Payroll tax is an important consideration for medium and large businesses, both in preparing their tax returns and planning for staffing costs. This article presents a brief overview of payroll tax in Australia, useful for new or expanding businesses paying the tax for the first time. We can also help you reduce your tax bill.
Who pays, and when?
Payroll tax is paid by the employer, and is calculated as a function of the total wages the employer pays each year. In this sense it is quite distinct from income tax. Businesses might employ many people on low wages, or a few on high wages, but payroll taxes only change by what the total amount being paid.
The rates and thresholds vary from state to state, and if you employ staff in different states you will need to calculate payroll tax for each state individually. You won’t pay tax until your total wage bill reaches a certain level ($750,000 per annum in NSW) and pay a percentage of your wage costs after that (5.45% in NSW). Payroll tax is often calculated monthly, so you will also see monthly thresholds. You can see the thresholds and rates for all states here.
‘Wages’ is broadly defined, and generally covers any employee benefit. These provisions can be complex, so it is advised to seek advice to avoid falling foul of rules relating to the scope of wages.
How can I minimise my tax bill?
Since payroll tax become a significant expense for businesses with large wage costs, it is important to structure your tax affairs to remain compliant while avoiding unnecessary costs. One way is ensuring that you are not counting employee costs which are not covered by payroll tax. Another is to ensure that multiple businesses are not unnecessarily ‘grouped’ together, losing the advantage of the threshold.
We can help you navigate this complex regulatory environment, particularly at a time of increased scrutiny as payroll tax continues to be an important source of revenue for state governments.
The information contained in this blog is general in nature and does not take into account your personal circumstances. You are advised to seek independent advice from a Financial Adviser before acting on any information contained herein