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Find out if you are eligible for a payroll tax exemption in NSW. Certain exemptions are available if wages paid meet specific requirements or if you are a non-profit organisation.
If you pay wages to an employee on maternity, paternity or adoption leave, the wages are exempt for 14 weeks full-time. The wages are also exempt if they’re paid for an equivalent period of leave at a reduced rate of pay.
For example, if wages are paid for maternity leave for 28 weeks at half of the rate, they would be exempt from payroll tax.
This exemption does not apply to wages that are paid as annual leave, long service leave, sick leave or any fringe benefits.
You must have medical records or a statutory declaration to verify that the exemption applies.
Paid parental leave payments made under the Paid Parental Leave Act 2010 are not liable for payroll tax. Even though these payments are paid by employers, we do not consider the payments to be for services provided by the employee.
Wages are exempt from payroll tax for a person who is performing duties as a member of the Australian Defence Force or the armed forces of any part of the Commonwealth.
Wages are exempt from payroll tax if they are paid to an Indigenous person employed under a Community Development Employment Project funded by the Department of Employment and Workplace Relations of the Commonwealth, or the Torres Strait Regional Authority.
Exempt employers
If you’re a non-profit organisation that is either a religious institution, charitable organisation or an organisation set up for public benefit, the wages you pay may be exempt from payroll tax. These include:
religious institutions
public benevolent institutions
non-profit organisations whose sole or dominant purpose is charitable, benevolent, philanthropic or patriotic
non-profit private schools and educational institutions that provide education at or below the secondary level
the Governor of a State
the Commonwealth War Graves Commission
the Australian-American Fulbright Commission
Consular and non-diplomatic representatives
Trade Commissioners
health care service providers - for employees working exclusively in the kind of work ordinarily performed by health care service providers. Health care service providers are:
a public hospital
a non-profit hospital carried on by a society or association
area health services
ambulance services
council, county council or local government business (with exceptions)
non-profit group training organisations (these organisations must be approved by the Department of Industry).
To be recognised as a charity, an organisation must be non-profit, for the public and have objects solely or dominantly for the:
relief of poverty or sickness or the needs of the aged
advancement of education
advancement of social and community welfare
advancement of health
advancement of culture
advancement of religion
advancement of the natural environment
other purposes beneficial to the community.
For an exemption to apply, the wages must be paid to workers engaged exclusively for work of a kind ordinarily performed in connection with the charitable or benevolent purpose of the organisation. A partial exemption can also be applied.
Most wages paid by council, county council or local government business entities are exempt from payroll tax. However, wages are not exempt if they are paid for:
the construction of any buildings or works
the installation of plant, machinery or equipment for use in the supply of:
electricity
gas
water
sewerage
liquefied petroleum
hydraulic power
the operation of:
abattoirs
public markets (which include food markets)
parking stations
cemeteries or crematoria
hostels
coal mines
transport service
supply of building materials
a prescribed activity.
Non-exempt employers
The following organisations are not exempt from paying payroll tax on wages:
an educational institution (a tertiary education provider)
an educational company (a company in which an educational institution has a controlling interest)
an instrumentality of the state (entities that are an arm or agent of state government bodies).
Applying for an exemption
An exemption from payroll tax in NSW may be granted by Revenue NSW to eligible employers.
If your organisation has an approved payroll tax exemption and there is a change in circumstances, in particular the organisation’s objects and/or non-profit status, you must let us know immediately.
These changes also include:
constitution
rules
memorandum/articles of association
organisation’s name.
Period of exemption
If your application is approved, your organisation will be exempt from payroll tax for three years. We’ll review your exemption status every three years.
Exemption review
Before we start the review, we’ll send you a letter to let you know we’re reviewing your exemption status. To make sure your exemption remains valid you’ll need to either:
confirm that your organisation’s details remain unchanged, or
provide details of any changes that have occurred within your organisation, including changes to your organisation’s name, constitution, rules, memorandum or articles of association.
You can provide this information online which takes approximately five minutes. You’ll need your client ID and correspondence ID, which is printed on the top right of your payroll tax exemption review letter.
Privacy statement
The information collected is necessary to see if you have a liability or entitlement. The information may be provided to third parties with your consent or as required or permitted by law. We’ll correct or update your personal information at your request.
Under the Tax Administration Act 1996, it’s an offence to give false or misleading information. You may be liable for interest and/or penalty tax. We conduct random checks to ensure compliance.