Are you liable for payroll tax?

Payroll tax is a self-assessed state and territory tax assessed on wages paid or payable by an employer to its employees when the total wage expense of an employer exceeds a threshold amount.

Payroll tax was first introduced by the Federal Government during the second world war (from 1/07/1941) to finance their obligations to pay child endowment. When first introduced tax was paid at the rate of 2.5% of wages paid. Unlike today where States/Territories apply a threshold system, no threshold amounts applied when first administered.

In 1971 the Federal Government transferred the power to tax payrolls to the States and Territories. Payroll tax is now used by each State and Territory to meet a significant part of its revenue requirements.

Each State and Territory have their own tax rates and thresholds with several key areas of payroll tax administration harmonised.

In Queensland if you pay Australian taxable wages over the threshold of $1.1 million you are required to be registered for payroll tax. The current applicable tax rate for Queensland is 4.75%.

Taxable wages include cash and non-cash wages, third-party payments and salary sacrifice amounts. Cash and non-cash wages also includes allowances and super contributions. Depending on the circumstances payments made to contractors are also included.

If you are approaching the applicable threshold, please don’t hesitate to contact our office on 5437 8888 to discuss your payroll tax obligations with one of our accountants.

Kristina Brown