What is Payroll Tax?

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What is Payroll Tax?

July 22, 2022         Maria Mubeen

Payroll tax is a tax paid on employee’s wages. It only needs to be paid once a business’ total payroll amount exceeds the state or territory tax-free threshold set out by the Revenue office. 

The following payments and benefits generally attract payroll tax if together they exceed the threshold:

  • Employee wages 
  • Contractor payments 
  • Company directors’ remuneration 
  • Superannuation 
  • Allowances 
  • Bonuses and commissions 
  • Termination payments

Threshold and Tax Rate in NSW 

In NSW the Payroll Tax threshold to be met is as follows:

  • $750,000 (annually)
  • $62,500 (monthly)

The Payroll Tax rate is 5.45% as of 1st July 2022 onwards.

Threshold and Tax Rate in Victoria 

In VIC the Payroll Tax threshold to be met is as follows:

  • $700,000 (annually)
  • $58,333 (monthly)

The Payroll Tax rate is 4.85% (or 1.2125% for regional Victorian employers).

For other states or territories and updated information refer to www.payrolltax.gov.au 

How to Register for Payroll Tax?

Each state or territory has a different application process which can be found on the Revenue office website. However, the following information is generally what is required:

  • ABN
  • Total Australian wages for the current financial year 
  • Wages paid in each state or territory the business operates in 
  • For businesses that are part of a group, the groups total Australian and state or territory based wages

Having Employees in More Than One State or Territory 

Irrespective of having employees in multiple states or territories, Australian businesses must be registered in every state or territory that they operate in. Once their wages exceed the threshold amount in all states or territories combined they will be required to pay the Payroll Tax. However, the threshold may be reduced state or territory wise if the business has employees in more than one state. 

Key Takeaways 

All businesses Australia wide will be required to pay the Payroll tax if their total wages exceed the threshold. Whether you have employees in one or more states or territories you are required to be registered with your respective Revenue office.

About Maria Mubeen

Maria is a legal intern at Openlegal and is currently in her third year studying Law and Business at UTS. Her interests are commercial law, contract law, and litigation.