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Payroll – What is Payroll Tax? (September 2013)
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Payroll Tax
What is Payroll Tax?
Each state of Australia has its own unique payroll tax legislation. The various State Acts are broadly
similar, in that payroll tax is levied on "wages", but the Acts differ in rates, definitions, thresholds and
application. Payroll tax was initially introduced at a Federal Level in 1941. In 1971 payroll tax was
transferred to the states.
Payroll tax is a state tax paid by an employer exceeding the relevant state threshold of wages paid.
Payroll tax is not paid until an employer exceeds the threshold in any month.
Geographical grouping is required where a group of companies are inter-related therefore the total of
their wages are accumulated for calculation if one company exceeds the threshold.
Reasons for grouping:
- Companies are related corporations under the Corporations Act 2001 (parent and subsidiary
companies)
- Employee/s are used in another business
- Two or more businesses are controlled by the same person/s
- A head or parent business exercises managerial control over a branch, agency or subsidiary
business
Payroll Tax is in the process of being harmonised between the states. There is now one website that
links to all the state websites and relevant thresholds. For more detail on the harmonisation protocol:
http://www.payrolltax.gov.au/harmonisation/payroll-tax-rates-and-thresholds
State
ACT
NSW
SA
WA
QLD
NT
TAS
VIC
PAYROLL TAX THRESHOLDS FROM 1 JULY 2013
Wage Thresholds
Annual
Monthly
28 Days
30 Days
31 Days
$1,750,000
$145,833
$750,000
$57,534
$61,644
$63,699
$600,000
$50,000
$750,000
$62,500
$1,100,000
$91,666
$1,500,000
$125,000
$1,250,000
$95,890
$102,740 $106,164
$550,000
$45,833
Rate
6.85%
5.45%
4.95%
5.50%
4.75%
5.5%
6.1%
4.90%
 In QLD the monthly threshold is referred to as a periodic deduction. The deduction depends on the amount of which the annual Australian-wide
wages exceed the threshold. For every $4 of wages over the threshold, the deduction reduces by $1. When wages reach 5 times the threshold, the
deduction is zero. There are two types of periodic deductions actual periodic deductions and fixed periodic deductions.
 In NT the monthly threshold is referred to as a periodic deduction. The deduction depends on the amount of which the annual Australian-wide wages
exceed the threshold. For every $4 of wages over the threshold, the $1 threshold is lost.. There are two types of periodic deductions actual periodic
deductions and fixed periodic deductions.
* QLD the Australian Wide Wages of $416,667 per month or greater, the threshold deduction is zero, therefore tax is payable on the full amount of the
taxable wages)
** NT the Australian Wide Wages of $625,000 per month or greater, the threshold deduction is zero, therefore tax is payable on the full amount of the
taxable wages)
*** NSW and TAS the monthly threshold depends on the number of days in the month
© The Institute of Certified Bookkeepers
Page 1
Payroll – What is Payroll Tax? (September 2013)
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Calculation of Payroll Tax
Standard Calculation:
Gross Taxable Wages – Threshold = Taxable Wages  Taxable Wages x Payroll Tax Rate % = PT
Payable
VIC Example
Gross Monthly Taxable Wages
Less Threshold
Taxable Wages
Payroll Tax @ 4.90%
400,000
-45,833
354,167
17,354
Threshold on days Calculation used in NSW and TAS
NSW 30 Days Example
Gross Monthly Taxable Wages
Less Threshold
Taxable Wages
Payroll Tax @ 5.45%
400,000
-61,644
338,356
18,440
Periodic Calculation used in QLD
Total Taxable Gross Wages – threshold / 4 = Periodic Deduction
Threshold – periodic deduction = Actual Deduction
Total Taxable Gross Wages – Actual Deduction x rate = PT Payable
