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Payroll Tax – What is Payroll Tax? Payroll
Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ Payroll Tax What is Payroll Tax? Each state of Australia has its own unique payroll tax legislation. The various State Acts are broadly similar, in that payroll tax is levied on "wages", but the Acts differ in rates, definitions, thresholds and application. Payroll tax was initially introduced at a Federal Level in 1941. In 1971 payroll tax was transferred to the states. Payroll tax is a state tax paid by an employer exceeding the relevant state threshold of wages paid. Payroll tax is not paid until an employer exceeds the threshold in any month. Geographical grouping is required where a group of companies are inter-related therefore the total of their wages are accumulated for calculation if one company exceeds the threshold. Reasons for grouping: - Companies are related corporations under the Corporations Act 2001 (parent and subsidiary companies) - Employee/s are used in another business - Two or more businesses are controlled by the same person/s - A head or parent business exercises managerial control over a branch, agency or subsidiary business Payroll Tax is in the process of being harmonised between the states. There is now one website that links to all the state websites and relevant thresholds. For more detail on the harmonisation protocol: http://www.payrolltax.gov.au/harmonisation/payroll-tax-rates-and-thresholds State ACT NSW SA WA QLD NT TAS VIC PAYROLL TAX THRESHOLDS FROM 1 JULY 2013 Wage Thresholds Annual Monthly 28 Days 30 Days 31 Days $1,750,000 $145,833 $750,000 $57,534 $61,644 $63,699 $600,000 $50,000 $750,000 $62,500 $1,100,000 $91,666 $1,500,000 $125,000 $1,250,000 $95,890 $102,740 $106,164 $550,000 $45,833 Rate 6.85% 5.45% 4.95% 5.50% 4.75% 5.5% 6.1% 4.90% In QLD the monthly threshold is referred to as a periodic deduction. The deduction depends on the amount of which the annual Australian-wide wages exceed the threshold. For every $4 of wages over the threshold, the deduction reduces by $1. When wages reach 5 times the threshold, the deduction is zero. There are two types of periodic deductions actual periodic deductions and fixed periodic deductions. In NT the monthly threshold is referred to as a periodic deduction. The deduction depends on the amount of which the annual Australian-wide wages exceed the threshold. For every $4 of wages over the threshold, the $1 threshold is lost.. There are two types of periodic deductions actual periodic deductions and fixed periodic deductions. * QLD the Australian Wide Wages of $416,667 per month or greater, the threshold deduction is zero, therefore tax is payable on the full amount of the taxable wages) ** NT the Australian Wide Wages of $625,000 per month or greater, the threshold deduction is zero, therefore tax is payable on the full amount of the taxable wages) *** NSW and TAS the monthly threshold depends on the number of days in the month © The Institute of Certified Bookkeepers Page 1 Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ Calculation of Payroll Tax Standard Calculation: Gross Taxable Wages – Threshold = Taxable Wages Taxable Wages x Payroll Tax Rate % = PT Payable VIC Example Gross Monthly Taxable Wages Less Threshold Taxable Wages Payroll Tax @ 4.90% 400,000 -45,833 354,167 17,354 Threshold on days Calculation used in NSW and TAS NSW 30 Days Example Gross Monthly Taxable Wages Less Threshold Taxable Wages Payroll Tax @ 5.45% 400,000 -61,644 338,356 18,440 Periodic Calculation used in QLD Total Taxable Gross Wages – threshold / 4 = Periodic Deduction Threshold – periodic deduction = Actual Deduction Total Taxable Gross Wages – Actual Deduction x rate = PT Payable QLD Periodic Calculation Gross Monthly Taxable Wages Less Threshold Periodic Deduction Periodic Deduction / 4 = 400,000 -91,666 308,334 77,084 Threshold – Periodic Deduction Actual Periodic Deduction 91,666 – 77,084 14,582 Gross Monthly Taxable Wages – Actual Taxable Wages Payroll Tax @ 4.75% 400,000 – 14,582 © The Institute of Certified Bookkeepers 385,418 $18,307 Page 2 Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ Periodic Calculation used in NT Threshold – (Taxable Monthly Gross Wages - Threshold) / 4 = Periodic Deduction Periodic Deduction x (Number of days in month wages are paid) / number of days in month) Total Taxable Gross Wages – Actual Deduction x rate = PT Payable NT Periodic Calculation Gross Monthly Taxable Wages Less Threshold Periodic Deduction 400,000 -125,000 275,000 Periodic Deduction / 4 = 68,750 Threshold – Periodic Deduction Actual Periodic Deduction Periodic Deduction x days in month/month * Gross Monthly Taxable Wages – Actual Taxable Wages Payroll Tax @ 5.90% 125,000 – 68,750 56,250 56250 x (31/31) 400,000 – 56,250 343,750 20,281 * Days in month for this example is the full month ie January days is 31 Grouping Calculation: If a client has wages in more than one state or territory, the