Pay-roll Tax – A Guide for Employers

Posted on 6th November 2014 by Ashley Dawson

Pay-roll Tax is a state based tax assessed on the wages paid by an employer in Western Australia. The tax is administered by the Office of State Revenue, and has seen several changes to the legislation take affect recently which employers may not be aware of.

Threshold

The first major change is the lifting of the pay-roll tax threshold as of 1st July 2014 from $750,000 to $800,000. For monthly lodgers, this means an increase in the threshold from $62,500 per month to $66,667 per month from 1 July 2014.

Pay-roll Tax Rates Effective 1 July 2014

Monthly Wages                    Annual Wages ($)                   Tax Rates (%)
$0 – $66,667                     $0 – $800,000                             Nil
Over $66,667                     Over $800,000                             5.5

It is important to note that pay-roll tax rate of 5.5% is only applied to the balance of taxable wages above the applicable threshold. For example, if your taxable wages for the 2015 financial year total $850,000, the 5.5% tax rate is applied to the $50,000 and hence a pay-roll tax liability of $2,750 would arise.

Definition of Wages

All payments to workers including wages, salaries, leave entitlements, commissions, bonuses, allowances, directors fees, employee fringe benefits and superannuation contributions are wages subject to pay-roll tax.

Certain contracting arrangements may also be captured under the definition of wages, if the contractor is engaged under a contract of service.

The following payments are also captured under the definition of wages for payroll tax purposes:

• Portable long service leave
• Employee share acquisitions
• Industry redundancy funds
• Payments to employment agents
• Termination payments

Please note that the list above is not exhaustive, and if you are unsure if a particular employee entitlement is subject to pay-roll tax, please contact one of our team.

Exempt Payments

The following payments are excluded from the calculation of taxable wages for pay-roll tax purposes:

• Wages paid in the first two years of employment to new employees with a disability, for whom the employer receives or is entitled to receive a wages subsidy under the Commonwealth Government’s Disability Employment Services Program, or the Western Australian Disability Services Commission;

• Payments to apprentices (including trainees) under a training contract registered under Part 7 of Division 2 of the Vocation Education and Training Act;

• Payments to employees under the provisions of the Workers Compensation and Injury Management Act 1981;

• Payments to employees who are absent in the defence forces;

• Parental leave from 1 July 2009 (includes maternity, parental and adoption leave);

• Payments to volunteer emergency services workers;

• Wages paid to an employee in Western Australia are exempt where the wages are paid in respect of services performed by the employee wholly in another country, for a continuous period exceeding six months;

• Reasonable motor vehicle allowances, to the extent that they do not exceed the Australian Taxation Office’s (‘ATO’) large car rate;

• Accommodation allowances up to certain limits. These limits reflect the ATO rates for reasonable travel allowance amount for lowest salary / lowest city rate, or by an amount prescribed.

Registering for Pay-roll Tax

An employer or a group liable for pay-roll tax must “Register as an Employer” with the Office of State Revenue within seven days of the close of the month in which wages exceed $66,667 in a month.

Following registration, a return declaring wages paid must be lodged together with the tax payable within seven days of the end of the month to which the return relates. June monthly and annual returns are due for lodgment and payment by 21 July.

Here at GeersSullivan we handle many of our clients’ monthly and annual pay-roll tax reporting obligations. Please give one of our team a call to discuss your pay-roll tax registration or lodgement requirements.