Payroll Tax

• Legislation
• Payroll Tax Return Forms
• Payroll Tax Thresholds and Rate
• Registration
• Lodgment of Monthly Returns and Annual Adjustment
• Penalties and Interest
• Taxable Wages and Payments
  • Service Contracts
  • Employment Agents
  • Benefits
  • Compensation Payments
  • Overseas Payments
• Exempt Wages and Payments
• Grouping of Employers
• Objections and Appeals

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Legislation

The relevant legislative provisions in relation to ACT payroll tax are contained in the Payroll Tax Act 1987 and the Taxation Administration Act 1999.

Payroll Tax Return Forms

• Application for Payroll Tax Registration
• Online Payroll Tax Return Form 
• 2006-07 Payroll Tax Return Form  (69Kb)
• Designated Group Employer Nomination Form  (121Kb) or  Word  

Payroll Tax Thresholds and Rate

If your business employs personnel in the ACT and you or your group pays monthly Australia-wide wages exceeding the ACT determined monthly threshold, then you are required to register, lodge a return and pay payroll tax in the ACT. The various wages thresholds for the ACT are as follows:

1 July 2008 to 30 June 2009 $125,000.00 per month ($1,500,000 per annum)
1 July 2001 to 30 June 2008 $104,166.67 per month ($1,250,000 per annum)
1 July 2000 to 30 June 2001 $ 70,833.33 per month ($ 850,000 per annum) 
1 July 1998 to 30 June 2000 $ 66.666.67 per month ($ 800,000 per annum) 
1 July 1997 to 30 June 1998 $ 62,500.00 per month ($ 750,000 per annum)

The current rate of payroll tax that applies in 2008-09 is 6.85% of taxable wages that exceed the monthly or annual threshold.

Division 81 of the GST legislation exempts ACT payroll tax from GST.

Registration

From 1 July 2006, any employer who becomes liable for ACT payroll tax must register with the Commissioner for ACT Revenue. An employer commits an offence if they do not apply to be registered within 7 days after the end of the month in which the total of all taxable wages paid or payable in Australia exceeds the determined threshold amount.

To register for ACT payroll tax please complete the following approved form: Application for Payroll Tax Registration . Any employer who lodged a payroll tax return for June 2006 is already registered and is not required to complete an application.

For more information about the requirement to register for ACT payroll tax, please refer to Revenue Circular PTX009.

Lodgment of Monthly Returns and Annual Adjustment

Once you have established that you are required to register for payroll tax in the ACT you must apply to be registered and lodge your monthly return form together with the amount of interim monthly tax payable within seven days after the end of the relevant month. Once you are registered for payroll tax in the ACT, you must continue to lodge monthly returns together with any amount of payroll tax payable for a particular month.

For example, the payroll tax return for the month of July must be lodged with the ACT Revenue Office by the seventh day of August, together with the payment of the interim monthly tax. When the seventh day of the month falls on a weekend or a public holiday, the lodgment due date becomes the next working day.

Even though a number of employers may be grouped for payroll tax purposes, each employer must register separately and lodge returns.

From 1 July 2008, employers that are a member of a business group may nominate a Designated Group Employer (DGE) and only the DGE will be able to claim the ACT payroll tax free threshold amount.  If the DGE wishes to claim the ACT tax free threshold in any monthly return or annual adjustment (June return), it will have to provide both its ACT wages paid together with the group's entire Australia-wide wages (including wages paid in the ACT).  The DGE must have paid in 2007-08, total Australia-wide wages in excess of $1,250,000 or is likely to exceed $1,500,000 during the current financial year.

The DGE can also apply to be the sole group lodger for the entire group.  In this instance, the DGE must lodge a single return on behalf of all group members and must also provide details of ACT wages and Australia-wide wages paid by all group members.

If an employer is a member of a group and is not the DGE, it cannot claim any tax free threshold entitlement and the amount of payroll tax is calculated at the flat rate of 6.85% of its ACT wages.

If none of the group members have total Australia-wide wages exceeding $1,500,000, the group may nominate a single lodger to be responsible for lodging and paying payroll tax on behalf of all members of the group.

The payroll tax return for the month of June incorporates the annual adjustment for the financial year and must be lodged with the ACT Revenue Office by 31 July of the same year.  An annual payroll tax assessment will then be issued notifying you of any underpaid tax liability or your entitlement to a refund of any overpaid amounts.

Variation of Lodgment Period

Section 17 of the Payroll Tax Act 1987 provides that an employer may apply to the Commissioner for a variation of the period, or the time within which, the employer is to lodge payroll tax returns. An application must be in writing, addressed to the Commissioner and specify the grounds on which the variation is sought. The Commissioner will consider applications to lodge annual payroll tax returns by employers who anticipate that their annual ACT payroll tax liability will be $3,000 or less or where their circumstances justify lodgment on this basis.

