What is payroll tax in Australia?
Payroll taxes are state-based taxes on wages by businesses paid to employees. Whether your business needs to pay payroll taxes depends on your state or territory’s legislation in Australia.
However, all Australian businesses with employees must report ‘pay as you go’ (PAYG) withholding taxes.
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Who needs to pay payroll tax in Australia?
Employers who pay wages above a certain wage threshold in a particular state or territory are required to pay payroll tax. Each state and territory has its own payroll tax legislation, rates, and thresholds. Payroll tax is calculated as a percentage of the total wages paid.
If you’re part of a group of companies, the combined wages of the group might exceed the threshold, requiring registration for the entire group. Some organisations, like charities or religious institutions, might be exempt from payroll tax.
How much is payroll tax? Payroll tax by state & territory
See our small business summary below of the different payroll tax rates and thresholds for each state and territory. We also include links to official government sources so you can check the most up-to-date payroll tax rates and legislation.
Important payroll tax payment due dates
Employers in Australia are generally required to pay payroll tax within seven days after the end of each month. If the seventh day falls on a weekend or public holiday, the payment is due on the next business day.
Payroll tax annual reconciliation deadline dates by state and territory
- NSW (New South Wales) payroll tax due date: 28th July
- Victoria payroll tax due date: 21st July
- QLD (Queensland) payroll tax due date: 21st July
- SA (South Australia) payroll tax due date: 22nd July
- WA (Western Australia) payroll tax due date: 21st July
- NT (Northern Territory) payroll tax due date: 21st July
- Tasmania payroll tax due date: 21st July
- ACT (Australian Capital Territory) payroll tax due date: 21st July
How are payroll taxes calculated?
Payroll tax is calculated as a percentage of the total wages paid by an employer. The rates, thresholds, and due dates of payroll taxes vary depending on the state or territory where an employer operates.
To calculate it, follow these steps:
- Check if you owe payroll tax: Determine if your business’s total annual wages exceed the payroll tax-free threshold set by your state or territory.
- Calculate your taxable wages: Add up all wages, salaries, commissions, and bonuses paid to Australian employees. Make necessary adjustments for superannuation, fringe benefits, and payments to contractors.
- Find your payroll tax rate: Each Australian state and territory has its own payroll tax rate. Check the relevant government website for the most current rate.
- Identify any deductions or exemptions: Some businesses might qualify for payroll tax deductions or exemptions. Check with your state’s revenue office.
- Calculate the tax: Multiply your taxable wages by the payroll tax rate and subtract any deductions or exemptions.
- Lodge and pay: File your payroll tax return and make the payment on time according to your state’s requirements.
What are the consequences of not paying payroll tax?
Failure to pay payroll tax can result in penalties and interest charges being imposed by your relevant state or territory revenue authority. Legal action may be taken against the employer in serious cases. If you require further information regarding payroll taxes in Australia, it’s best that you contact your state or territory revenue authority or consult with a qualified tax professional.
Are there any exemptions or deductions available for payroll taxes in Australia?
Yes, there are some exemptions and deductions specific to a state or territory. Some states provide exemptions for specific types of wages or salaries like apprentices or trainees. Employers may also be eligible for deductions or rebates for certain activities, such as research and development or employing people with disabilities.
What is the payroll tax threshold?
Payroll tax threshold is the total amount of wages an employer can pay their Australian employees in a financial year without incurring payroll tax. Each state and territory in Australia has a specific annual payroll tax threshold.
For example, if the threshold in a state is $700,000, a business that pays its employees a total of $680,000 in a year would not be liable for payroll tax. However, if the total wages reach $720,000, they would be liable for payroll tax on the entire amount, not just the excess over the threshold.
The government aims to ease the financial burden of small businesses and encourage entrepreneurship by exempting businesses below a certain size from payroll tax. For smaller businesses, payroll tax administration can be complex. The threshold reduces the number of businesses that need to register and comply with payroll tax regulations.
What is the payroll tax threshold?
Payroll tax threshold is the total amount of wages an employer can pay their Australian employees in a financial year without incurring payroll tax. Each state and territory in Australia has a specific annual payroll tax threshold.
For example, if the threshold in a state is $700,000, a business that pays its employees a total of $680,000 in a year would not be liable for payroll tax. However, if the total wages reach $720,000, they would be liable for payroll tax on the entire amount, not just the excess over the threshold.
The government aims to ease the financial burden of small businesses and encourage entrepreneurship by exempting businesses below a certain size from payroll tax. For smaller businesses, payroll tax administration can be complex. The threshold reduces the number of businesses that need to register and comply with payroll tax regulations.
What are payroll tax exemptions and concessions?
Even if your business payroll exceeds the threshold, you may still be eligible for exemptions or concessions that reduce your payroll tax liability. These rules vary significantly between states and territories.
Exemptions
Certain types of employers or wages may be completely exempt from payroll tax. These can vary by state but may include:
- Public benefit organizations (e.g., charities)
- Registered religious institutions
- Employers of foreign diplomats
- Wages paid for certain types of work (e.g., some agricultural work)
Concessions
Some states offer concessions that reduce the amount of payroll tax payable. These can include:
- Payroll tax rebates for employing new staff
- Reduced tax rates for specific industries
- Exemptions for a portion of wages paid (e.g., for apprentices or trainees)
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