Calculation of payroll tax

ACT proportion of tax-free threshold

There are two options for calculating the tax payable depending on whether you wish to claim the ACT proportion of the tax-free threshold or not.

Option 1 - not claiming the ACT threshold

A member of a business group which has not been nominated and approved as the Designated Group Employer (DGE) for ACT payroll tax purposes is required to pay ACT payroll tax at a flat rate of 6.85% of the total ACT wages for all returns.

An individual employer or an approved DGE may choose not to claim the ACT tax-free threshold in each monthly return, but retain the option to claim the tax-free threshold in the annual reconciliation return.

Option 2 - claiming the ACT threshold

Individual employers or an approved Designated Group Employer (DGE) can claim the tax-free threshold in any monthly return or annual reconciliation return.  To claim the tax-free threshold, the total ACT wages, ACT group wages (where applicable) and Australia-wide wages for your entire business (or business group) must be declared in each reporting period.

The online return form automatically calculates the tax payable based on wages figures entered and the employer status selected.  To calculate the amount of payroll tax payable in a reporting period, use Steps 1, 2 and 3 for the annual reconciliation return and Steps 2 and 3 for a monthly return.

Step 1 
Proportion the annual tax-free threshold based on the number of days in the financial year where ACT or interstate wages were paid or payable by the employer (or any member of the group).  This is the initial annual threshold adjustment.

Step 2
Divide the total ACT taxable wages (or total ACT Group taxable wages if applicable) by the total Australia-wide wages.  Multiply the result by the initial annual threshold adjustment (or monthly threshold if applicable) to obtain the final tax-free threshold amount.

Step 3
Deduct the final tax-free threshold amount from the total ACT taxable wages.  Multiply the remainder by 6.85% to obtain the primary tax payable.

Penalties and interest

Division 5.2 of the Taxation Administration Act 1999 allows for the imposition of penalty tax where a tax default occurs.  The amount of penalty tax will depend on the circumstances surrounding the tax default.  In addition, any overdue payment of tax will also attract interest.

Full or part remission of penalty tax and interest may be granted in cases where it can be demonstrated that mitigating circumstances contributed to the tax default.

If you are having difficulty in meeting your payroll tax obligations, please contact the ACT Revenue Office to discuss alternative payment arrangements.  Further information is available at Penalties and Interest.