Exempt wages

Payroll tax

Exempt wages are predominately those paid by non-profit organisations that are religious institutions, charitable organisations or organisations set up for the public benefit.

Some wages are exempt based on the circumstances in which they are paid. This includes wages paid to employees on maternity, paternity or adoption leave or on military leave.

Employer based exemptions

Non-profit organisations

Wages are exempt from payroll tax subject to section 48(2) of the Payroll Tax Act 2007 when paid to employees engaged to perform work connected with the objectives of:

  • a religious institution

  • a public benevolent institution

  • a non-profit organisation whose objectives are solely or dominantly for charitable, benevolent, philanthropic or patriotic purposes.

Wages paid by the following organisations are not exempt under this provision:

  • an educational institution – a tertiary education provider

  • an educational company – a company where an educational institution has a controlling interest

  • an instrumentality of the State.

Wages must be paid to a person engaged exclusively for work of a kind ordinarily performed in connection with the religious, charitable, benevolent, philanthropic or patriotic purpose of the organisation. People engaged directly in the primary work or in administrative or management work which is predominately associated with the organisation’s charitable or similar work are accepted as being exclusively engaged in that work.

What is a charity?

To be recognised as a charity, an organisation must be non-profit, for the public benefit, and be 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.

What is a public benevolent institution?

To be classed as a public benevolent institution, an organisation must be non-profit and set up, usually in perpetuity, for the:

  • relief of sickness, suffering, distress, misfortune, destitution or helplessness

  • benefit of members of a community or of a particular locality, who are suffering from a particular disadvantage.

The institution must provide services without discrimination to every member of that section of the public for which the institution was created according to its constituent documents.

Other exempt employers

Wages are exempt wages if paid by:

  • private schools or educational institutions that provide education at the secondary level or below

  • the Governor of a State

  • the Commonwealth War Graves Commission

  • the Australian-American Fulbright Commission.

Wages paid to official staff are exempt wages if paid by:

  • a consular representative

  • other representatives (other than a diplomatic representative)

  • Trade Commissioner.

Health care service providers

Wages are exempt wages if paid to employees engaged exclusively in the work of a health care service provider. Health care service providers are:

  • a public hospital

  • a non-profit hospital that is carried on by a society or association.

Wages are exempt wages if paid by the Crown to employees engaged to perform work connected with the objectives of:

  • Local health districts

  • Home Care Service

  • Ambulance Service of NSW.

Local government

Wages paid by a council, county council or wholly owned subsidiaries are exempt except when paid for or in connection with:

  • the construction of any buildings or works, or the installation of plant, machinery or equipment for use in the supply of electricity or gas, water supply, sewerage, liquefied petroleum or hydraulic power and the operation of:

    • abattoirs

    • public markets, including food markets

    • parking stations

    • cemeteries or crematoria

    • hostels

    • coal mines

    • transport service

    • supply of building materials

    • a prescribed activity.

Other exemptions

Aboriginal persons

Wages are exempt if paid to an Aboriginal person who is employed under a Community Development Employment Project being a project funded by the Department of Employment and Workplace Relations of the Commonwealth or the Torres Strait Regional Authority.

Maternity, paternity or adoption leave

Wages are exempt if paid to an employee for 14 weeks full-time or an equivalent period of leave at a reduced rate of pay.

For example, the exemption may apply to wages paid for maternity leave that extends to 28 weeks at half of the part-time rate of pay that would normally apply to the employee.

This exemption does not apply to wages paid as recreation leave, annual leave, long service leave, sick leave, or any part of wages paid in respect of maternity, paternity or adoption leave that comprises fringe benefits.

Medical records or a statutory declaration will be required for this exemption.

For more information, view Revenue ruling PTA 012 – Exemption from maternity and adoption leave pay.

Volunteer fire fighters and emergency service volunteers

Wages are exempt if they are paid to an employee when they were:

taking part in bushfire fighting activites as a volunteer member of a rural fire brigade under the Rural Fires Act 1997.

engaged in emergency operations as a volunteer member of an emergency services organisation under the State Emergency and rescue Management Act 1989.

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

Non-profit group apprentices and traineeship schemes

Wages, including superannuation, allowances and fringe benefits, are exempt wages if they are paid to an employee who is employed by a non-profit organisation in accordance with a group apprenticeship or traineeship scheme. Both the organisation and the scheme must be approved by the Director-General of the Department of Education and Communities.

Defence personnel

Wages are exempt if they are paid to an employee who is on leave from employment due to being a member of the Defence Force of the Commonwealth or the armed forces of any part of the Commonwealth of Nations.

Applying for an exemption

How do I apply for an exemption?

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

  • submit an Application for exemption – payroll tax (OPT007) (PDF), and provide:

    • your organisation's Constitution and/or Memorandum and Articles of Association or proof of incorporation under the Associations Incorporation Act, including the organisation’s rules. This must show the organisation’s objectives and non-profit status. All documentation must be signed and dated and should support the date you are requesting the exemption to start

    • a copy of 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.

What if the organisation’s circumstances change?

You must tell us anytime there is a change to the organisation’s governing rules, specifically the organisation’s objects and/or non-profit status, to confirm your exemption remains valid. These include the organisation’s:

  • constitution

  • rules

  • memorandum/articles of association

  • organisation name.

Will the organisation’s exemption status be reviewed?

Your organisation's exemption status will be reviewed every three years to ensure the exemption remains valid.

Last updated: 7 July 2016