Calculation of Payroll Tax

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:

If you are a member of a business group and you have not been nominated as the DGE for ACT payroll tax purposes, you will be required to pay ACT payroll tax at a flat rate of 6.85% of the total ACT wages.  If you are an individual employer and you chose to pay the flat rate of 6.85% for your monthly returns, you may still claim your portion of the threshold in your annual adjustment (June return).

Option 2. Claiming the ACT Threshold:

Individual employers or any DGE can claim the tax free threshold in any monthly return or annual adjustment (June return).  DGEs must provide both your ACT wages and the Australia-wide wages figures for your entire business group.

Where you are claiming the tax free threshold, the calculation of the amount of payroll tax payable in a month or for a financial year is as follows:

Step 1:

Deduct the tax free threshold ($125,000.00 for each month or $1,500,000.00 for the financial year) from your employer's or group's Australia-wide wages to obtain the taxable Australia-wide wages.

Step 2:

Multiply the taxable Australia-wide wages by 6.85% to obtain the tax on the Australia-wide wages.

Step 3:

Multiply your ACT wages by the tax on Australia-wide wages and then divide by your employer's or group's Australia-wide wages to obtain your 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.

Taxable Wages and Payments

Taxable wages are any payment provided to an employee in return for services provided to an employer (see section 2D of the Payroll Tax Act 1987). The meaning of wages for ACT payroll tax purposes is defined in section 2 of the Payroll Tax Act 1987 and includes the following:

• remuneration, wage, salary, commission, bonus, allowance or other benefit;
• a superannuation benefit;
• a payment made under an employment or a service contract;
• director's fees;
• payments to employees (before or after retirement or termination) which relate to the term of their employment. These include payments for accrued annual and long service leave, sick leave (where cash is paid in lieu of unclaimed sick leave) and any other bonus or loading;
• eligible termination payment that would be included in assessable income;
• the value of any payments made in kind;
• payments not made directly by an employer to an employee for work performed by the employee (ie. payments made to a third party);
• benefits paid or granted by employers to employees (benefits include a fringe benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986);
• any employer contributions to employee share schemes (including the grant of shares or options) and any similar contributions to a director or member of the governing body of a company, including eligible termination payments (refer to Revenue Circular PTX020).

Service Contracts

Section 4 of the Payroll Tax Act 1987 imposes a liability to payroll tax for payments made to contractors that provide labour or services primarily to one person (and not to the public generally) as taxable wages.

Contracts that are subject to payroll tax are called "service contracts" in the Act and are those contracts where a person or company:

(a) supplies services to someone else in relation to the performance of work; or

(b) is supplied with the services of someone else in relation to the performance of work; or

(c) gives out goods to individuals for work to be performed by them in relation to the goods and for resupply of the goods to the designated person, or, if the designated person is a member of a group, to another member of the group.

Payments made under a service contract will be subject to payroll tax whether or not the person supplying the services or labour does so as an individual or through a company, trust or partnership.

The service contract provisions are complex and employers who are unsure of their liability should refer to Revenue Circulars PTX006, PTX018, PTX019, PTX021 and PTX022 or Contact Us.

Any GST included in service contract payments is not subject to payroll tax.

Employment Agents

Employment agents are liable to payroll tax on the wages paid to persons hired out by them irrespective of who pays the wages.

Section 9(3) of the Payroll Tax Act 1987 allows employment agents to exclude from payroll tax any payments made to persons supplying the services where it can be established that the contractor is truly independent. Employment agents who require further information on this matter should Contact Us or refer to Revenue Circular PTX023.

Any GST included in the employment contract is not subject to payroll tax.

Benefits

Benefits that are provided by employers to employees are to be included as wages for payroll tax purposes. Primarily, the types of benefits are those which are presently subject to Fringe Benefits Tax (FBT) under the Commonwealth's Fringe Benefits Assessment Act 1986 (the FBT Act).

Where a benefit is provided by an employer, the value of the benefit for the purpose of assessing payroll tax liability is the amount that would be defined as the "fringe benefits taxable amount" for the purposes of the FBT Act. The "fringe benefits taxable amount" is the actual value of the fringe benefit to the employee and is known as the grossed up, or tax inclusive amount.

From 1 July 2008, for benefits that attract a fringe benefits tax liability, a single gross-up factor (Type 2) is used for calculating the value of such benefits as wages for payroll tax purposes (section 3A of the Payroll Tax Act).

For administrative ease, Section 3B of the Payroll Tax Act allows employers that have been liable to pay FBT for a period of not less than 15 months prior to the commencement of the relevant tax year, to elect an alternative method, whereby the amounts declared in each monthly payroll tax return for fringe benefits are based on actual FBT returns.  Where such an election is made, employers must include in each monthly payroll tax return from July to May, one-twelfth of the total taxable value of fringe benefits in the FBT return for the year ending 31 March immediately preceding the start of the current financial year, grossed-up by the Type 2 factor.  The Annual Adjustment return (June return) for each financial year should include the total taxable value of fringe benefits declared in the FBT return ending 31 March immediately before the Annual Adjustment return, grossed-up by the Type 2 factor.

