Payroll tax | State Revenue Office (2024)

Do I have to register for payroll tax in Victoria?

If you are an employer in Victoria andyour wage bill goes over a monthly threshold, you will have to pay payroll tax.

Changes to payroll tax threshold

From 1 July 2024, the payroll tax free threshold will be lifted from $700,000 to $900,000 for annual returns, and from $58,333 to $75,000 for monthly returns.

From 1 July 2025, the payroll tax free threshold will be lifted from $900,000 to $1,000,000 for annual returns, and from $75,000 to $83,333 for monthly returns.

There will also be a phasing of the threshold for every dollar of wages above $3,000,000.

Businesses with Australian wages above $5,000,000 will not receive any payroll-tax free threshold.

Find out more about changes to the threshold

Frequently asked questions about payroll tax

Your wage bill determines your obligations

From 1 July 2024, payroll tax applies if you pay wages in Victoria and your Australian wages exceed the monthly threshold of $75,000.

Payroll tax surcharges

If you are liable for payroll tax, there are 2 payroll tax surcharges. These apply if you pay Victorian taxable wages and your Australian wages exceed the first annual threshold of $10 million, with a first monthly threshold of $833,333.

The mental health and wellbeing surcharge commenced from 1 January 2022.

The COVID-19 debt temporary payroll tax surcharge commenced on 1 July 2023, and will apply for 10 years until 30 June 2033.

Both surcharges are calculated on the same basis:

Businesses with a national payroll above $10 million will pay a combined 1%.
Businesses with a national payroll above $100 million will pay a combined 2%.

The surcharges only apply to businesses’ Victorian share of wages over these thresholds.

More about the surcharges

Registering for payroll tax

You must register with us to pay payroll tax.Registering with us is simple, although you will need your payroll records handy to help you.Penalties and interest may apply if you do not register.

Paying is easy

Once registered, use our secure online systemPayroll Tax Express(PTX Express)to lodge monthly returns, pay your tax, complete your annual reconciliation, apply for a refund and update your records.

Who pays?

Youor yourgroup of employerspay this state tax the wages you pay in Victoria and your Australian wages exceed certain thresholds.

The tax-free annual threshold for 1 July 2023 to 30 June 2024 is $700,000, with a monthly threshold of $58,333.

The annual threshold is adjusted if you are not an employer for a full financial year.

The payroll tax rate is 4.85%except for regional Victorian employers.

More about interstate wages

Regional Victorian employers

The rate of payroll tax for regional Victorian employers is 1.2125%.There is also a special payroll tax rate for businesses in bushfire affected local government areas.

From 1 July 2019, you are a regional Victorian employer if you are paying at least 85%of your wages to regional employees. For wages paid before 1 July 2019, you must also satisfy the business location test.

When do I pay?

If you are registered to lodge and pay monthly, you must submit your wage details every month, even if you do not have a payroll tax liability.Employers self-assess their liability on a monthly basis, and pay by the seventh day of the following month or the next business day.

All employers must lodge an annual reconciliation by 21 July each year.

What are wages?

Wages are defined under the Payroll Tax Act 2007 (the Act)and include:

wages,
remuneration,
salaries,
allowances,
commissions,
bonuses,
employer (pre-tax) superannuation contributions such as:
- superannuation guarantee payments,
- salary sacrifice contributions,
- the value of non-monetary contributions (from 1 July 2007),and
- superannuation contributions to defined benefit funds
fringe benefitswithin the meaning of the Fringe Benefits Tax Assessment Act 1986 (Cth),
the value of shares and options granted to employees, directors, former directors and some contractors,
payments to some contractors,
payments by employment agencies arising from employment agency contracts,
remuneration paid by a company to company directors, and
employment termination payments and accrued leave.

Payments (considered wages) to employees engaged on a permanent, temporary or casual basis are always subject to payroll tax.

Watch a video about wages ►

Exempt wages

Some wages are exemptfrom payroll tax. These include:

Primary and secondary caregiver leave (formerly adoption and maternity parental leave).
Commonwealth paid parental leave.
Contributions to redundancy benefit schemes.
Wages paid to employees absent from work to volunteer as firefighters or respond to other emergencies.
Wages paid to a person while on military leave as a member of the Defence Forces.
Bone fide redundancy or early retirement payments.
Wages paid from non-profit group training organisations. From 1 July 2018, this also includes for-profit group training organisations.

Use our checklist

Wages taxable inVictoria

When an employee provides services wholly in Victoria, payroll tax is paid in Victoria in a calendar month on their wages.