threshold is based on the total Australian Wages. This is relevant for determining the level of its general exemption deduction for each state. For example, you may have to pay in NSW even if the total NSW Wages do not exceed the NSW threshold, but your Australian combined wages do. Company A: State Taxable Wages x State Threshold / Total State Taxable Wages State Taxable Wages – Threshold Value = State Threshold x State Rate = Payroll Tax Co.A Company B: State Taxable Wages x State Threshold / Total State Taxable Wages = Threshold Value State Taxable Wages – Threshold Value = State Threshold x State Rate = Payroll Tax Co.B Payroll Tax Co.A + Co.B = Total Payroll Tax for Month ABC WA P/L ABC NSW P/L MAIN BRANCH © The Institute of Certified Bookkeepers Page 3 Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ Group Example Gross Monthly Taxable Wages Calculation of Threshold Threshold Value Wages less Threshold Rate Calculation Payroll Tax ABC WA 95,000 ABC NSW 54,000 TOTAL 149,000 95,000x62,500 / 149,000 39,849 95,000 – 39,849 55,151 X 5.5% $3,033 54,000x56,500 / 149,000 20,476 54,000 – 20,476 33,524 X 5.45% $1,827 $4,860 Fringe Benefits Calculation: Benefits provided to employees that attract Fringe Benefits Tax are also included in payroll tax calculations. The taxable value of the Fringe Benefits uses the grossed up value being a gross factor of up to 1.8692. Grossed up value is the gross pay the tax office deems the employee would have had to earn to have paid for the benefit from his net pay. The benefit may including GST therefore to formulas are required. Factor Calculation without GST Grossed up factor = 1 / (1 – FBT rate) Therefore is FBT rate is 46.5% = 1 / (1 - .465) = 1 / (0.535) = 1.8692 Factor Calculation including GST Grossed up factor = (FBT rate + GST Rate) / (1 – FBT rate) x (1 + GST Rate) x FBT Rate FBT rate is 46.5% and GST 10% = (0.465 + 0.10) / (1 - 0.465) x (1 + 0.10) x 0.465 = 0.535 / 0.535 x 1.1 x 0.465 = 0.565 / 0.27365 = 2.0647 FBT Calculation Employee Benefit not including GST Factor Taxable Value 1,000 1.8692 $1869.20 Employee Benefit including GST Factor Taxable Value 1000 2.0647 $2,064.70 © The Institute of Certified Bookkeepers Page 4 Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ Employer’s Obligations 1. The employer must register with the Office of State Revenue within 7 days before end of month when gross wages exceed the monthly threshold. 2. Once registered you MUST lodged a return even if a NIL return. 3. Employers must apply for an exemption. Exempted employers:a. Religious Institution b. Public Benevolent Institution c. Non-Profit Charitable, benevolent or philanthropic organisation d. Public Hospital e. Non-Profit Private Hospital f. Area Health Service g. Home Care Service h. Ambulance Service i. Municipalities / Local Councils unless wages connected to business j. Government Departments – WA Only Office of State Revenue for each state State Website ACT www.revenue.act.gov.au NSW www.osr.nsw.gov.au SA www.revenuesa.sa.gov.au WA www.dtf.wa.gov.au QLD www.osr.qld.gov.au NT www.revenue.nt.gov.au TAS www.sro.tas.gov.au VIC www.sro.vic.gov.au NATIONAL www.payrolltax.gov.au © The Institute of Certified Bookkeepers Phone 02 6207 0028 1300 139 815 08 8204 9870 08 9262 1400 1300 300 734 1300 305 353 03 6233 2813 13 21 61 Page 5 Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ What is included in Gross Wages? Payroll Tax Calculation Includes: Wages (Salary and Hourly) Piecework payments Commissions and Bonuses (see exemptions) Allowances: - Fixed Amount Car Allowance - Cents per km Car Allowance EXCEEDING ATO rate - Accommodation Allowance EXCEEDING Daily Reasonable Amount - Shift Allowance - Tool Allowance - Site Allowance - First Aid Allowance - Meal Allowance Employer Contributions to Industry Redundancy and LSL Pmts Employer Contributions towards the issues of Shares, Options or Units is treated as wages NSW VIC QLD TAS ACT WA SA NT (NOTE: from 1/7/11 for the following states, if the share or employee share scheme is deemed to be a fringe benefit the discount must be treated as a FBT for payroll tax using grossed up amount 1.8692) Employee working overseas for less than 6 months Employee working overseas for more than 6 months × × × × × × × × Terminations (Including ETPs but Excluding Lump Sum D) Leave Payments Annual, Personal, Long Service Superannuation Salary Sacrifice Superannuation Salary Sacrifice Novated Lease Jury Service and Volunteer Work Employees Shares Directors Fee/Remuneration (whether working as a director or not) Sub-Contractors Included: - Piecework Contractor ? × x ? x (Note: If employee exceeds the 6 months then a rebate can be claimed if Payroll Tax was paid in the first 6 months) (Eg. Orchard Hand pruning trees paid per tree) - Contractor working solely for the company State and Territory Government Contractors provides same or similar services for a total of more than 90 days in a financial year (Note: One day = any time from