QLD Periodic Calculation
Gross Monthly Taxable Wages
Less Threshold
Periodic Deduction
Periodic Deduction / 4 =
400,000
-91,666
308,334
77,084
Threshold – Periodic Deduction
Actual Periodic Deduction
91,666 – 77,084
14,582
Gross Monthly Taxable Wages –
Actual
Taxable Wages
Payroll Tax @ 4.75%
400,000 – 14,582
© The Institute of Certified Bookkeepers
385,418
$18,307
Page 2
Payroll – What is Payroll Tax? (September 2013)
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Periodic Calculation used in NT
Threshold – (Taxable Monthly Gross Wages - Threshold) / 4 = Periodic Deduction
Periodic Deduction x (Number of days in month wages are paid) / number of days in month)
Total Taxable Gross Wages – Actual Deduction x rate = PT Payable
NT Periodic Calculation
Gross Monthly Taxable Wages
Less Threshold
Periodic Deduction
400,000
-125,000
275,000
Periodic Deduction / 4 =
68,750
Threshold – Periodic Deduction
Actual Periodic Deduction
Periodic Deduction x days in
month/month *
Gross Monthly Taxable Wages – Actual
Taxable Wages
Payroll Tax @ 5.90%
125,000 – 68,750
56,250
56250 x (31/31)
400,000 – 56,250
343,750
20,281
* Days in month for this example is the full month ie January days is 31
Grouping Calculation:
If a client has wages in more than one state or territory, the threshold is based on the total Australian
Wages. This is relevant for determining the level of its general exemption deduction for each state.
For example, you may have to pay in NSW even if the total NSW Wages do not exceed the NSW
threshold, but your Australian combined wages do.
Company A: State Taxable Wages x State Threshold / Total State Taxable Wages 
State Taxable Wages – Threshold Value = State Threshold x State Rate = Payroll Tax Co.A
Company B: State Taxable Wages x State Threshold / Total State Taxable Wages = Threshold Value

State Taxable Wages – Threshold Value = State Threshold x State Rate = Payroll Tax Co.B
Payroll Tax Co.A + Co.B = Total Payroll Tax for Month
ABC WA P/L
ABC NSW P/L
MAIN
BRANCH
© The Institute of Certified Bookkeepers
Page 3
Payroll – What is Payroll Tax? (September 2013)
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Group Example
Gross Monthly Taxable
Wages
Calculation of Threshold
Threshold Value
Wages less Threshold
Rate Calculation
Payroll Tax
ABC WA
95,000
ABC NSW
54,000
TOTAL
149,000
95,000x62,500 / 149,000
39,849
95,000 – 39,849
55,151 X 5.5%
$3,033
54,000x56,500 / 149,000
20,476
54,000 – 20,476
33,524 X 5.45%
$1,827
$4,860
Fringe Benefits Calculation:
Benefits provided to employees that attract Fringe Benefits Tax are also included in payroll tax
calculations. The taxable value of the Fringe Benefits uses the grossed up value being a gross factor
of up to 1.8692. Grossed up value is the gross pay the tax office deems the employee would have
had to earn to have paid for the benefit from his net pay. The benefit may including GST therefore to
formulas are required.
Factor Calculation without GST
Grossed up factor
= 1 / (1 – FBT rate)
Therefore is FBT rate is 46.5%
= 1 / (1 - .465)
= 1 / (0.535)
= 1.8692
Factor Calculation including GST
Grossed up factor
= (FBT rate + GST Rate) / (1 – FBT rate) x (1 + GST Rate) x FBT Rate
FBT rate is 46.5% and GST 10% = (0.465 + 0.10) / (1 - 0.465) x (1 + 0.10) x 0.465
= 0.535 / 0.535 x 1.1 x 0.465
= 0.565 / 0.27365
= 2.0647
FBT Calculation
Employee Benefit not including GST
Factor
Taxable Value
1,000
1.8692
$1869.20
Employee Benefit including GST
Factor
Taxable Value
1000
2.0647
$2,064.70
© The Institute of Certified Bookkeepers
Page 4
Payroll – What is Payroll Tax? (September 2013)
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Employer’s Obligations
1. The employer must register with the Office of State Revenue within 7 days before end of
month when gross wages exceed the monthly threshold.
