Taxation is the imposition of compulsory levies on individuals or entities by the government. Taxes are levied in most countries around the world, primarily to raise revenue for government expenditures and other purposes.
In modern economies, taxes are the most important source of government revenue. There are various types of taxes that people pay for—one of which is payroll tax. But if you’re new to payroll taxes, here are some answers to a few questions you might have:
What is Payroll Tax
A payroll tax is a percentage withheld from an employee’s pay by an employer. This withheld amount is paid to the government on their behalf. The collected amount is based on the employee’s wages, salaries, and tips.
Also called a state or territory tax, it is only taken from an employee if their total Australian wage exceeds the threshold. Every state has a different value for their threshold and may be higher or lower than the others. There are also exemptions for payroll tax. However, businesses have to qualify for it through a set of rules set by the government.
Is Payroll Tax the Same for Every State?
No. Payroll taxes vary per state.
Australian Capital Territory
The rate for the Australian Capital Territory is at 6.86 per cent. Meanwhile, the threshold in the state is between $2,000,000 per year or $166,666.666 in a month.
New South Wales
The rate for New South Wales is at 4.85 per cent from 1 July 2020 to 30 June 2022 and 5.45 per cent from 1 January 2011 to 30 June 2020, then 1 July 2022. Meanwhile, the threshold in the state is at $92,055 for months with only 28 days, $98,630 for months with only 30 days, $101,918 for months with only 31 days, $850,000 from 2018 to 2019, and $1,200,000 from 2020 to the FY onwards.
Northern Territory
The rate for the Northern Territory is at 5.50 per cent. Meanwhile, the threshold in the state is between $1,500,000 per year or $125,000 in a month.
Queensland
The rate for Queensland is at 4.75 per cent for employers or groups paying $6.5 million or less in Australian taxable wages and 4.95 per cent for employers or groups paying more than $6.5 million in Australian taxable wages. Meanwhile, the threshold in the state is between $1,300,000 per year or $108,333 in a month and $25,000 per week.
South Australia
The rate for South Australia is 0 and 4.95 per cent, depending on wages paid for the full financial year. Meanwhile, the threshold in the state is between $1,500,000 per year or $125,000 in a month. However, the deduction entitlement is up to $600,000 in a year and up to $50,000 in a month.
Tasmania
The rate for Tasmania is at 4 per cent. Meanwhile, the threshold in the state is at $95,890 for months with only 28 days, $102,740 for months with only 30 days, $106,164 for months with only 31 days, and $1,250,000 per year.
Victoria
The rate for Victoria is at 4.85 per cent or 2.425 per cent for regional employers. Meanwhile, the threshold in the state is between $650,000 per year or $54,166 in a month.
Western Australia
The rate for Western Australia is at 5.50 per cent. Meanwhile, the threshold in the state is between $1,000,000 per year or $83,333 in a month.
Conclusion
Payroll taxes in Australia are paid in agreed frequency—monthly, quarterly, or annually to the respective revenue office in the Australian state or territory where the wage payment is deemed liable.
The ECommerce Accountant helps online entrepreneurs minimise tax and increase profit by providing accountant services. Our mission is to provide our clients with specific advice to grow and protect their business and motivate them to reach their goals. Visit our website to learn more.