Taxes, duties, levies and royalties
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Payroll tax exemptions

Wages paid to employees may be exempt from payroll tax if they meet specific requirements.

Payroll tax exemptions

Maternity, paternity or adoption leave

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.

For more information, read Revenue Ruling PTA 012.

Commonwealth Government paid parental leave

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.

For more information, read Revenue Ruling PTA 037.

Emergency service volunteers

This exemption applies to wages paid for a specific period to an employee who is:

This exemption does not apply to wages that are paid as annual leave, long service leave or sick leave.

Defence personnel

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.

Indigenous person under a Community Development Employment Project

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).

Public benevolent institutions

In order to be exempt from payroll tax, a public benevolent institution (PBI) must be non-profit and set up for the:

  • relief of sickness, suffering, distress, misfortune, destitution or helplessness, or
  • benefit of members of a community or a particular locality suffering from a particular disadvantage.

Charities

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.

For more information, go to the Australian Charities and Not-for-profits Commission (ACNC) website.

Please note that being registered with the ACNC may not result in an exemption from payroll tax.

Council, county council or local government businesses

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

To apply for an exemption from payroll tax, you must provide:

  • a completed application for exemption from payroll tax form
  • the organisation’s last audited annual report
  • details of the day to day activities and services provided by the organisation
  • details of other jurisdictions where wages are paid
  • any other relevant information in support of your application.

If you’re not registered on ACNC, you must also provide your organisation’s constitution and/or memorandum and articles of association or proof of incorporation under the Associations Incorporations Act, including the organisation’s rules. This must show the organisation’s objectives and non-profit status. All documentation must be signed, dated and should support the date you are requesting the exemption to start from.

Change in circumstances

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.

Find out more about our privacy policy.

Penalties

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.