Newly registered employers will be allowed to make monthly payments based on an estimate of benefits paid or payable, if they had not been required to lodge an FBT return in the previous year. Any adjustments to instalments accepted for FBT purposes would be automatically accepted for payroll tax purposes. (refer to Revenue Circular PTX003)

Compensation Payments

Payments of compensation under the Workers' Compensation Act 1951 are not subject to payroll tax, however, wages paid to sick or injured employees are taxable wages. (refer to Revenue Circular PTX005)

Overseas Payments

Payroll tax is payable on wages paid in the ACT for services provided outside Australia for a period of less than six months.

Where services are performed by an employee on a continuous assignment in another country or countries for greater than six months, any wages paid or received in the ACT (including the first six months) are not subject to payroll tax.  The six-month period does not have to be within one financial year but must be continuous.

Where an employee, working on assignment in another country, returns to Australia, it will not be considered to be a break in continuity in the circumstances where the employee returns for a holiday or the employee returns to perform work exclusively related to the overseas assignment for a period of less than one month, and in either case, the employee immediately returns to that overseas country to perform further work on the assignment. (refer to Revenue Circular PTX002)

Exempt Wages and Payments

Wages that are exempt from ACT payroll tax are those paid or payable as follows: 

• by the Governor General;
• by a charitable organisation (other than a charitable organisation carried on for an educational purpose);
• by a charitable organisation that is a school or college (other than a technical school or college) carried on by a body corporate, society or association and providing education at or below, but not above, the secondary level of education;
• by a hospital that is a recognised hospital under the Health Insurance Act 1973 (Cwlth);
• to members of his or her official staff by a representative (other than a diplomatic or consular representative) in Australia of the government of another country;
• to a person who is a member of the Defence Force, being wages paid or payable by the employer from whose employment the person is on leave by reason of the person being such a member;
• to a person who is a new starter, is employed for the first time in an industry or occupation and is receiving eligible training that is approved training as described for the purposes of the Training and Tertiary Education Act 2003 for work in the industry or occupation, and commences training within the first 12 months of employment and continues with that training for no more than 12 months;
• from a bank account kept under the Financial Management Act 1996, part 5, unless: (i) the bank account is nominated by the Minister in writing for this subparagraph; or (ii) the wages are paid or payable by an entity prescribed for the Taxation (Government Business Enterprises) Act 2003, section 9; or (iii) the wages are paid or payable by an entity to which a direction under the Taxation (Government Business Enterprises) Act 2003, section 10 applies to make the entity liable to tax under this Act;
• by a Territory authority funded solely by money appropriated from the public money of the Territory by an Act unless: (i) the wages are paid or payable by a Territory authority prescribed for the Taxation (Government Business Enterprises) Act 2003, section 9; or (ii) the wages are paid or payable by a Territory authority to which a direction under the Taxation (Government Business Enterprises) Act 2003, section 10 applies to make the authority liable to tax under this Act;
• to a person who was previously long term unemployed (refer to Revenue Circular PTX013);
• to employees on paid maternity, adoption and/or primary carer leave for a maximum of 14 weeks (refer to Revenue Circular PTX012); and
• by approved Group Training Organisations from 1 June 2006 in respect of wages of trainees and apprentices for the full term of an approved training contract (refer to Revenue Circular PTX007). 

Grouping of Employers

The grouping provisions are contained in Division 1A.4 of the Payroll Tax Act 1987.

Grouping provisions for payroll tax purposes apply in all jurisdictions throughout Australia and are designed to prevent taxpayers using a number of business entities to avoid or diminish their payroll tax liability.

Under the grouping provisions of the Payroll Tax Act, two or more employers may constitute a group if:

• They are related bodies corporate within the meaning of the Corporations Act 2001 (Cwth) (section 3H of the Payroll Tax Act 1987); or
• They use the same employees, or have an agreement for shared use of employees, or an employee is hired by one employer to work in another business (section 3I of the Payroll Tax Act 1987); or
• The same persons have controlling interests in a number of businesses (whether conducted by persons, partnerships, corporations or trusts)(section 3J of the Payroll Tax Act 1987); or
• One has a controlling interest in the other (being a corporation) under the tracing provisions (section 3K of the Payroll Tax Act 1987).

Section 3L of the Payroll Tax Act provides that if an employer is a member of two or more groups, all the members of those groups will constitute one group.

Employers who constitute a group are required to advise the details of employers in their group on the Application for Payroll Tax Registration . You must notify the ACT Revenue Office in writing if the group details alter during the year.

Objections and Appeals

For further information please see Objections and Appeals.