midnight to midnight) (Eg: Cleaner providing a service everyday for a Restaurant) - Contractor business provides services for a total of more than 180 days in a financial year - (Eg: Contractor business installing clients product for a period of time >180 days - Contractors work performed is the normal activity of the business (Eg. Architectural Practice hires a contract architect) - Contractor earns ‘significant’ proportion of his/her income from one client © The Institute of Certified Bookkeepers Page 6 Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ Fringe Benefits (See advice from Accountant of FBT items) - Living Away Allowance (LAFHA) - Car Parking Fly in Fly out Remote Area Share Schemes if deemed to be FBT EXEMPTIONS for Payroll Tax Calculations Sub-Contractors Excluded: - Contractor not integral to the employer’s business × × NSW VIC QLD TAS × × × × × × ACT WA SA × × × ? ? × × × × × × × × × × × × × × × × × × NT Ie A bookkeeper - Contractor works for other businesses Commonwealth Departments State and Territory Government Contractor employs two or more people to perform work Sole Trader – plus one or more Partnership – partner plus one or more Company – two or more Owner/driver Insurance Sales Agents Door to Door Sales Agents Contractors provides same or similar services for a total of less than 90 days in a financial year (Eg: Consultant installing and training Accounting Software) - Contractor business provides services for a total of less than 180 days in a financial year - (Eg: IT team developing a website) Exempted Items included in wages from payroll tax and FBT - Tools of trade - Laptop Computer * - Mobile Phone * - Briefcase - Calculator - Notebook - Electronic Diary - Printers for use with portable computers * A benefit arising from a laptop, mobile phone or car phone is only exempt of the item is primarily for business use) Military Leave Commissions paid to Insurance Agents of domestic goods Commissions paid to Door to Door Sellers of domestic goods Allowances: - Accommodation Allowance within Daily Reasonable Allowance Termination – Genuine Redundancy Payments (Lump Sum D) Emergency Duties ie Volunteer State Emergency Service Trainees Not for Profit Scheme – Apprentice/Trainees Community Development Employment Project (CDEP) Film Production Paid Maternity/Adoption Leave (Max. 14 weeks) © The Institute of Certified Bookkeepers Page 7 Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ Government - Paid Parental Leave (PPL) Parental Leave Surrogacy Leave Paternity Leave Primary Carers Leave Workers Compensation payments * Rebate Claimable on Wages Apprentice/Trainees 2009/2010 and 2010/2011 25% rebate on all Wages New Starter Receiving Eligible Training Community Jobs Plan Long Term Unemployed Persons Aged 15-19yrs Film and Television Industry Export Rebate × × × × × × × × × × × × × NSW VIC QLD TAS × × × × × × × × × × × × × × × × × × × × × × × × × NT × × × × × × × × × × × × × × × × × ACT WA SA × × × × × × × × × × × × × × × × × × × *Rebates are claimed after the Payroll Tax is paid except in some states where you can claim the rebate on line at time of payment Lodgements: Lodged within 7 days after end of month for all states except NT; NT lodged within 21 days after end of month. Online lodgement is available for all states. Lodgement Adjustments and Penalties Penalties are imposed if: - Fail to register when required - Fail to lodge return on time - Under pay - Understate wages - Provide false or misleading information Lodgement of objection of penalty is to be done in writing within 60 days of receiving penalty notice. Other Online Services for Payroll Tax: GovReports allows lodgement of payroll tax. NSW QLD WA ACT - Payroll Tax Monthly Return Payroll Tax Annual Return Payroll Tax Periodic Return Payroll Tax Annual Return/Nomination of Designated Group Employer Payroll Tax Final Return/Nomination of Designated Group Employer Payroll Tax Lodgement Annual Payroll Tax Reconciliation Monthly Payroll Tax Return © The Institute of Certified Bookkeepers Page 8 Payroll – What is Payroll Tax? (September 2013) __________________________________________________________________________________________ NT - Payroll Tax Monthly Return - Payroll Tax Annual Return TAS - Annual Payroll Tax Reconciliation - Monthly Payroll Tax Return VIC - Annual Payroll Tax Reconciliation - Monthly Payroll Tax Return SA - Monthly Payroll Tax Return Most Common Pitfalls of Payroll Tax 1. 2. 3. 4. 5. 6. 7. 8. 9. Failure to register at time the wages exceed the threshold Failure to register as a group Failure to includes all components of gross wages Failure to not exclude exemptions and claim rebates Failure to include contractor payments Failure to include directors superannuation Failure to include salary sacrifice wages Failure to include grossed up taxable value of fringe benefits Failure to calculate correct state payroll tax when multiple states are involved. © The Institute of Certified Bookkeepers Page 9
