From 1 July 2019, the Queensland payroll tax threshold has increased from $1.1 million to $1.3 million annually, resulting in some long overdue (albeit small) relief for Queensland employers.
The rate for payroll tax remains the same at 4.75% for businesses with wages up to $6.5 million, but will increase for those over this to 4.95%.
Some additional rebates have been introduced to assist with employment growth and regional employers from 1 July 2019.
Payroll tax is payable in Queensland when Australian taxable wages exceed the threshold (currently $1.3 million). It is a state based tax and legislation does vary from state to state which is important to consider if you are operating outside of Queensland.
To refresh on some of the existing requirements for Queensland payroll tax:
When do I need to register?
Even though an annual threshold exists, the requirement to register is based on weekly taxable wages. You are required to register for payroll tax within 7 days after the end of the month in which your wages (or grouped wages) exceed $25,000 a week, even if you think you will pay less than $1.3 million in Australian taxable wages in a year.
What are Australian taxable wages?
Taxable wages for payroll tax purposes include a very broad scope of payments that, if you are unaware could easily throw you into payroll tax territory, these include:
- Gross salary and wages (including annual, sick and long service leave)
- Allowances (some exemptions apply)
- Director Fees
- Superannuation Contributions
- Fringe Benefits
- Termination Payments
- Contractor Payments (some exemptions apply)
- Shares and Options
Could my business be grouped for payroll tax?
The payroll tax grouping provisions are extremely broad and can often be overlooked when considering the requirement to register.
If your business is related or connected to another business, you will be treated as one for the purposes of payroll tax (grouping). Some key factors when considering if your business is grouped include:
- Related corporations (holding and subsidiary companies)
- Employees that work in more than 1 business
- Same person, or persons controlling 2 or more businesses
- An entity has a tracing interest in corporations (indirect interests)
- A person is part of 2 or more groups.
Meeting just one of these categories will result in the businesses being grouped for payroll tax, generally resulting in higher amounts of payroll tax being payable.
Are there any exemptions or rebates?
There are some exemptions available for components of taxable wages, namely allowances and contractor payments.
Generally, motor vehicle and accommodation allowances are exempt from taxable wages provided they are paid at appropriate rates as dictated by the ATO.
Contractor payments for services (rather than goods) are generally considered relevant contracts for payroll tax purposes and will be taxable unless an exemption applies. There are 9 exemptions available for contractor payments that will need to be carefully considered for each one of the contractors that you pay. This can be quite an onerous task, but very important should you be required to defend your position on what contractors are included or excluded.
Apprentices and trainee wages are exempt from taxable wages. Existing rebates remain available for employers of apprentices and trainees (called an incentive rebate) of up to 50% of the payroll tax liability on exempt wages.
New rebates from 1 July 2019
A new rebate is available from 1 July 2019 of up to $20,000 for employers who have a net increase in full time employees over a year, called a growth rebate. The details around eligibility and rebate calculations are yet to be released, however it is important to keep track of employee numbers and changes from 1 July 2019 to see if you may be eligible for the reduction in your annual 2019-2020 return.
Reductions to the payroll tax rate for business by 1% is available for regional employers (to 3.75% for wages up to 6.5 million and 3.95% for above this). To be eligible, businesses must have a registered business address in a regional area and 85% of taxable wages paid to regional employees. Regional areas include Cairns, Central Queensland, Darling Downs- Maranoa, Mackay-Isaac-Whitsunday, Queensland-Outback, Townsville and Wide Bay.
Payroll tax can be a complex area to navigate and get right. The consequences of incorrect assessments can mean significant liabilities and penalties. If you have any concerns or would like a review of your business situation, contact your Hoffman Kelly advisor who will be happy to discuss with you.