Payroll tax is a tax levied by state governments and the rates and deductibles vary from state to state.

With respect to Western Australia, the rate of the payroll tax is 5.5% which is levied on any wages in excess of $950,000 (effective January 1, 2020) however the tax is calculated on a sliding scale basis on the excess of $950,000 and the deductible ceases for wages greater than or equal to $7.5M.

There are some important compliance issues with respect to payroll tax. In summary, these are as follows:-

Taxable Wages:

• These include
• Salaries and wages
• Commissions bonuses and allowances
• Remuneration paid or payable to a director
• Superannuation contributions
• Fringe benefits
• Salary sacrifice arrangements
• Termination payments
• Contributions to industry redundancy fund or portable long service leave fund
• Employee share acquisitions
• Payments to certain contractors

For clarification of taxable wages in WA go to- https://www.wa.gov.au/organisation/department-of-finance/payroll-tax#taxable-wages

Exempt Wages:

• Maternity Leave
• Parental and adoption leave payments
• Paid parental leave
• Workers compensation payments
• Some profit and trust distributions, and loans deemed to be income to the beneficiary of shareholder
• Some motor vehicle and accommodation allowances
• Overnight accommodation for allowances paid to truck drivers

For clarification of exempt wages in WA go to- https://www.wa.gov.au/organisation/department-of-finance/payroll-tax-exemptions

Grouping Provisions: For the purpose of calculating payroll tax the OSR groups entities where any of the following exist:-

• One company is related to another company under the Corporations Act 2001 (Cth)
• An employee or employees of one business perform duties for or in connection with another business, whether by the arrangement or otherwise
• The same person or persons have a controlling interest of more than 50% in each of two or more businesses
• An entity has a direct, indirect, or aggregate controlling interest in a corporation

Where a group exists the deductible amount is applied to one member of the group with the balance of group members paying the tax on all assessable wages.

For clarification of grouping provisions in WA go to:-https://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/Pay-roll_Tax/Payroll_Tax_Fact_Sheet_-_Grouping_Provisions.pdf

It is important that employers comply with all aspects of the payroll tax act as there are significant fines and or penalties imposed by all state governments for non-compliance.