Where the employee provides services in more than one Australian jurisdiction in a calendar month, or partly overseas in a calendar month, a four-tiered test is used to determine payroll tax liability.

This test uses the location of the employee’s principal place of residence and can take into account other factors related to the employer’s business.

Exempt organisations

Non-profit organisationshaving as their whole or dominant purpose a charitable, benevolent, philanthropic or patriotic purpose (but not including a school, an educational institution, an educational company or an instrumentality of the state), for wages paid or payable to a person engaged exclusively in work of a religious, charitable, benevolent, philanthropic or patriotic nature for the institution or non-profit organisation (there are qualifications on exemptions available to organisations engaging in commercial activities).
Public benevolent institutionswhere persons are engaged exclusively in work of a public benevolent nature.
Religious institutionswhere persons are engaged exclusively in religious work of that institution.
Non-profit non-government schools where persons are providing education at or below secondary level. From 1 July 2024, this exemption is limited to non-government schools declared by the Minister for Education to be exempt.
Healthcare service providers (i.e. public hospitals, non-profit hospital, denominational hospital, public health service, registered community health centre, multi-purpose service, ambulance service and the Victorian Institute of Forensic Mental Health) for wages paid for work ordinarily performed in connection with the conduct of the healthcare service provider.
Municipalities, other than wages paid or payable in connection with specified business activities such as the supply of water or electricity.
State school councils within the meaning of theEducation and Training ReformAct 2006.
Approved group training organisations (GTOs) for wages paid to a new entrant apprentice on-hired to their host clients. These approved GTOsare exempt from payroll tax in respect of wages paid to those apprentices and trainees.

Apply for a payroll tax exemption

Contractors

Payments to contractors are deemed wages and taxable in certain circ*mstances. The person or entity engaging the contractor is deemed to be an employer and is liable to payroll tax on those deemed wages.

Contractorsinclude sub-contractors, consultants and outworkers. The provisions apply regardless of whether the contractor provides services via a company, trust, partnership or as a sole trader.

Several exemptions are allowed, and if any one of the exemptions applies to a particular contract, the payments are not taxable. People on-hired under an employment agency contract are subject to different provisions.

More about contractors

Employment agencies

Employment agents are liable for payroll tax on payments made under employment agency contracts to 'on-hire' a worker (service provider) to their client, where the client and service provider do not enter into any form of agreement between themselves.

Where there is an employment agency contract, the employment agent is deemed to be an employer, the on-hired person an employee and payments made as wages.

A contract includes an agreement, arrangement or undertaking. However, a contract is not an employment agency contract if it is, or results in the creation of, a contract of employment between the service provider and the client, which is typically known as a placement arrangement. In these circ*mstances, the client is liable for payroll tax as the employer.

Employment agency contracts are not eligible for contractor exemptions.

More about employment agencies

Grouping

Businesses may be grouped together and effectively treated as a single entity for payroll tax purposes.

A payroll tax group exists where:

Corporations are related bodies corporate within the meaning of s50 of the Corporations Act 2001 (commonly known as a holding and subsidiary relationship).
Employees are shared between businesses.
The same person or the same persons together have a controlling interest in at least two businesses.
An entity has a controlling interest in a corporation.

A company includes all bodies and associations (corporate and unincorporated) and partnerships.

A corporation has the same meaning as in s9 of the Corporations Act 2001 (Cth).

Effect of the grouping provisions

The grouping provisions have the effect of deeming businesses to be related and including these businesses in a group. The wages of these related businesses are then added together, with only one member of the group entitled to claim the threshold amount.

Therefore, in most cases, although each member of the group must register for payroll tax and lodge a separate return, the businesses constituting the group are effectively treated as one entity and their payroll tax liability is calculated on the group’s total wages.

All members of the group, irrespective of whether they are employers, become jointly and severally liable for the debts of the group that are incurred while they are group members. This means that if one member defaults in paying tax, that amount may be recovered from any of the other group members.

More about grouping

Registering for WorkSafe insurance

Ifyou engage workers or contractors deemed to be workers and you pay, or expect to pay, more than the current threshold limit per year inrateable remuneration(as defined in theWorkplace Injury Rehabilitation and Compensation Act 2013), or if you engage apprentices or trainees, you must register forWorkSafeinsurance.

There are differences between wages for payroll tax purposes and remuneration for WorkSafe insurance purposes.

Payroll Tax Australia

All Australian states and territories have a payroll tax system, and have worked together to ensure their legislation is aligned (excludingrates and thresholds).

More about Payroll Tax Australia

Getting it right

Our priority is to help you pay the right amount of tax at the right time. Learn more.

Last modified: 30 May 2024