Payroll tax is a self-assessed tax on the wages paid or payable during the business’s financial year. It is imposed on the employer or group of employers whose businesses exceed the State’s payroll tax threshold.
How it is calculated?
Payroll tax usually falls into two categories:
- a. Taxes paid by the employer based on the employee’s wages.
- b. Deductions from an employee’s wages.
The Rates and the threshold in NSW thresholds vary every year. The current annual threshold for the financial year 1-7-2020 to 30-06-2021 is $1.2 million
within a payroll tax rate of 4.85%.
Exemptions:
- Non-profit Organisations
- Some Public Employers
- Some types of Leave
Consequently, wages levels should be monitored periodically, if the annual threshold is reached, the employer needs to register for payroll tax within seven
days after the month when the business’s total Australian wages surpass the monthly threshold.
The monthly threshold is calculated as follows:
******Number of days in the month/365*annual threshold*******
When to lodge and pay payroll tax?
Firstly, the employer needs to Assess if the business belongs to a group.
An employer who pays wages in NSW: must register, if during any one month the total Australian wages were above the relevant monthly threshold.
Monthly thresholds:
Days in the month Threshold
28 $92,055
30 $98,630
31 $101,918
Member of a group: Total wages paid or payable by all members of the group determines if the group should register if during any one month the total
Australian wages were above the relevant monthly threshold.
Pay annually or monthly?
Estimate the payroll tax for the financial year.
- Less than $20k you can pay annually.
- More than $20k you must pay your payroll tax monthly.
What information is required to register for registration?
- ABN
- address details
- contact details
- other details are specific to payroll tax.
Note, once you start the form, you cannot save and restart afterwards. Make sure you have all the information.
What’s the payroll tax contribute towards?
Because payroll taxes fall exclusively on wages and not on returns to financial or physical investments, payroll taxes may contribute to
underinvestment in human capital such as higher education.
In Summary, making sure your business comply with all the tax obligations contributes to the general well-being of all Australia’s communities and
the health of the business on its own.