TABLE OF CONTENTS
- What is payroll tax?
- Difference between payroll tax, PAYG, and income tax
- Payroll tax obligations
- Understanding taxable wages
- Payroll tax threshold and payroll tax rate
- Overview of payroll tax for each state and territory
- Pay payroll tax
- Employer responsibilities
- Exemptions to payroll tax
- Record keeping and compliance
- Consult an advisor
When you become an employer in Australia, you should also become aware of your responsibilities in terms of payroll tax, as per the rules set by your state or territory.
Since payroll tax not a federal requirement, but rather dependent on states and territories, you’ll need to investigate the rules that affect your specific business and location.
Let’s do a quick rundown of payroll tax and how it functions.
What is payroll tax?
Payroll tax is a state or territory tax on a company’s taxable employee wages. Payroll tax kicks in for employers once the sum of these wages reaches a certain threshold.
Each state and territory have their own payroll tax system, threshold amount, tax rates, exemptions, and other rules. There is no national standard for payroll tax.
Payroll tax is usually calculated on total Australian wages, not just wages paid in the relevant state or territory.
Difference between payroll tax, PAYG, and income tax
Payroll tax is based on the total wages you pay your employees and contractors, while PAYG speaks to your employees’ personal income tax, which you set aside on their behalf.
Payroll tax is a state or territory-based tax, while PAYG is a federal requirement, and income tax is a federal tax.
Payroll tax obligations
Every employer, regardless of their state will have a range of payroll responsibilities. These will generally mean that you,
- register for payroll tax
- understand rates and thresholds
- pay payroll tax
- do an annual reconciliation
- keep records and remain compliant.
Understanding taxable wages
Taxable wages generally include wages, salaries, super, contractor payments, leave etc. They apply to all workers, regardless of whether full time, part time, or casual.
Payroll tax threshold and payroll tax rate
You need to check directly with your state or territory to know your specific payroll tax rates and thresholds. Each of these will have different tax rates and threshold amounts.
Furthermore, these rates and thresholds are in constant flux. You need to check regularly and be ahead of any changes, as payroll tax is self-regulated and the onus is on you to meet your responsibilities.
Overview of payroll tax for each state and territory
Payroll tax rates and thresholds vary by state and territory. Businesses are responsible for paying payroll tax in any state or territory in which they operate or in which their employees reside.
For more specific information, you can refer to detailed guides on payroll tax requirements for each region. Here are the resources:
For additional government information, you can also visit:
- ACT payroll tax
- NSW payroll tax
- NT payroll tax
- VIC payroll tax
- QLD payroll tax
- SA payroll tax
- WA payroll tax
Pay payroll tax
If you are registered to lodge and pay monthly, you must submit your wage details every month, even if you do not have a payroll tax liability. Sometimes this happens half yearly or yearly.
As an employer, you must self-assess your liability, pay payroll tax, and adhere to the payment dates and requirements in your state.
Employer responsibilities
Employers’ obligations and liabilities are generally their own. If you’re an employer, it’s up to you to register, pay, report, and submit returns, as per your state.
Exemptions to payroll tax
There are often exemptions to payroll tax. These may include apprentices and trainees. Exempt organisations can include charities and regional organisations.
Record keeping and compliance
Never underestimate the importance of keeping accurate payroll tax records. In general, you’ll need great records for a variety of purposes, such as PAYG and STP, so relying on using payroll or accounting software can really help here.
Failure to register for, report, or pay, your payroll taxes could result in a number of penalties.
You could also face a full tax audit, which may uncover other missed payments or tax-related mistakes.
Consult an advisor
It’s always a good idea when it comes to payroll and taxes to consult with a bookkeeper, accountant, or advisor. You can find one near you by using our free search tool.