2. Once registered you MUST lodged a return even if a NIL return.
3. Employers must apply for an exemption. Exempted employers:a. Religious Institution
b. Public Benevolent Institution
c. Non-Profit Charitable, benevolent or philanthropic organisation
d. Public Hospital
e. Non-Profit Private Hospital
f. Area Health Service
g. Home Care Service
h. Ambulance Service
i. Municipalities / Local Councils unless wages connected to business
j. Government Departments – WA Only
Office of State Revenue for each state
State
Website
ACT
www.revenue.act.gov.au
NSW
www.osr.nsw.gov.au
SA
www.revenuesa.sa.gov.au
WA
www.dtf.wa.gov.au
QLD
www.osr.qld.gov.au
NT
www.revenue.nt.gov.au
TAS
www.sro.tas.gov.au
VIC
www.sro.vic.gov.au
NATIONAL www.payrolltax.gov.au
© The Institute of Certified Bookkeepers
Phone
02 6207 0028
1300 139 815
08 8204 9870
08 9262 1400
1300 300 734
1300 305 353
03 6233 2813
13 21 61
Page 5
Payroll – What is Payroll Tax? (September 2013)
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What is included in Gross Wages?
Payroll Tax Calculation Includes:
Wages (Salary and Hourly)
Piecework payments
Commissions and Bonuses (see exemptions)
Allowances:
- Fixed Amount Car Allowance
- Cents per km Car Allowance EXCEEDING ATO rate
- Accommodation Allowance EXCEEDING Daily
Reasonable Amount
- Shift Allowance
- Tool Allowance
- Site Allowance
- First Aid Allowance
- Meal Allowance
Employer Contributions to Industry Redundancy and LSL Pmts
Employer Contributions towards the issues of Shares, Options
or Units is treated as wages
NSW
VIC
QLD
TAS
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NT
(NOTE: from 1/7/11 for the following states, if the share or employee
share scheme is deemed to be a fringe benefit the discount must be
treated as a FBT for payroll tax using grossed up amount 1.8692)
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Employee working overseas for less than 6 months
Employee working overseas for more than 6 months
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Terminations (Including ETPs but Excluding Lump Sum D)
Leave Payments Annual, Personal, Long Service
Superannuation
Salary Sacrifice Superannuation
Salary Sacrifice Novated Lease
Jury Service and Volunteer Work
Employees Shares
Directors Fee/Remuneration (whether working as a director or not)
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Sub-Contractors Included:
- Piecework Contractor
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(Note: If employee exceeds the 6 months then a rebate can be
claimed if Payroll Tax was paid in the first 6 months)
(Eg. Orchard Hand pruning trees paid per tree)
-
Contractor working solely for the company
State and Territory Government
Contractors provides same or similar services for a
total of more than 90 days in a financial year
(Note: One day = any time from midnight to midnight)
(Eg: Cleaner providing a service everyday for a Restaurant)
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Contractor business provides services for a total of
more than 180 days in a financial year
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(Eg: Contractor business installing clients product for a period of
time >180 days
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Contractors work performed is the normal activity of the
business
(Eg. Architectural Practice hires a contract architect)
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Contractor earns ‘significant’ proportion of his/her
income from one client
© The Institute of Certified Bookkeepers
Page 6
Payroll – What is Payroll Tax? (September 2013)
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Fringe Benefits (See advice from Accountant of FBT items)
- Living Away Allowance (LAFHA)
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Car Parking
Fly in Fly out Remote Area
Share Schemes if deemed to be FBT
EXEMPTIONS for Payroll Tax Calculations
Sub-Contractors Excluded:
- Contractor not integral to the employer’s business
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NT
Ie A bookkeeper
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Contractor works for other businesses
Commonwealth Departments
State and Territory Government
