Payroll tax is a state based tax that is imposed on employers. It is regulated and collected by the NSW Office of State Revenue (OSR) and not the Australian Tax Office (ATO). Payroll tax is applied to all Australian taxable wages that exceed the payroll threshold. The NSW threshold for 2017 financial year is $750 000 and payroll tax is payable on the balance of the wages at a rate of 5.45%.
When do you need to register?
Payroll tax is administered monthly. It means that you are required to register with the NSW OSR and pay payroll tax if your monthly taxable wages exceed the monthly tax-free threshold. The 2016-17 monthly thresholds for NSW are as follows:
- 28 day month= $57,534
- 30 day month= $61,644
- 31 day month= $63,699
If your annual taxable wages exceeded $750,000 for the year ended 30 June 2017, you have until the 21st of July 2017 to register and pay payroll tax.
The full annual threshold of $750,000 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 liable for payroll tax?
Employers are required to pay payroll tax on all of their taxable wages. The term ‘wages’ is widely defined in the NSW Payroll Tax Act 2007 (the Act) and includes all forms of direct and indirect reward for work. It is not restricted to wages and salaries and includes other payments such as fringe benefits, superannuation, director’s fees and all contractors’ payments unless at least one of seven exemptions applies
For payroll tax purposes, businesses may be grouped with other businesses if there is a link between the companies. When a group exists:
- Only a single threshold applies to the group, and
- Each member of the group is liable for any outstanding payroll tax of the 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 both subsidiaries of the same holding company;
- Use of common employees when an agreement for services between two or more businesses results in the employees of one business performing duties as an employee for another business;
- Commonly controlled businesses where two businesses are controlled by the same person(s) and have a controlling interest of more than 50% across different entities. A ‘person’ means a natural person, trustee or corporate entity.
- Subsuming means that a larger group can be formed out of multiple smaller groups.
NSW OSR uses data analytics and risk assessment processes to identify employers that may be non-compliant in their payroll tax obligations. It regularly exchanges information with other agencies including the ATO, Safe Cover NSW, the Australian Securities and Investments Commission (ASIC) and Rental Bond Board. Therefore, you should take appropriate steps to be prepared for an audit by undertaking a review of your current Payroll tax processes and procedures.
If you require assistance with payroll tax or your business has been selected for a Payroll Tax Audit and you have been requested to complete an Employers Questionnaire you should contact us on (02) 9223 9166 to get assistance with completing this form and discussing your options. Alternatively you can submit an online enquiry form.