The collection of payroll tax payments and carrying out payroll tax audits by Revenue NSW, are a significant source of revenue for the State Government.
As outlined in previous budget announcements, the NSW Government has strong plans to return the State Budget to surplus by 2024-25, and so we can expect to see an increased focus in enforcing compliance when it comes to businesses correctly reporting and remitting payroll tax obligations. That could mean less leniency and concessions when it comes to meeting deadlines, as well as higher levels of scrutiny.
One of the main ways that Revenue NSW ensures compliance is by conducting Payroll Tax Audits.
Audits not only help to monitor that businesses are correctly meeting their reporting and lodgement obligations, but that they are making the correct payments too. Since payroll tax constitutes a big portion of state government revenue, and they are looking to increase that revenue even further, of course they want to take whatever actions are necessary to ensure they are receiving every dollar that is owed.
Be Prepared for Your Payroll Tax Audit
The thing about audits is that you never know when it might be your turn to undergo rigorous investigation. No doubt, audits can be stressful too.
When the time comes that you are subjected to a payroll tax audit, you can minimise the stress and overwhelm by being well prepared. The expert team of tax accountants at The Quinn Group can show you how to keep on top of things, and correctly meet your payroll tax obligations, so that you are always ready should you be faced with a Payroll Tax Audit. Or, if you are perhaps not as prepared as you should be, and get caught a little off-guard when advised of an upcoming audit, we can help you with that too.
Failing to meet your payroll tax obligations can result in interest and penalties, so it is important to do the right thing to avoid any additional costs.
Contact us by calling (02) 9223 9166 or submit an online enquiry to discuss your payroll tax audit needs.
We’ve outlined a few key points below that can help you to stay in good stead when it comes to payroll tax obligations and audits.
Maintaining Good Business Records is Key
As a business owner, maintaining good business records, including records and obligations in regards to payment of wages and payroll, is a key responsibility.
In relation to payroll tax and payroll tax audits, Revenue NSW requires that you must:
- keep relevant records for at least five years following the completion of any transaction
- ensure records enable a payroll tax liability to be properly assessed
- keep records in English or in a form easily translated to English.
It should certainly not be underestimated how much time and effort the practice of “doing the right thing” can save when it comes to being audited. In fact, not meeting your obligations and having badly kept records, does not only mean it will likely take longer to locate all the data and records that the auditors require, but it may also prompt them to delve even further into your business dealings and records.
Make an effort to thoroughly check all payroll tax submissions for possible errors. You should also conduct regular reviews and make a voluntary disclosure if you do happen to find an error. Engaging the services of tax professionals, like the team at The Quinn Group, to assist with payroll tax advice and obligations, can help to ensure that you not only minimise the chance of errors, but can also help to relieve some of the pressure off you as a business owner, who undoubtedly has many more things to focus on.
How Are Businesses Selected for a Payroll Tax Audit?
Revenue NSW may audit customers who are already registered for payroll tax to ensure the correct amount of payroll tax has been paid. They might also audit unregistered employers it believes should be registered for payroll tax as their wages are above the tax-free threshold.
Specialised data matching programs are used to help in identifying risks and errors, as well as research and risk profiling, information sharing with other government agencies, and tip-offs and referrals.
Some of the most common reasons that businesses might be selected for an audit include:
- An undeclared or incorrect grouping has been identified
- There is a risk contractor exemptions may have been claimed in error
- The value of fringe benefits have been understated or not reported
- Additional or salary sacrifice superannuation payments were not reported
- The value of shares and options were not reported or calculated incorrectly
- An employer has failed to register for payroll tax when required
- There are significant payroll tax risks identified in a particular industry.
So really, any business who pays wages in NSW could be audited for Payroll Tax, regardless of whether they are registered or not.
What is Payroll Tax and the Payroll Tax Threshold?
Each state and territory has its own payroll tax legislation, with different rates and thresholds.
In NSW, payroll tax is applied to a business’ New South Wales (NSW) wages that exceed the payroll tax threshold.
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%.
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.
Find out more about NSW Payroll Tax, including registration requirements and which payments are liable for payroll tax in our article, What is NSW Payroll Tax?.
Received Notification of a Payroll Tax Audit?
You Don’t Have to Do It Alone. We Can Help!
If your business has received notification of being selected for a Payroll Tax Audit, contact us as soon as possible on (02) 9223 9166 or submit an online enquiry for expert advice and assistance through the auditing process. We have considerable experience with payroll tax audits and liaising with Revenue NSW and can help you to meet the audit requirements and hopefully minimise the stress and potential impact to you and your business along the way.