Wages paid to employees may be exempt from payroll tax if they meet specific requirements.
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.
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.
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.
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:
In order to be exempt from payroll tax, a public benevolent institution (PBI) must be non-profit and set up for the:
To be recognised as a charity, an organisation must be non-profit, for the public and have objects solely or dominantly for the:
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.
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 following organisations are not exempt from paying payroll tax on wages:
To apply for an exemption from payroll tax, you must provide:
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.
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:
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.
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:
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.
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.