TRANSCRIPT

PAYROLL TAX 101 VIDEO

Hi. My name is Catherine. This video is designed to introduce you to the key concepts of payroll tax and the important things that you need to be aware of.

Payroll tax is a State tax paid by employers on the wages paid to employees.

Payroll tax becomes payable when the total Australian wages exceed a tax free threshold amount and that employer pays some wages in a particular State or Territory. Each State and Territory has a different threshold. Therefore, employers need to be aware if they have a liability in more than one State or Territory.

Most of the payments made to your workers attract payroll tax. The legal definition of wages is broad and includes:

  • normal gross pay
  • superannuation contributions
  • allowances and
  • the value of any fringe benefits shown on your most recent FBT return

There are a couple of things you need to be aware of

Remember that gross wages includes any PAYG tax that you are required to withhold

The value of non-cash benefits you provide to your staff, which includes things like company cars and phones, are valued in exactly the same way that they are valued for fringe benefits tax purposes

Allowances and reimbursements are treated differently. On the face of it most allowances attract payroll tax. In some instances however allowances paid to employees for using their own car for work purposes and for short-term accommodation may be exempt. You should check with your local Revenue Office for details of exempt motor vehicle and travel allowances. Reimbursements of business expenses are not payroll taxable. A reimbursement will generally be supported by a tax invoice or receipt provided to you by your employee.

To determine if you have to pay payroll tax simply work out the total wages paid in the financial year across Australia and compare this against the threshold in each state and territory in which you employ.

Thresholds can be found on the harmonised Payroll Tax website at payrolltax.gov.au

You need to be mindful that the full tax free threshold is only available to employers who have employed for the entire financial year and do not pay wages in another State or Territory. The threshold will be reduced if you employ in more than one State or Territory.

Australia wide wages are the aggregate of all of the wages paid in all States and Territories and includes all amounts that normally attract payroll tax.

Many employers fail to fully understand the grouping and contractor provisions that apply to payroll tax in most states.

In a nutshell the contractor provisions are designed to impose payroll tax upon payments that you make to workers that are not your employees but who do work for your business. So how would you determine if you have to make payroll tax payments on payments that you make to a contractor? For the purpose of this video we're deliberately keeping things uncomplicated so the simplest way is for you to work on the basis that the contractor provisions are designed to impose payroll tax on payments made to essentially a one person business that works predominantly for your business. Now, there may be some exceptions to this however this is the simplest way to explain the fundamental aim of the provisions.

If you do have contractors that work for you and you're not sure about whether you have to include their payments I'd suggest you contact your nearest Revenue Office for advice.

Another issue that catches some employers by surprise is the grouping provisions. The grouping provisions were introduced to aggregate the wages of separate businesses where there is strong ownership or management links between those entities. The grouping provisions can be complex and if the owners of your business are involved in other businesses or employees of your business also do work for other businesses, then you should contact your nearest revenue office for advice on these provisions.

Hopefully you've found this introductory payroll tax video useful. Over time a whole series that will cover all of the necessary components of payroll tax will be developed and released. It is our aim to give you as much information as necessary to assist you in meeting your payroll tax obligations.

Remember, if you are in doubt always contact your tax adviser or nearest revenue office.