Payroll tax and your business

In Queensland, businesses that pay wages of more than $21,153 a week or are a member of a group that exceed this amount must register to pay payroll tax.[1] Businesses that overlook this obligation risk considerable penalties if they fail to register in time. This article outlines businesses obligation in relation payroll tax and how to take advantage of any exemptions.

What is payroll tax?

In Queensland, liability to pay payroll tax is governed by the Payroll Tax Act 1971 (Qld) (PTA). Employers with taxable wages exceeding the statutory minimum (Statutory Minimum) are required to pay payroll tax.

Schedule 1 of the PTA defines wages broadly to include remuneration, salary, commission, bonuses or allowances paid or payable, reward for services, payments where the recipient has an enforceable right and taxable termination payments.

When is an employer required to register to pay payroll tax?

Employers that pay more than $21,153 a week or are a member of a group that pays more than this amount are required to register to pay payroll tax. Employers must register for payroll tax within seven (7) days after the month in which this minimum is paid. Penalties apply to employers that do not register on time.

Every business that is required to register for payroll tax may not reach the statutory minimum for payment. The minimum taxable wages required to pay payroll tax is $1.1 million annually.

How is payroll tax calculated?

The current rate of payroll tax is 4.75%. The amount of payroll tax is calculated by determining the total taxable wages of employees, subtracting any deductions claimed and multiplying this amount by the payroll tax rate of 4.75%.

Deductions

The maximum deductions that can be claimed will depend on the total taxable wages paid by the employer.  Businesses that pay over $5.5 million in taxable wages will not be able to claim any deductions.

The range of deductions available for the current 2013-2014 financial year (Current Financial Year) for businesses with taxable wages of between $1.1 million to $5.5 million ranges between $91,666 and $458,333.

Exemptions and rebates

Some businesses may be able to reduce the amount of tax payable through claiming exemptions and rebates. Below are some common examples of the rebates and exemptions available for payroll tax:

Exempt allowances

Most allowances paid to employees are taxable wages and therefore not exempt from payroll tax. However, a payroll tax exemption can be claimed for motor vehicle or accommodation allowances provided to employees for business purposes. The rate allowed for motor vehicle allowance and accommodation allowances is prescribed by the Australian Tax Office (ATO).

The allowance for motor vehicles is calculated in accordance with the number of kilometres the employee travels for business purposes within an allocated period of time.  The rate for motor vehicle allowance for the Current Financial Year is $0.75 per kilometre for motor vehicles and $250.85 per night for accommodation expenses.

Exempt employees

Some apprentices and trainees are exempt from payroll tax under the PTA. To qualify for this exemption the employee must sign a training contract and the contract must be approved pursuant to Vocational Education, Training and Employment Act 2000 (Qld).

Certain employersare also exempt from payroll tax under section 14 of the PTA. This includes wages paid by public hospitals, charitable institutions and local government.

Exempt leave

Some types of paid leave provided to employees are exempt from payroll tax:

Parental, adoption and surrogacy leave

Parental, adoption and surrogacy leave is exempt from pay-roll tax. Wages of full time employees is exempt for a period of up to fourteen (14) weeks. While the wages of part-time employees is are also exempt for a period of up to (14) weeks at a part-time rate. Parental leave includes both maternity and paternity leave. The fourteen (14) week maximum for parental, adoption and surrogacy leave can take at one time or be accumulated over an extended period.

Volunteer work

Where an employee is paid wages while undertaking volunteer work, this wage may be payroll exempt where it includes:

• firefighting activities in a rural fire brigade and the Fire and Rescue Service Act 1990;
• State Emergency Service, or another emergency service unit pursuant to the Disaster Management Act 2003; and
• activities as an honorary ambulance officer under the Ambulance Service Act 1991.

Defence or military

Wages paid to an employee that is on leave in the Australian Defence force are exempt from payroll tax.

Non-exempt leave

Recreation, annual, long service and sick leave are not payroll exempt.

Film and television rebate

Some film and television productions are eligible for payroll rebates; this includes feature films and telemovies that meet minimum requirements for contract expenditure. Short films, documentaries and television commercials are not eligible.

Consequences

Failure to pay payroll tax can result in unpaid tax interest, penalty tax and can constitute an offence under the Taxation Administration Act 2001.

Unpaid Tax Interest (UTI)

Overdue or delayed payment of tax may attract UTI until the tax payment and interest is paid in full. The rate of UTI for the Current Financial Year is 10.82%. The method used to calculate UTI is contained within section 54(4) of the Taxation Administration Act 2001. This and other taxes can also be calculated using the Office of State Revenue’s UTI calculators.

Penalty tax

Pursuant to section 58(1) of the Taxation Administration Act 2001 (Qld) penalty tax may be charged where a business fails to register for payroll tax, lodge the appropriate documentation or notify the Office of State Revenue of a change of circumstance.
The rate of penalty tax is 75% of the outstanding amount and can increase for hindering investigations, misleading the department or withholding information regarding calculation errors.

Offences

Under Part 10, Division 1 of the Taxation Administration Act 2001 (Qld) it is an offence to fail to notify the commissioner of a change, to comply with information or fail to lodge requirement. It is also an offence under section 122–123 or knowingly providing false or misleading documents or obstructing the Taxation Commissioner or its investigators.

Links and further references

Legislation

Payroll Tax Act 1971 (Qld)

Fringe Benefits Tax Assessment Act 1986 (Cth)

Taxation Administration Act 2001 (Qld)

Other links

Business Queensland: Payroll Tax

PTAQ014A.2.2—Exemption for parental, adoption or surrogacy leave pay

PTA012.03—Exemption for parental and adoption leave pay.

Further information

If you need further information about payroll tax or other state taxes, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Queensland Government, Office of State Revenue (effective 19 June 2014) <<https://www.osr.qld.gov.au/payroll-tax/about-payroll-tax/payroll-tax-overview.shtml>.

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