As a business owner in Australia there are various taxation obligations that you are required to navigate and adhere to, of which payroll tax is one.
Payroll tax is a state based tax that is imposed on employers. It is applied to all Australian taxable wages that exceed the payroll threshold. Each state and territory has its own payroll tax legislation, with different rates and thresholds.
Let’s take a closer look at the key points to help you better understand NSW Payroll Tax.
NSW Payroll Tax
In NSW, payroll tax is regulated and collected by the State Government department, Revenue NSW, not the Australian Tax Office (ATO).
The NSW payroll tax threshold for 2023/24 financial year is $1,200,000 and payroll tax is payable on the balance of the wages at the rate of 5.45%.
When Do You Need to Register?
Payroll tax is administered monthly.
If you are an employer who pays wages in NSW and your monthly taxable wages exceed the monthly tax-free threshold (as detailed below) you are required to register with Revenue NSW and pay payroll tax by the 7th day after the end of each month.
The 2023-24 monthly thresholds for NSW are as follows:
- 29 day month= $95,082
- 30 day month= $98,361
- 31 day month= $101,639
Eligibility for the Full Annual Threshold
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
Your business’ entitlement to the full threshold may be reduced if:
- you start or stop employing in NSW within a financial year;
- you pay wages in another State or Territory;
- your business is part of a group of businesses.
Which Payments are Liable for NSW Payroll Tax?
Payroll tax is imposed on an employer’s liable NSW wages after adjusting for any applicable threshold entitlement. Wages is widely defined and generally includes any remuneration paid by an employer to an employee. Payments made to certain contractors may also be deemed to be wages and therefore subject to payroll tax.
It is important to first determine whether a contractor might be considered an employee for payroll tax purposes. If it is determined that they are not to be treated as an employee, those payments may be eligible for a payroll tax exemption. There are payroll tax conditions to be considered in regards to payments made to sub-contractors too.
For payroll tax purposes in NSW, taxable wages includes payments such as:
- wages
- salaries
- allowances
- bonuses and commissions
- apprentice and trainee wages
- director’s fees and other payments
- fringe benefits
- superannuation
- termination payments
There are some payments which are exempt from, or not liable for, payroll tax in NSW. Additional conditions may apply. These include:
- jury duty payments made by the court system to an employee
- maternity and paternity leave
- wages paid to a volunteer member involved in emergency operations
- workers compensation payments
- trust distributions and dividends
NSW Payroll Tax Grouping Provisions
For payroll tax purposes, businesses may be grouped with other businesses if there is a link between the entities. Grouping can occur regardless of where the businesses operate and has important implications for calculating threshold entitlements.
Where a group exists:
- the threshold entitlement is based on the proportion of NSW wages against total Australian wages
- a single threshold deduction applies to the group
- the group can nominate to use the designated group employer (DGE) or single lodger method of reporting and paying group payroll tax obligations
- every member of the group is liable for any outstanding payroll tax of other group members.
A group can be defined in the following ways:
- Related companies – where two or more companies are a holding company and a subsidiary or are subsidiaries of the same holding company;
- Use of common employees – if one or more employees of a business performs duties under an agreement between the employers;
- Commonly controlled businesses – where a person or set of persons together have a controlling interest in two or more businesses. A ‘person’ includes a natural person, trustee or corporate entity;
- Tracing of interest – if an entity has a direct, indirect or aggregate interest of more than 50 per cent in any corporation;
- Subsuming – a larger group can be formed out of multiple smaller groups when a business is a member of two or more groups at the same time, or the members of a group share a controlling interest in another business.
Payroll Tax Reporting & Compliance
Revenue NSW uses data analytics and risk assessment processes to identify employers that may be non-compliant in their payroll tax obligations and conducts regular payroll tax audits. It also exchanges information with other agencies including the ATO, SafeWork NSW, the Australian Securities and Investments Commission (ASIC) and Rental Bond Board.
It is important that you regularly review your payroll tax processes and procedures to ensure that you are meeting your reporting and payment obligations as well as remaining compliant. If everything is systematically in order there should be no need to worry when the time comes for an audit.
Lodge NSW Payroll Tax Annual Reconciliation
The due date for lodgement and payment of the 2022/23 annual payroll tax reconciliation is 28 July 2023. The reconciliation is your chance to double check, adjust and correct any reporting and payment errors that may have occurred throughout the year. It is important to be thorough and on time with lodging your annual reconciliation to avoid any potential penalties.
Seek Expert Advice for NSW Payroll Tax
Navigating NSW Payroll Tax doesn’t need to be overwhelming. With the right advice and guidance, you can be confident that you are meeting your payment and lodgement obligations, as well as legally minimising the amount of tax that you are liable to pay by correctly claiming any rebates or exemptions that you may be eligible for.
If you have any questions regarding your NSW payroll tax obligations, or need help lodging your annual reconciliation, contact the expert team of tax accountants at The Quinn Group by calling +61 2 9223 9166 or submit an online enquiry form to arrange an appointment.
