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Payroll
Payroll tax in Australia: What is it and how does it work
What is payroll tax?
Payroll tax is levied by the state and calculated based on the taxable wages employers pay to their employees. It's self-assessing, which means employers need to establish whether or not they are required to register for payroll taxes.
If you need to register for payroll tax, you can do it online. You will need to lodge a return, either monthly, quarterly or annually, as set out by the State Commissioner. When you lodge the return, you will need to pay any tax due.
As a business owner, you’ll need to agree with the revenue office (of the state you’re in) on how frequently you will pay payroll tax, be it monthly, quarterly, or annually. If you make monthly payments, you have seven days from the month's end to pay the payroll tax.
When you reach the end of a financial year, you will need to conduct an annual reconciliation to ensure you’ve paid the correct liability. The annual reconciliation is due by 21 July. Every state and territory has key areas of payroll tax that differ from other states and territories, but they share many similarities too.
You should maintain your payroll records for five years. Your records must be available to the tax office, in English (or easily translated), and sufficient for the tax office to properly assess payroll tax liability.
Payroll tax in Australia
The threshold is based on the total wages you pay annually in Australia or group-wide before any deductions or entitlements are subtracted. Check with your state or territory to determine the threshold where you pay your wages.
Australian Capital Territory
For all business levels, the ACT Payroll Tax Rate stands at 6.85%, with a monthly threshold of $166,666.66 ($2,000,000 per year).
New South Wales
On 1st July 2022, the NSW payroll tax rate reverted back to 5.45%.
Northern Territory
The Northern Territory payroll tax is calculated based on an employer's employee wages. Employers, or groups of employers, with annual wages of $1.5 million or more or monthly wages of $125,000 or more are required to pay payroll tax. As of the 2021-22 financial year, the payroll tax rate in the NT was 5.5%.
Queensland
The Queensland payroll tax rate is determined by whether you pay over or under $6.5 million in taxable wages. If you pay over this amount, the rate for employers is 4.95%. If you pay less than $6.5 million, the rate is 4.75%.
South Australia
The South Australia payroll tax rate is calculated based on the annual wages (or group wages) and is set to a variable rate from 0% up to 4.95%.
Tasmania
If your wages exceed the threshold in Tasmania, as an employer, you are responsible for paying payroll tax. For wages ranging between $1.25m - $2m, the Tasmania payroll tax rate is calculated at 4%, and if the total wage bill surpasses $2m, the rate becomes 6.1%.
Victoria
The Victoria payroll tax threshold is $700,000 annually or $58,333 per month. Regional employers enjoy a rate of 1.2125%, while the rate for non-regional employers is 4.85%.
Western Australia
Like other states, Western Australia sets its own payroll tax rates. Currently, WA employers operate on a tiered rate scale until June 30, 2023, with the minimum payroll tax rate set at 5.5% and the maximum rate set at 6.5% for employers or groups of employers.
Australia states and territories payroll tax rates and thresholds
|
State/Territory |
Tax threshold |
Payroll tax rate |
|
NSW |
$1,200,000 |
5.45% |
|
VIC |
$700,000 |
4.85% or 1.2125% for regional employers |
|
QLD |
$1,300,000 |
4.75% - 4.95% |
|
ACT |
$2,000,000 |
6.85% |
|
TAS |
$1,250,000 - $2,000,000 |
4% - 6.1% |
|
SA |
$1,500,000 |
0% - 4.95% |
|
NT |
$1,500,000 |
5.5% |
|
WA |
$1,000,000 |
5.5% - 6.5% |
When To Register For Payroll Tax
If your taxable wages in Australia exceed the state payroll tax threshold and you pay wages in that state, you’ll need to register for payroll tax. If an employer is part of a group and pays taxable wages, registration is required if the group's taxable wages exceed the threshold.
For example, if you have businesses in both New South Wales and Queensland, you will need to review their respective thresholds to ensure you follow both states' rules.
Queensland's monthly threshold is $108,333, While New South Wales' 31-day threshold is $101,918. If your 31-day wages exceed $108,333, you have to meet your payroll tax obligations in both states. However, if your total wage bill for the 31 days is $102,000, you only need to register for payroll tax in New South Wales. If your wage bill falls under the threshold, you don't need to register to pay.
How to check if I have to register?
The Australian government provides resources for business owners. You can find details of the threshold for your state or territory from the local revenue office. The limits may vary from state to state, but you need to register for payroll tax if the wages paid exceed the threshold amount.
QuickBooks Can Help You With Payroll Tax Payments
Small business owners have enough to deal with, and payroll taxes don't need to complicate matters. QuickBooks cloud payroll software powered by Employment Hero, makes the process simple, from providing Single Touch Payroll to rostering and accounting.
QuickBooks Payroll offers a wide range of functions for businesses across every industry such as:
- Employee self-service kiosk
- Timesheet and rostering
- Automated calculation of super, leave, and termination payments
- Award wages calculations
- Customised payslips
You don't need to worry about payroll tax rates every month or panic over how much tax you will pay.
Once you input the relevant information, QuickBooks will take it from there with income tax calculations, the appropriate medicare levy, and tax rates. It even makes your annual tax return a cinch. Schedule a free payroll setup session today.
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