What is payroll tax in NSW?

Payroll tax in NSW is a tax imposed on employers and is calculated based upon the amount of taxable wages paid. The tax is payable when an employer’s total Australian wages exceed the payroll tax-free threshold. Australian wages comprise of NSW wages and interstate wages.

 

When do you need to register in NSW?

Your clients are required to register as soon as their monthly Australian taxable wages exceed the payroll tax-free threshold. The 2016–17 monthly thresholds are:

  • 28 day month – $59 426
  • 30 day months – $61 475
  • 31 day months – $63 525.

If your annual taxable wages exceeded $750 000 for the year ended 30 June 2016, you have until the 21st of July 2016 to register. The annual threshold for the year ended 30 June 2017 is also $750 000.
The full annual threshold is only available to employers who:

  • employ for a full financial year
  • do not pay wages outside NSW
  • are not grouped with other businesses.

What payments are considered to be wages?
For payroll tax purposes, wages include:

  • gross wages and salaries
  • bonuses
  • directors fees
  • allowances
  • payments to certain contractors
  • superannuation contributions paid to employees and directors
  • fringe benefits.

How are businesses grouped for payroll tax?

If you are a member of a group for payroll tax purposes, you need to aggregate all Australian wages paid by each group member in order to establish if the monthly threshold has been exceeded.
Businesses may be grouped for payroll tax by:

  • common control
  • being related corporate bodies within the meaning of the Corporations Act 2001
  • common employees
  • tracing of interests in corporations.

Two businesses are grouped by common control when the same person or set of persons, together either as a director(s) or shareholder(s) of a corporation, partner(s) of a partnership or beneficiaries of a trust, have greater than 50 per cent control of each business.

It is important to note that the same person or persons can control two or more businesses by any combination of the above common control types. Related corporations are those that have a holding and subsidiary relationship because one company holds greater than 50 per cent of the share capital of the other, or the board of one corporation can control the other corporation, or one company can control the voting power of the other at a general meeting of shareholders.

Businesses can also be grouped from the use of common employees and the tracing of interests in corporations.

 

Common payroll tax errors made

A review of OSR audit program results have found the most common errors made when calculating payroll tax include:

  • Superannuation:
    Not including any payments in excess of the super guarantee or additional payments made to directors of the business outside the payroll system.

 

  • Apprentice/trainee rebates:
    Claiming rebates for apprentices and trainees not registered with the NSW Department of Industries (DOI). Claiming the rebate for the whole year when the employee is only eligible for a part period or claiming the rebate for an employee classified as an “existing worker trainee” by NSW DOI.

 

  • Fringe Benefits Tax (FBT):
    Including only the FBT tax paid or not aggregating Type 1 and Type 2 amounts and multiplying by the Type 2 grossed up rate.

 

  • Grouping businesses:
    Not being aware businesses can be grouped for payroll tax purposes therefore having to share a single threshold.

 

  • Liable contractors or consultants:
    Not being aware payments made to contractors or consultants may be considered wages for payroll tax purposes even if they hold an ABN or provide tools and/or equipment.

 

  • Interstate wages:
    Not including wages paid in other States or Territories and declaring these payments as ‘interstate wages’ in NSW payroll tax returns.

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