Payroll tax – the basics
What is this?
Payroll tax is a tax assessed based on wages paid or payable an employer to its employees. It is a state tax –each state and territory has their own legislation with varying rates and thresholds. It is also a self-assessed tax, which means that it is the employer’s responsibility to ensure these obligations are met.
Below are some of the basics of payroll tax that every business owner should be aware of.
Q: Who do I pay this to?
A: Payroll tax is administered by the Office of State Revenue in WA.
Q: Who pays it?
Employers whose taxable wages exceed a threshold amount is required to pay.
Q: What is the threshold amount?
A: Currently the Australian taxable wages threshold is $850,000 for a year (or $70,833 per month), which means that if your taxable wages are more than this amount, you will be required to register for payroll tax.
Q: What are Australian taxable wages?
A: Australian taxable wages are the total taxable wages paid or payable by an employer or group of employers across all Australian jurisdictions in an assessment year. This includes wages that are taxable in WA and wages that are liable to tax in another state or territory under that jurisdiction’s corresponding payroll tax legislation.
Q: What is the payroll tax rate?
A: Currently the rate is 5.5% of Australian taxable wages, with a view to be increased to 6.5% by 30 June 2023.
Q: I am the owner of several entities that I run my business from, each entity’s Australian taxable wages are less than the payroll tax threshold. Am I not required to register for payroll tax?
A: In short: no. Your arrangement is classed as “Grouping of employers” to the Office of State Revenue, and is likely to be seen as one combined business with assess to only one tax-free threshold ($850,000).
Businesses that constitute a group where any one (or more) of the following criteria are met:
- corporations are related bodies corporate within the meaning of section 50 of the Corporations Act 2001 (Cth) (Corporations Act)
- common employees are used between businesses
- the same person has (or the same persons together have), a controlling interest in at least two businesses
- an entity has a direct, indirect or aggregate controlling interest in a corporation or
- smaller groups are subsumed into one larger group.
Exclusions of grouping for payroll tax purposes do exist as the Commissioner has discretionary power to exclude a business from a group if they are satisfied that the business is carried on independently and is not connected with any other member(s) of the group.
Over the years Aston Accountants have helped businesses register, prepare and lodge Payroll tax, as well as assist with Payroll Tax Audits.
If you think your business may be required to pay Payroll tax but do not know where to start, contact us to find out how we can help.