligated to pay payroll tax based on the following 2012-2013 thresholds:
|State/Territory||Annual threshold||Rate payable|
|New South Wales||$689,000||5.45%|
Who has to pay payroll tax?
Each employer has an obligation to self-assess their liability on a monthly basis and perform an annual reconciliation at the end of each financial year (due by 21 July). When an employer’s total wages exceed the relevant threshold levels, payroll tax is payable. Employers must register for payroll tax with the relevant State Revenue Office (SRO) where threshold levels have been exceeded.
What is considered as ‘wages’?
Broadly speaking, any remuneration made to employees and “deemed” employees is included as wages. This would include, but not limited to the following:
- Wages, salaries, commissions, bonuses, allowances
- Directors fees
- Fringe benefits
- Payments in kind
- Eligible termination payments
- Superannuation contributions
Payments made to employment agencies for labour hire services, payments for service contracts, and to other third parties may be deemed to be wages assessable for payroll tax. To get a clearer understanding as what may be deemed as wages, refer to the relevant State or Territory SRO website for further clarification.
When is payroll tax payable?
Upon registering for payroll tax with the SRO, employers are obligated to pay tax by the 7th day of the month, following the month in which their wages exceeded the deduction threshold level.
If an employer is liable to pay payroll tax and fails to register with the SRO, penalty tax and interest may be payable on unpaid taxes.