Considering all of the different taxes and obligations that employers have these days, it can be tough to keep up and remain compliant. But with recent changes to legislation, Payroll Tax is now back at the top of the agenda with business owners. The increase to the annual wages payable threshold means some businesses, from 1 January 2020, will see some welcome cost reductions come into effect. So – what is payroll tax, how do you know if you have to pay it, and what’s the deal with this new legislation? Let’s take a look…
What is Payroll Tax?
Payroll tax is a tax imposed by the state government, assessed on the taxable wages paid (or payable) by an employer in WA. As it is a self-assessed tax, onus is on the employer to ensure that any information provided is correct, and that they comply with their tax obligations. Payroll tax is paid into the Consolidated Fund of Western Australia to meet the costs of public services such as education, health, public safety, and law and order. As with other taxes, the state government reserves the right to apply penalty tax, make an estimate assessment of your liability, and conduct an audit to verify your liability if you don’t register and lodge your returns as required.
How can you determine your Payroll Tax liability?
Currently, if your wage bill per month is less than $850,000 per annum (or less than $70,833 per month) then you will not be subject to Payroll Tax. The Payroll Tax Employer Guide is a useful resource, outlining all the relevant information that employers should be aware of. This includes guidance around exempt employers (e.g. religious organisations; schools below tertiary level; some government departments; certain charitable organisations), and also information on what types of wages and payments are included under payroll tax.
How does the new legislation change things?
Effective 1 January 2020, the payroll tax threshold will increase to $950,000 per annum, and then to $1,000,000 effective 1 January 2021. The latest legislative changes will result in 1000 Western Australian small and medium sized businesses no longer being liable for Payroll Tax and will see significant savings for another 11,000 businesses.
If you are unsure if you are liable for Payroll Tax, or would like some further information or advice, please don’t hesitate to contact the CFO2Go team via our website or call us on 08 9233 9204.