Overview

Payroll tax is a state or territory tax. It’s calculated on the total wages you pay each month. The state or territory that your employees are located in collects the tax. Not all businesses have to pay payroll tax. You pay when your total Australian wages are over the tax-free threshold for the relevant state or territory. Thresholds and tax rates vary between states and territories.

The NSW Government has announced a reduction in the payroll tax rate to 4.85 per cent for the 2020/21 and 2021/22 financial years. The threshold has also increased to $1.2 million for the 2020/21 and subsequent financial years. These changes apply retrospectively from 1 July 2020.

If you’re an employer who pays wages in NSW, you must register for payroll tax if your total Australian wages exceed the relevant monthly threshold.

NSW Payroll Tax Rebates

All wages – including superannuation, allowances and fringe benefits – paid to apprentices and trainees are liable for payroll tax and must be included in your returns.

You can claim a payroll tax rebate on wages paid to approved apprentices and new entrant trainees who are recognised by Training Services NSW.

Contractors

Payments to contractors are liable for payroll tax unless an exemption applies. To determine if an exemption applies, first check:

• if the contractor is an employee, even if they have an ABN or call themselves a contractor or
• if your contract is an employment agency contract.

You cannot claim an exemption if the contractor is an employee or if you have an employment agency contract.

Refer to the ATO employee or contactor decision tool and Revenue Ruling PTA 038 to help you decide if the contractor is an employee.

Grouping

For payroll tax purposes, businesses can be grouped with other businesses if there is a link between the companies. Grouping can occur regardless of where the businesses operate. Grouping has important implications for calculating threshold entitlements.

Where a group exists:

• the threshold entitlement is based on the proportion of NSW wages against total Australian wages
• a single threshold deduction applies to the group
• every member of the group is liable for any outstanding payroll tax of other group members.

Any questions about Payroll Tax? Please call us today for an obligation free consultation, or visit Revenue NSW website.

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