If your business employs people, you should know more about payroll tax – a self-assessed State and Territory based tax imposed in Australia. This is the tax payable when the total wages paid or owed to employees exceeds the threshold in the state where the business is located. Note that rates and thresholds vary between states.
Payroll tax is not dependent on the business structure but on payroll activity. This means businesses may still be liable for payroll tax if they exceed the threshold even if they hire sub-contractors with an ABN. The term employee for payroll tax purposes is not defined in the PTA Act but common law has established several principles to determine whether a worker is an employee or not.
Factors that have been considered by the courts in determining whether a worker is an employee include control and direction, contract and practical relationship, contracts to achieve a given result, independent business, power to delegate, risk, provision of tools and equipment and other indicators.
Businesses with employees across multiple states need to register for payroll tax across multiple states but the total is based on the Australia wide payroll. When you calculate the total wages, make sure you capture all payments including gross wages and salaries, bonuses, commissions, superannuation contributions, allowances, fringe benefits, accrued leave and termination payments, employee share acquisitions and directors’ remuneration. Note that gross wages and salaries are before deductions such as income tax, etc.
Several payments may be exempt from payroll tax like apprentices and trainees, workers’ compensation, defence force leave, disability wages, parental leave, emergency services leave and other allowances including motor vehicles and overnight accommodation. Lodgement may be required monthly, quarterly or annually so be sure that you have the funds to pay for these taxes because the State Revenue offices conduct audits.
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