Payroll tax can be a confusing topic. You may think that you already pay payroll tax as an employer, but this is an additional tax to the employer separate from PAYG Withholding requirements.
Payroll Tax – What is it and when do I have to pay it?
Payroll tax can be a confusing topic. You may think that you already pay payroll tax as an employer, but this is an additional tax to the employer separate from PAYG Withholding requirements.
What is Payroll Tax?
Payroll tax is a tax imposed by state/territory government on employers when their wage levels [see below] reach certain thresholds. The rates and thresholds vary between states, but we’ll be focusing on NSW rates and thresholds.
What is the current NSW Threshold and Rate?
Currently, you are required to register if your total wages paid in NSW exceed:
- $71,311 (29 day month)
- $73,770 (30 day month)
- $76,230 (31 day month)
- $850,000 (2018-19)
- $900,000 (2019-20)
- $950,000 (2020-21)
- $1,000,000 (2021 onwards)
If you pay wages in other states or territories, this will affect your NSW wages threshold. Grouping will also affect your threshold. If you’re unsure of your business payroll tax requirements, please give us a call and we are more than happy to help you.
What is the rate?
The current payroll tax rate is 5.45% on wages over the threshold.
What counts towards my wages threshold?
The definition of wages when it comes to payroll tax is broad. It includes the below:
- Normal salary and wages
- Allowances [some partial exemptions may apply]
- Bonuses and commissions
- Directors fees and other payments
- Employment Agencies
- Fringe Benefits
- Interstate Wages
- Salary Sacrifice
- Shares and options
- Nexus provisions
- Superannuation
- Termination payments
- Third party payments
- Deemed Contractor Payments
Some exemptions may apply surrounding the above.
Any wages paid to employees on Workers Compensation Payments, maternity leave or paid parental leave are exempt.
Contractors
Contractors can be deemed employees for payroll tax purposes even if they insist they are a contractor and have an ABN.
There are a few exemptions which Revenue NSW list:
- Services ancillary to the supply of goods
- Services not ordinarily required by your business
- Services required for 180 days or less in a financial year
- Services provided for 90 days or less in a financial year
- Services approved by the Commissioner as exempt
- Services performed by two or more people
- Services provided by an owner driver
For more information on payroll tax contractor exemptions, visit Revenue NSW’s website at https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/payroll-tax/contractors.
If you need help with working out if you need to register your business for payroll tax, please don’t hesitate to contact our friendly team.
