Payroll Tax Traps
Payroll tax is a State or Territory based tax imposed on employers who pay wages in excess of certain tax-free thresholds. There are considerable differences between the different States and Territories in the application of payroll tax.
The rates of tax vary from 4.75 per cent in Queensland to 6.85 per cent in the ACT. The tax-free threshold varies from $550,000 in Victoria to $1,850,000 in the ACT. Cleary, setting up in the ACT would be advantageous.
Employers should be aware of various anti-avoidance measures, including those dealing with contractors and group-related employers. From experience, we have seen some surprising decisions made by the Office of State Revenue (OSR).
| State/Territory | Rate on Excess Over Threshold | Threshold |
| NSW | 5.45% | $750,000 |
| VIC | 4.85% | $550,000 |
| QLD | 4.75% | $1,100,000 |
| SA | 4.95% | $600,000 |
| ACT | 6.85% | $1,850,000 |
| NT | 5.50% | $1,500,000 |
| TAS | 6.10% | $1,250,000 |
| WA | 5.50% | $800,000 |
Registration
Employers who are not members of a group must register within seven days after the end of the month in which their average weekly payroll exceeds 1/52 of the relevant annual exemption threshold.
Grouping Provisions
All States provide for the grouping of related or associated businesses, so that their wages are aggregated and one threshold only applied to the group. Normally, one group member claims the exemption threshold and the remaining members must pay a flat rate of tax.
Caution
As there are some border-line and definitional issues that vary between the States, use the above information as a guide only.
Areas of concern include what constitutes an employee and an independent contractor. As many businesses have been caught unawares, real care needs to be taken.
Although we make every reasonable effort to get the thresholds and payroll tax rates correct, some State Audits are often done by OSR after companies have closed and figures are made up by the auditors, and the onus of proof shifts to the company directors. This tactic often used is appalling and indefensible.
Budgets come out subsequent to publication. There is no substitute for proper professional advice. Contact your local TaxAssist Accountant today for the most up-to-date advice and guidance.
Last updated: 24th October 2016