Payroll tax is a tax on the wages paid by employers. You must register for payroll tax if your monthly wages exceed the threshold.
The threshold you claim depends on your wages and links to other businesses.
Only one member of the group can claim the threshold.
The threshold you claim depends on your links with other businesses.
For payroll tax purposes, you may be grouped with other businesses if there’s a link between the companies. Grouping can occur through:
Only one member of the group can claim the threshold.
The threshold can be claimed either by the Designated Group Employer (DGE) or the Group Single Lodger (SL).
If you are the DGE, the other group members become non-threshold claimers (NTC) and pay the flat rate of payroll tax on their wages.
Lodging as a DGE or SL does not affect the total group liability.
Wages are subject to payroll tax.
Some allowances are exempt from payroll tax.
A motor vehicle allowance is paid to an employee to compensate them if they use their private vehicle for business purposes.
To calculate the exempt component, multiply the number of business kilometres travelled in the financial year by the exempt rate.
For people working in the real estate industry, refer to Revenue Ruling PTA 025.
A living away from home allowance (LAFHA) is a fringe benefit. Its value for payroll tax purposes is outlined in the Fringe Benefits Tax Assessment Act.
If the allowance does not qualify as a LAFHA allowance benefit under the Act, it will be treated in the same way as an overnight accommodation allowance.
Not all apprentices and trainees are eligible for a rebate.
You can only claim a payroll tax rebate on wages paid to apprentices and new entrant trainees who are recognised by Training Services NSW.
You can claim the rebate on wages paid to trainees classified by Training Services NSW as ‘new entrant trainees’, but you can't claim on wages paid to ‘existing worker trainees’.
Ask Training Services NSW if you're unsure about the status of your trainees.
You can only claim the rebate on wages paid during the time the employee is an eligible apprentice or trainee – from the date of commencement until the date of completion or cessation.
A common mistake is continuing to claim the rebate after the employee has completed or ceased their apprenticeship/traineeship.
Apprentice and trainee wages aren't exempt from payroll tax. They need to be separately declared in the appropriate field in your payroll tax return. From this, the rebate will be calculated.
If you're part of a group, the total group wages should include wages paid to all apprentices and trainees, as apprentice and trainees wages still form part of taxable wages.
All wages paid to an eligible apprentice and trainee should be included in the rebate, including all forms of remuneration that are captured for payroll tax, such as superannuation, allowances and bonuses.
This situation may occur when a group member employs the apprentice or trainee, however the apprenticeship or traineeship is registered with Training Services NSW under another group member.
The rebate can only be claimed by one employer.
If the external training provider or employment agency is the employer of the apprentice or trainee (they're responsible for paying any wages and providing other employment benefits) then only they can claim the apprentice or trainee rebate.
As a ‘host’ employer, you don't include the wages paid to these apprentices or trainees in your annual returns. Furthermore, you're not entitled to claim the rebate on these wages
Include wages paid to a director, including non-working directors, for services performed in your returns.
Directors’ wages include:
If you’re an employment agent, you’re liable for payroll tax on wages you pay workers for services they provide to your clients.
For more information, read the employment agencies page.
Some fringe benefits are liable for payroll tax.
If you pay fringe benefits in NSW and interstate but cannot accurately determine your NSW fringe benefits value, you can pro-rata your FBT value based on the ratio of NSW wages to total Australian wages.
Your interstate wages affect the threshold you claim.
Include all wages paid in Australia, even if it’s from businesses that do not pay wages in NSW.
If you’re grouped with a business that only pays wages interstate, it’s important to include their wages in the ‘interstate wages’ section of your returns.
Interstate wages will affect the threshold entitlement of your business.
Where your employees work affects the threshold you claim.
If an employee works in more than one jurisdiction in a calendar month, the place where the wages for that month are taxable depends on:
If you send a worker overseas to perform a job for your business, that person’s wages continue to be NSW wages and subject to payroll tax for the first six months.
For more information, refer to the nexus provisions decision guide.
Often businesses fail to include all salary sacrifice amounts that are liable for payroll tax. Payroll tax is applicable to salary sacrifice arrangements. Note the following:
Shares and options are wages that are liable for payroll tax. If you grant shares or options to your employees, you must declare the value of the shares or options provided as wages. Common errors include:
Although these shares are exempt for income tax purposes, they are not exempt for payroll tax purposes.
The pro-rata method is not accepted when calculating liable taxable shares and options for payroll tax. While employees may spend part of their employment in Australia, you must work out whether shares or options are liable for payroll tax.
Often when customers submit their annual reconciliation they do not clearly declare the ESS values as part of the return. These need to be reported in the shares and options category.
All contributions to superannuation made on behalf of an employee or director are liable for payroll tax. Common errors involve not including:
For more information, read the superannuation page.
Employment termination payments (ETPs) are liable for payroll tax. The amount of ETP that is liable is the amount paid by you, minus the income tax exempt component.
If an employee or director provides services to a business, all payments for that service are liable for payroll tax, no matter who makes or receives the payments.
Wages you pay an employee or a director for services they provide to your business as known as third party payments and must be included in your returns even if they are paid:
These payments for services can include consultancy fees paid to or received by a third party.
Payments made to contractors are included for payroll tax unless an exemption applies.
For more information, read the contractors page.
You need to consider the full relationship when deciding if your contractor is really an employee. Even if the contract says they are an independent contractor, they may still be an employee.
For more information, read Revenue Ruling PTA 038.
The 180 day exemption focuses on the type of services the business uses. The 90 day exemption focuses on the contractor and the number of days they provide their services. The 180 day exemption does not extend the 90 day exemption.
A contract is exempt from payroll tax if:
For more information, read Revenue Ruling PTA 022.
Payments made to a contractor are exempt if they engage two or more workers to provide the contracted services. For the exemption to apply, the services performed must be for that contract only.
For more information on the conditions necessary for the exemption to apply, read Revenue Ruling PTA 023.
We also offer seminars and webinars.