Outlined in the Payroll Tax Act 2007 (NSW), payroll tax is a state tax regulated and collected by the NSW Office of State Revenue (OSR) and not the Australian Taxation Office (ATO).
It is vital for employers to understand the payroll tax system and what wages are liable so the OSR doesn’t audit your business.
Payroll Tax is imposed on an employer’s liable NSW wages minus any threshold amount. From 1 July 2012 to 30 June 2013 the payroll tax threshold is $689,000. Wages include any remuneration by an employer to an employee. Payments made to certain contractors may also be deemed to be wages.
Liable wages include:
• Salaries, commissions, allowances, penalty rates, overtime and leave payments
• Wages, including superannuation
• Superannuation contributions
• Fringe benefits including all benefits subject to the Fringe Benefits Tax Assessment Act 1986
• Termination payments including the value of an employment termination payment and all paid out annual and long service leave
• Shares and options
• Allowances not subject to fringe benefits tax
• Accommodation allowances
Payments which are not liable to Payroll Tax include:
• Jury day payments made by the court system to an employee
• Workers Compensation payments
• GST component of a wage or relevant contract payment
• Reimbursement of the exact amount of an employee’s receipted or documented business expenses.
There are two payroll tax exemptions. Some wages are exempt when paid for a specific purpose (e.g. maternity, paternity, or adoption leave) and others are exempt due to the nature of the organisation (e.g. religious institutions, public hospital and charitable organisations may qualify for an exemption.)
To prevent companies from avoiding payroll tax by subdividing their businesses into a number of subsidiary companies, detailed grouping provisions apply to ensure that corporate groups will be considered as one collective employer. For payroll tax purposes, a group is constituted under the following circumstances:
• Related corporations within the meaning of the Corporations Act 2001
• Use of common employees
• Commonly controlled businesses
• Groups arising from tracing of interests in corporations
• A larger group can be formed out of smaller groups
What this means is that a group is only entitled to one (1) payroll tax threshold.
If you have more questions about Payroll Tax or your company has been Payroll Tax audited by the OSR, our dedicated and passionate accountants here at The Quinn Group can assist you with your matter. Please submit an online enquiry or call 1300 QUINNS (784 667) to book an appointment.
