In Western Australia (WA), payroll tax is a state-based tax imposed on employers for the wages paid to their employees. Funds from payroll tax are paid to the Consolidated Fund of Western Australia.
Payroll tax is designed to accommodate for the costs of certain public services, including education, health, public safety, and law and order.
Every employer needs to be careful they comply with all rules of payroll tax, as it’s on them to self-apply such taxes. As an employer you can look to the payroll tax guide provided by the WA government for full information.
Here’s how payroll tax in WA generally works.
Who needs to register for payroll tax?
You need to register for payroll tax when you pay your staff over a certain threshold. This threshold changes through time, so you need to pay attention.
It is your responsibility to ensure you register, lodge, and pay payroll tax on time.
Registration for payroll tax is required within seven days after the month in which your total Australian wages first exceed the current WA monthly or annual threshold amount.
Registration is necessary to comply with payroll tax laws and regulations in Western Australia.
Understanding payroll tax rates and thresholds in WA
Payroll tax rates and thresholds change over time and can be subject to gradual and variable rates or thresholds.
As of 2024 for example, the payroll tax rate starts at 5.5% and the payroll tax threshold applies to annual payrolls over $1 million.
The rate changes on higher values. As the WA government states,
“A diminishing threshold will apply for employers or groups of employers with annual taxable wages in Australia between the annual threshold of $1 million and the upper threshold of $7.5 million.”
With the complexities involved, it’s best to check thresholds and rates directly with the WA government.
Calculating payroll tax
The best way to calculate your payroll tax on taxable wages is to use the payroll tax calculator provided by the WA government. It’s clean and straightforward.
What are taxable wages
Payroll tax applies to taxable wages. So what are they?
Taxable wages include gross wages, salaries, bonuses, superannuation, commissions, allowances, and the cash value of fringe benefits. Certain items, such as wages paid to apprentices and trainees, may be exempt or have concessions applied.
Exemptions and deductions
There are various exemptions and deductions available under WA payroll tax law, such as wages paid to apprentices and trainees, wages paid to certain employees in regional areas, and wages paid by certain charitable organisations.
Compliance and payments
You must lodge and pay payroll tax on time to avoid penalties.
Payroll tax is typically due on the 7th day of the month following the end of each month (e.g., tax for June is due by July 7th). Penalties and interest may apply for late payments or failure to lodge returns on time.
Annual reconciliation and outstanding returns
At the end of the financial year (30th June), employers must reconcile their payroll tax liability for the year by lodging an annual return. This return summarises the payroll tax paid throughout the year and adjusts for any overpayments or underpayments.
