Some employers in Australia have an obligation to pay payroll tax, while others do not. As a business owner, it is important to consider whether payroll tax applies to you.

What is payroll tax?

Payroll tax is a tax on the wages that you pay as an employer. It is calculated against the wage amount you pay each month and it is generally lodged monthly.

It should be noted that payroll tax is a state and territory tax, meaning it is payable to the state of Australia where your services/work were conducted. Each state or territory has different thresholds and requirements for payroll tax.

Types of pay which can be potentially liable for payroll tax include:

  • Employee wages
  • Payments to contractors
  • Directors’ remuneration
  • Superannuation
  • Allowances for employees
  • Fringe benefits
  • Bonuses and commissions
  • Payments related to termination

Do I have to pay it?

Employers who pay wages over a certain amount will be required to pay payroll tax. The thresholds are dependent on which state or territory you have conducted your work in.

In Victoria, the threshold for paying payroll tax is $650,000 (annually) or $54,166 (monthly). The rate is 4.85% for metro employers, or 2.425% for regional employers.

To learn about the threshold for your particular state, you can click here.

A number of employers can seek an exemption for payroll tax. To find out if this is the case for you, you should check with your state or territory’s revenue office.

For more information, you can search the ATO website, or get in touch with a Tax Champion.