Guide to Payroll Tax in Queensland

Guide to payroll tax

Payroll tax is a state-based tax assessed on wages paid by an employer to its employees, when the total wage bill of an employer (or group of employers) exceeds a threshold amount. The payroll tax rates and thresholds vary between states and territories.

Returns are lodged, and payment is made, to the respective revenue office in the Australian state or territory in which the wage payment is liable.

In Queensland, businesses become liable once their wage bill reaches $1.3 million a year (current 2019-2023 threshold)*. The Queensland payroll tax rate is:

• 4.75% for employers or groups of employers who pay $6.5 million or less in Australian taxable wages
• 4.95% for employers or groups of employers who pay more than $6.5 million in Australian taxable wages.

*The rate for 2008 to 2019 was 4.75%

 

Payroll tax in Queensland

Employers must register for payroll tax within seven days after the end of the month in which they:

• pay more than $25,000 a week in taxable wages, or

• become a member of a group that together pays more than $25,000 a week in taxable wages.

You must register within 7 days after the end of the month in which your wages (or your group wages) exceed $25,000 a week, even if you think that you will pay less than $1.3 million in Australian taxable wages in a year.

 

Mental health levy

From January 2023, a mental health levy applies to payroll tax to fund mental health and associated services.

The levy applies to:

• employers and groups of employers who pay more than $10 million in annual Australian taxable wages
• annual Queensland taxable wages.

Read more about the mental health levy.

Australian taxable wages (annual)	Levy rate (applied to Qld taxable wages exceeding the thresholds)
Up to $10 million	Nil
More than $10 million (primary threshold)	0.25% (primary rate)
More than $100 million (additional threshold)	0.25% (primary rate) + 0.5% (additional rate)

 

What are ‘taxable wages’ for payroll tax purposes?

In general, payments to employees are liable for payroll tax if they are:

• a reward for services rendered by an employee (or deemed employee)
• payments to which the recipient has an enforceable right

This includes:

• penalty rates, overtime payments, long service leave, holiday pay, sick leave, piece work rates, study leave, bonuses and termination payments
• commissions
• superannuation payments including salary sacrifice arrangements and top-up lump sum contributions made by employers into superannuation
• most allowances such as clothing, tools, relocation and travel
• fringe benefits such as loans to employees, free holidays or accommodation and club memberships
• contributions to employee share or option schemes

Some payments made to apprentices and trainees may be exempt if they are paid under the Further Education and Training Act.

 

Are fees and payments to directors considered ‘taxable wages’?

Yes.  Directors’ wages include:

• superannuation contributions
• shares or options
• directors fees
• employment termination payments
• any other amount paid by a company as remuneration to a working or non-working director of that company

 

Grouping of employers for payroll tax

Payroll Tax grouping provisions were introduced in the mid-1970s to prevent companies employing staff under different entities to take advantage of the threshold exemptions.  The rules are complex, but in general, if your business is related or connected to another business you will be treated as one unit for payroll tax purposes.

A group exists if:

1. Corporations are related bodies corporate.  Corporations are related if any of the following apply:

• one corporation controls the board composition of another corporation
• one corporation can control more than 50% of votes in a general meeting of another corporation
• one corporation holds more than 50% of the share capital of another corporation.

2. Employees are used in more than one business.  You are grouped if your employees:

• perform duties for a business carried on by you and another person or persons
• are employed solely or mainly to perform duties for another business
• perform duties for other businesses due to an agreement you have with those businesses.

3. The same person, or set of persons, has a controlling interest in two or more businesses.  ‘Person’ includes an individual, a set of persons, a corporation, all bodies and associations (corporate, incorporated and unincorporated), and partnerships.

4. An entity has a tracing interest in corporations.  Under the tracing rules, an entity and a corporation are grouped if the entity has a direct, indirect or aggregate interest of more than 50% in that corporation.

5. A person is part of two or more groups.

A business only needs to fit into one of these categories to be grouped.

The group’s payroll tax amount is calculated on the group members’ combined taxable wages.  Each group member must lodge returns, and all group members are liable for any payroll tax liability that other members have not paid (including interest and penalties).  If the group is eligible for a deduction, one employer from the group claims the deduction.

 

Payroll Tax rates and thresholds in other states and territories:

NSW – https://www.revenue.nsw.gov.au/taxes/payroll

VIC – https://www.sro.vic.gov.au/payroll-tax

ACT – https://www.revenue.act.gov.au/payroll-tax

SA – https://www.revenuesa.sa.gov.au/taxes-and-duties/payroll-tax

WA – https://www.finance.wa.gov.au/cms/State_Revenue/Payroll_Tax/Payroll_Tax.aspx

NT – https://www.treasury.nt.gov.au/TaxesRoyaltiesAndGrants/PayrollTax/Pages/default.aspx

TAS – https://www.sro.tas.gov.au/payroll-tax

 

Key take aways:

1. Payroll tax is a state based tax.  If you employ in other states you need to review the thresholds as some of them are lower than Queensland.

2. There may be a significant difference between what a business will pay in payroll tax as a single entity and what it will pay as part of a group.  Therefore, it is important to be aware of your total employee wages expenditure, business structure, relationships with other entities and the implications of this on your payroll tax liability.

 

Further help:

Always ensure that you obtain professional advice where necessary.  Marsh & Partners payroll tax specialists provide expert advice on meeting your tax and compliance obligations.  Please contact us for further assistance.You can reach us on (07) 3023 4800 or at mail@marshpartners.com.au.

As your Absolute.Account.Ability partner we’re on a mission to make your business life better. We’ll help you set goals for your business or financial goals, devise an Action Plan to make them happen and meet with you regularly to ensure you stay on track. You can find out more about working with Marsh & Partners here.

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