Payroll Tax: Is your Business over the Threshold?


If you own a business that employs people then you need to know about payroll tax. This is a self-assessed State and Territory based tax imposed on businesses in Australia. The tax is payable when the total wages paid or owed to employees exceeds a threshold. 

These thresholds and rates vary between states. In fact the variance between states is significant. At the time of this publication the threshold in Victoria is only $600,000, however, in Queensland it is $1.1 million. This means that businesses with wage costs over $600k in Victoria need to fork out an extra 4.85% in payroll tax, yet those in Queensland don’t need to pay anything until their payroll reaches over $1.1 million annually or $91k a month. Rates also vary with WA & NT having to pay 5.5% compared to Victoria who only pay 4.85% and 3.65% for regional employees.

Be careful when hiring sub-contractors

It is important to understand that payroll tax is not based on your business structure, but rather your payroll activity. So sole traders, companies, trust businesses, and partnerships may all be liable for payroll tax if they exceed the threshold. You must also be careful about hiring sub-contractors. Even if they have an ABN they may still be considered an employee for payroll tax purposes. While the term employee isn’t defined in the PTA Act, the courts use the common law meaning and have established a number of principles to assist in determining whether a worker is a common law employee. These include:

  • Contract and practical relationship
  • Working to achieve a given result
  • Control and direction by the principal over the worker and the work performed
  • The extent to which the contractor operates an independent business
  • The contractors ability to delegate and subcontract work
  • The degree of integration of the worker, and the services they perform

We always advise you speak with your Accountant to better understand the nature of hiring sub-contractors and the impact this may have on payroll tax.

So what happens to those businesses that have employees across multiple states?

Well you need to register for payroll tax across multiple states, but the total is based on your Australia wide payroll. For example, if you employee staff in Queensland and NSW and your Australia wide wage bill for 31 days is $95,000 then you will need to register for Payroll Tax in both states. However, if your bill was only $75,000 then you would  register in NSW. Yet, you still need to register in QLD, you are just not liable to pay any PRT.

When calculating the total wages you need to ensure that you are capturing all payments. For the purposes of Payroll Tax wages is broadly defined. This includes gross wages and salaries, commissions, bonuses, allowances, superannuation contributions, fringe benefits, termination payments and accrued leave paid on termination, employee share acquisitions and directors’ remuneration.

Remember that gross wages and salaries is before deductions such as income tax, health fund contributions, union fees, holiday pay and super.

There are a number of payments that may be exempt from payroll tax and these include apprentices and trainees, workers’ compensation, disability wages, defence force leave, emergency services leave, parental leave, and some allowances such as overnight accommodation and motor vehicles.

Lodgement times depend on the estimated annual liability and may be required monthly, quarterly or annually. Payment is generally due at the same time as lodgement so ensure that you have the funds available. The State Revenue offices do conduct audits so ensure that you keep good records for 5 years.

These thresholds and rates vary between states so we recommend checking the thresholds for your state here or speaking with your Accountant for further advice.


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About Author

Kelly Morgan
Kelly Morgan

Kelly Morgan has over 32 years’ experience as a Chartered Accountant and is the Managing Partner of Azure Group heading up the Business Accounting, Technology & International divisions. Kelly is passionate about working with business owners. By working closely with her clients, Kelly helps them to maximise the opportunities in their business and assist them to achieve their goals.

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