What is payroll tax?
Payroll tax is a state and territory tax that is imposed on employers and is calculated based upon the amount of taxable wages paid. The 5.45% tax is payable when an employer’s total Australian wages exceed the tax-free threshold. Australian wages comprise of NSW wages and interstate wages.
When do you need to register?
Payroll tax is administered monthly. You are required to register if your monthly taxable wages exceed the tax-free threshold. The 2015-16 monthly thresholds for NSW are as follows:
- 29 day month= $59,426
- 30 day month= $61,475
- 31 day month= $63,525
If your annual taxable wages exceeded $750,000 for the year ended 30 June 2015, you have until the 21st of July 2015 to register. The annual threshold for the year ended 30 June 2016 is also $750,000.
The full annual threshold is only available to employers who:
- Employ for a full financial year
- Do not pay wages outside NSW
- Are not grouped with other businesses
What payments are considered to be wages?
For payroll tax purposes, wages include:
- Gross wages and salaries
- Directors fees
- Payments to certain contractors
- Fringe benefits
- Superannuation contributions paid on behalf of employees and directors
How are businesses grouped for payroll tax?
Businesses may be grouped for payroll tax by:
- Common control
- Being related corporate bodies within the meaning of the Corporations Act 2001
- Common employees
- Tracing of interests in corporations
Two business are grouped by control when the same person or set of persons, together either as a director(s) or shareholder(s) of a corporation, partner(s) of a partnership or beneficiaries of a trust, have greater than 50% control of each business.
It is important to note that the same person can control two or more businesses by any combination of the above common control types.
Related corporations are those that:
- have a holding and subsidiary relationship because one company holds greater than 50% of the share capital of the other, or
- the board of one corporation can control the other corporation, or
- one company can control the voting power of the other at a general meeting of shareholders.
NSW businesses whose taxable wages are over the $750,000 annual threshold are liable to payroll tax.