Payroll Tax Victoria

State Budget News 1 May 2018

The Victoria State budget for 2018-19 contained the following measures:

  • payroll tax rates for regional businesses to be reduced from 3.65 % to 2.425%.

For detailed budget information see Budget Papers

State Budget News 2 May 2017

The Victoria State budget for 2017-18 contained the following measures:

  • The threshold of $575,000 for 2016-17 will increase to $625,000 on 1 July 2017, and to $650,000 by 1 July 2018.
  • From 1 July 2017, a lower payroll tax rate of 3.65% will apply to businesses with payrolls having at least 85% regional employees.
  • The threshold under which businesses can opt to make annual payroll tax payments, rather than monthly payments, will increase from $10 000 to $40 000 of annual payroll tax liabilities.See Budget Papers

State Budget News 27 April 2016

The Victoria State budget for 2016-17 contained the following measures:

  • payroll tax threshold to be progressively lifted from $550,000 to $650,000 over the next four years
  • from 1 July 2016 any business that takes on a retrenched apprentice or trainee will receive full payroll tax relief on those wages.

Payroll Tax Rate in Victoria

The general payroll tax rate in Victoria is currently (since 1 July 2014) is 4.85%, eligible regional employers 2.425%.

From 1 July 2017 a payroll tax rate of 3.65% (reducing to 2.425% from 1 July 2018) is for businesses with a payroll of 85% regional employees

For the 2013-14 financial year (and earlier years since 1 July 2010) the rate was 4.9% of taxable wages

Historical payroll tax rates and thresholds are listed here.

Payroll Tax Threshold in Victoria

From 1 July 2018 the threshold will move to $650,000. For monthly returns and the necessary monthly tax calculations, the annual deduction is converted to a monthly deduction of $54,166.

From 1 July 2017 the annual threshold is $625,000. For monthly returns and the necessary monthly tax calculations, the annual deduction is converted to a monthly deduction of $52,083.

The 2016-17 payroll tax annual threshold (from 1 July 2016) was $575,000. For monthly returns and the necessary monthly tax calculations, the annual deduction is converted to a monthly deduction of $47,916.

Earlier thresholds and rates are here.

In an annual reconciliation, the threshold amount is deducted from annual wages to determine the actual payroll tax liability for the year. This calculated liability is then compared to the total of monthly returns, resulting in either a balance to pay, or a refund due.

Due dates

  • Monthly returns and payment are due seven days after the end of each month except June, or if a weekend or public holiday, the next business day.
  • An annual return and reconciliation is required by 21 July each year

Definition of wages

The payroll tax base include wages and salaries, the definition of which is expanded to include a range of contractor payments, allowances and fringe benefits as they are defined under the Fringe Benefits Tax Assessment Act 1986. Included are payments to third parties for services provided by and employee (or director) to an employer.

Victoria payroll tax exemptions

There are a number of exemptions and exclusions from payroll tax in Victoria.

Exemptions may be based on the status of the employer, or the nature of the wages.

Exempt organisations include Not For Profits, Public Benefit Institutions, Religious organisations and government schools.

For details of what qualifies for exemption and exempt organisations see here.

Payroll tax and contractors

The definition of wages for payroll tax purposes includes payments contractors who provide predominantly labour, and who mainly work for one person. The contractor provisions can apply whether or not the services are provided through another entity such as a company or trust, and deemed wage amounts exclude any GST component.

The Payroll Tax Act 2007 specifically exempts payments made for services provided by:

  • Owner-drivers;
  • Insurance agents; and
  • Door-to-door sellers.

or if one of the following six exemptions applies:

  1. The contractor provides services to the one designated person on no more than 90 days in a financial year.
  2. The contractor engages others to do all or part of the work pursuant to the contract (subject to certain conditions being met).
  3. The provision of labour is ancillary or secondary to the supply of materials or equipment by the contractor.
  4. The services provided under the contract are of a type not ordinarily required in the designated person’s business and the contractor usually provides those services to a range of clients.
  5. The services are of a type ordinarily required by the designated person for less than 180 days in a financial year.
  6. The Commissioner is satisfied that the contractor ordinarily renders services of the type under the contract to the public generally in a financial year.

Contractor payments is a complex area, and there are anti-avoidance provisions. Professional advice is strongly recommended. Further details and relevant contractor information links are on the SRO’s website, and see  pdf-doc[1] Payroll Tax
See also: Contractors’ Information Circular.

Employment Agencies

An employment agency arrangement typically involves:

  • the service provider contracting with the employment agent, and
  • the employment agent contracting with the client.

The Payroll Tax Act 2007 provides that an ’employment agency contract’ is not a ‘relevant contract’, and therefore payments are not exempt under the contractor provisions. Consequently a payroll tax liability remains with the agency.

For further information, the Employment Agency rules and variations of circumstances are more fully described here.

Grouping provisions

Payroll values of grouped entities are added together for taxing purposes so that the deductible threshold is only available once within groups of related parties. Relationships (and hence aggregation of payroll amounts) are determined on the basis of :

  • Related companies according to the Corporations Act definition
  • Use of common employees
  • Common control by one or more persons
  • Tracing of aggregate controlling interests

There are grouping exclusions available on the exercise of the Commissioner’s discretion.

Registration

Electronic registration and payment of payroll tax is required by the 7th day of the month following the month in which wages exceed the deduction threshold level.

Each member of the group must be registered with the SRO both individually and as part of the group, whether or not an employer, and group changes notified online.

For more information on payroll tax registration in Victoria – go here.

Further information

This is general information and not advice. For more complete information go to the Victorian State Revenue Office.

 

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This page was last modified 2018-05-01