Contractor employs two or more people to perform
work
Sole Trader – plus one or more
Partnership – partner plus one or more
Company – two or more
Owner/driver
Insurance Sales Agents
Door to Door Sales Agents
Contractors provides same or similar services for a
total of less than 90 days in a financial year
(Eg: Consultant installing and training Accounting Software)
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Contractor business provides services for a total of less
than 180 days in a financial year
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(Eg: IT team developing a website)
Exempted Items included in wages from payroll tax and FBT
- Tools of trade
- Laptop Computer *
- Mobile Phone *
- Briefcase
- Calculator
- Notebook
- Electronic Diary
- Printers for use with portable computers
* A benefit arising from a laptop, mobile phone or car phone is only exempt
of the item is primarily for business use)
Military Leave
Commissions paid to Insurance Agents of domestic goods
Commissions paid to Door to Door Sellers of domestic goods
Allowances:
- Accommodation Allowance within Daily Reasonable
Allowance
Termination – Genuine Redundancy Payments (Lump Sum D)
Emergency Duties ie Volunteer State Emergency Service
Trainees
Not for Profit Scheme – Apprentice/Trainees
Community Development Employment Project (CDEP)
Film Production
Paid Maternity/Adoption Leave (Max. 14 weeks)
© The Institute of Certified Bookkeepers
Page 7
Payroll – What is Payroll Tax? (September 2013)
__________________________________________________________________________________________
Government - Paid Parental Leave (PPL)
Parental Leave
Surrogacy Leave
Paternity Leave
Primary Carers Leave
Workers Compensation payments
* Rebate Claimable on Wages
Apprentice/Trainees
2009/2010 and 2010/2011 25% rebate on all Wages
New Starter Receiving Eligible Training
Community Jobs Plan
Long Term Unemployed Persons Aged 15-19yrs
Film and Television Industry
Export Rebate
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NSW
VIC
QLD
TAS
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NT
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ACT
WA
SA
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*Rebates are claimed after the Payroll Tax is paid except in some states
where you can claim the rebate on line at time of payment
Lodgements:
Lodged within 7 days after end of month for all states except NT; NT lodged within 21 days after end
of month. Online lodgement is available for all states.
Lodgement Adjustments and Penalties
Penalties are imposed if:
- Fail to register when required
- Fail to lodge return on time
- Under pay
- Understate wages
- Provide false or misleading information
Lodgement of objection of penalty is to be done in writing within 60 days of receiving penalty notice.
Other Online Services for Payroll Tax:
GovReports allows lodgement of payroll tax.
NSW
QLD
WA
ACT
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Payroll Tax Monthly Return
Payroll Tax Annual Return
Payroll Tax Periodic Return
Payroll Tax Annual Return/Nomination of Designated Group Employer
Payroll Tax Final Return/Nomination of Designated Group Employer
Payroll Tax Lodgement
Annual Payroll Tax Reconciliation
Monthly Payroll Tax Return
© The Institute of Certified Bookkeepers
Page 8
Payroll – What is Payroll Tax? (September 2013)
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NT
- Payroll Tax Monthly Return
- Payroll Tax Annual Return
TAS
- Annual Payroll Tax Reconciliation
- Monthly Payroll Tax Return
VIC
- Annual Payroll Tax Reconciliation
- Monthly Payroll Tax Return
SA
- Monthly Payroll Tax Return
Most Common Pitfalls of Payroll Tax
1.
2.
3.
4.
5.
6.
7.
8.
9.
Failure to register at time the wages exceed the threshold
Failure to register as a group
Failure to includes all components of gross wages
Failure to not exclude exemptions and claim rebates
Failure to include contractor payments
Failure to include directors superannuation
Failure to include salary sacrifice wages
Failure to include grossed up taxable value of fringe benefits
Failure to calculate correct state payroll tax when multiple states are involved.
© The Institute of Certified Bookkeepers
Page 9