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Payroll Tax in Australian Capital Territory

Payroll Tax ACT Guide: Lodgment, Rate and Thresholds

Payroll tax is a self-assessed state and territory tax, and the rates and thresholds are set by the state or territory you operate in. It is calculated on the wages you pay monthly to your employees. 

Not every company needs to register to pay payroll tax. You only need to register and pay payroll taxes if you operate in the Australian Capital Territory (ACT) and exceed ACT's threshold. 

ACT Payroll Tax Rates & Thresholds 

The ACT Payroll Tax Rate is 6.85% for every business level, with a threshold of $166,666.66 per month ($2,000,000 per year), as of writing on 12 April 2024.

The ACT currently has the highest payroll tax rate in the country, which can be a significant expense for businesses operating in the region. However, it's important to note that payroll tax rates vary across the different states of Australia.

Read more about payroll tax rates and thresholds in Queensland, New South Wales and South Australia.

How is ACT payroll tax calculated?

To calculate your payroll tax, you can choose between two options based on whether you claim the ACT proportion of the tax-free threshold. 

Follow the below steps to determine the threshold amount. 

Not claiming the tax-free threshold

Employers in the ACT can skip claiming the tax-free threshold in their monthly returns, but may still choose to do so in their yearly reconciliation returns. Unapproved designated group employers pay a constant payroll tax rate of 6.85% on total wages for all returns.

Claiming the tax-free threshold

To claim the tax-free threshold, employers can declare their wages in monthly or annual returns. When submitting the return online, the payroll tax owed will be automatically calculated based on the entered figures and employment status. 

Step 1

Adjust the tax-free threshold ($2 million) based on the number of days in the financial year you paid or owed wages.

Step 2

Find the ratio of ACT taxable wages to total Australian wages and multiply it by the adjusted tax-free threshold to get your final amount.

Step 3

Subtract the final amount from ACT taxable wages, then multiply the remainder by 6.85% to determine your tax owed.

How to Register 

Before you pay, you need to register your business for payroll tax. You can do this online through the Online Payroll Tax Registration - Notification form on the ACT Revenue Office website. Once you register, you will be issued with an ACT payroll tax login that you can use when you need to lodge your returns. 

ACT Payroll Tax Due Date 

By law, you have 7 days from the end of the month to register once you have exceeded the payroll tax threshold. Returns and payments in the ACT are due by day 7 of the following month. December's return allows until 14 January to accommodate for public holiday closures. If the due date falls on a public holiday or weekend, the due date shifts to the next business day. 

As an employer, you don't need to lodge a separate payroll tax return for June, as this is rolled into the annual reconciliation return. Your annual reconciliation must be lodged and paid to the revenue office by 28 July. Once the return has been processed, the revenue office will send an assessment notice. This will indicate whether you have a tax liability or if you are due a refund. 

Grow Your Business with QuickBooks

Taxable Wages 

Employers are liable to pay payroll tax on taxable wages. These are classified as any payment an employer makes to an employee in exchange for their services. In the ACT, taxable wages include superannuation, sick or injury pay, wages, salary, director's fees, termination payments, employment agency payments, and payroll tax contractors. 

Taxable fringe benefits are also subject to payroll tax. Examples of fringe benefits can be cars, gym memberships, car parking, or low-interest loans. 

In terms of contractor provisions, certain exemptions apply, such as if the main purpose of a contractor is to supply goods, or if the contractor transports and delivers goods in their own vehicle. However, most contractor services are considered relevant contracts. To learn more about what exemptions are available for contractors you can visit the Revenue ACT site.

When a contractor issues a detailed invoice that provides separate amounts for non-labour and labour items, the total amounts paid are subject to payroll tax. You cannot attribute only the labour component as taxable wages. 

Grouping for payroll tax 

Businesses can be grouped with other similar entities (if there is a link between companies) for payroll tax purposes. It means the threshold is available just once for all members of the group. 

If one entity exceeds the threshold, all members of the group are subject to payroll tax. Grouping means shared liability, so all members of a group are liable for any debt that the group incurs. For payroll tax purposes, if one member fails to lodge their payroll tax return and pay what they owe, other members could be liable. 

QuickBooks can help 

QuickBooks cloud payroll software powered by Employment Hero can offer you functionalities like efficient automated paydays, payroll tax calculations, automated award identification, and much more. Our payroll software is also Single Touch Payroll compatible, this way you can make payroll a breeze, while you focus on growing your business. 

QuickBooks also offers other products to help your business with its accounting and tax needs

Start with a 30-day free trial to see everything that QuickBooks has to offer. 

While every care has been taken to ensure the accuracy of the information presented as at 12 April 2024, Intuit is not providing you with professional advice and we recommend you obtain your own professional advice. Intuit is not liable for your use of the information presented.

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