Understanding Payroll Tax for the 2016-2017 Financial Year
According to the Australian Revenue Office, Payroll tax is a self-assessed, general purpose state or territory tax that is based on the wages paid or payable by an employer to its employees, whenthe total wage bill of an employer (or group of employers) exceeds a threshold amount. Understanding this tax is vital if you don't want to land yourself in trouble with the Australian TaxationOffice.
An individual employer or a group of related businesses may be liable for payroll tax if the total liable wages throughout Australia, including New South Wales, exceeds the payroll tax threshold.For the 2016-2017 financial year, the payroll tax threshold is $750,000, and the payroll tax rate in New South Wales is 5.45%.
If you pay wages outside of New South Wales, your tax rate will be apportioned according to the ratio of wages paid within New South Wales.
What Wages are Liable?
Wages include any remuneration paid by an employer to an employee. Payments made to certain contractors may also be deemed to be wages. Liable wages include:
- Salaries, commissions, director fees, bonuses, allowances and any ordinary earnings, penalty rates, overtime and leave payments.
- Wages, including superannuation, allowances and fringe benefits, paid to apprentices and new entrant trainees.
- Superannuation contributions.
- Fringe benefits
- Termination payments including all paid out annual and long service leave irrespective of when it was accrued
- Shares and options contributions are liable up to their market value when granted or vested.
- Make-up pay that is additional to a workers’ compensation payment specified in an award or agreement.
- Allowances not subject to fringe benefits tax.
- Motor vehicle allowances.
- Accommodation allowances.
- Contracts, which provide for direct payments to contractors and subcontractors for work they perform.
There are some wages that are exempt from payroll tax, including:
- Jury duty payments made by the court system to an employee.
- Workers compensation payments, except for make-up pay.
- Reimbursement of the exact amount of an employee’s receipted or documented business expenses.
- The GST component of a wage or relevant contract payment.
Apprentice and Trainee Wages
Apprentice and trainee wages are liable for payroll tax. Taxpayers can claim a payroll tax rebate for wages paid to apprentices and trainees recognised by the New South Wales Department ofIndustry.
For rebates on trainee or apprentice wages, the trainee or apprentice must have been continuously employed by the taxpayer for less than three months full-time or 12 months casual or part-time before commencement as a trainee.
For example, if you employ someone for a probationary period before taking them on as a trainee and the initial probationary period was less than the periods mentioned above you can claim apayroll tax rebate on all wages paid to the employee. If you have had a labourer for two years that you decide to take on as an apprentice, you cannot claim a rebate.
The rebate can be claimed on a monthly or annual basis. Look at the following example of how a rebate is claimed.
Top-Shelf Painters operates only in New South Wales and is a non-grouped company. It paid wages of $240,000 for December 2016, and $80,000 was paid to apprentices. The threshold inDecember 2016 was $63,699. So, to calculate their payroll tax liability, they must subtract $63,699 from $240,000 and multiply by the tax rate of 5.45% ($9,608.40). The rebate is calculated bytaking apprentice wages paid ($80,000) and multiplying by 5.45% ($4,360), so the tax payable is $9,608.40 minus $4,360, giving a total payable amount of $5,248.40.
Exempt Wages in New South Wales
The most common exempt wages are those paid by non-profit organisations that are religious institutions, charitable organisations or organisations set up for the public benefit. Other exemptwages are made exempt because of the purpose of the payment, for example, wages paid to employees on maternity, paternity, adoption or military leave.
Other exemptions include wages paid to an indigenous person that is employed under a Community Development Employment Project funded by the Department of Employment and WorkplaceRelations of the Commonwealth or the Torres Strait Regional Authority.
For further information, visit: www.osr.nsw.gov.au.