“When total wages reach the threshold in any states or territories where they have employees, businesses must register for payroll tax, but it’s something that many businesses, who are focussed on maintaining their growth, forget to do,” said Peter Bembrick of HLB Mann Judd.
“However, just like the Australian Tax Office, the various State Revenue Offices are increasingly using data-matching from a variety of sources to test compliance with the rules.
“As a result, we are seeing an increase in payroll tax investigations, which can be very time-consuming and expensive for businesses to sort out.”
Mr Bembrick noted that because payroll taxes are state-based, the tax rates and payroll thresholds at which they apply vary dramatically.
He said that for the current financial year, payroll tax rates and thresholds look like this (ordered by the size of the tax rate):
- ACT: Rate of 6.85 per cent on an annual wage threshold of $2 million
- Tasmania: Rate of 6.1 per cent on an annual wage threshold of $1.25 million
- WA: Rate of 5.5 per cent on an annual wage threshold of $850,000
- NT: Rate of 5.5 per cent on an annual wage threshold of $1.5 million
- NSW: Rate of 5.45 per cent on an annual wage threshold of $750,000
- Queensland: Rate of 4.75 per cent on an annual wage threshold of $1.1 million
- Victoria: Rate of either 3.65 or 4.85 per cent on an annual wage threshold of $625,000
- SA: Rate varies between 2.5 per cent to 4.95 per cent on an annual wage threshold of $600,000
However, he noted the “good news” for employers in NSW with the increase in the payroll tax threshold announced as part of this year’s state budget.
Another source of confusion is where employers are registered for payroll tax in one state, but have workers based in other states.
“These businesses must then report their ‘taxable Australian wages’ in each state, applying the relevant tax-free threshold and then apportioning the excess over the threshold to each state,” Mr Bembrick said, noting that the method used to do this calculation also varies for each state and territory.
“Therefore, they need to register and start paying tax on wages relating to the second state, and in addition will face a higher payroll tax bill in their ‘home’ state.”
In a recent online poll on the My Business website, a quarter (24.6 per cent) of readers surveyed ranked payroll tax as their most cumbersome tax to deal with in business.