Employers in Victoria with a wage bill exceeding the tax-free annual threshold of $650,000, which equals a monthly threshold of $54,166, are required to pay a payroll tax of 4.85% of wages. According to the 2019-20 Victorian budget, the annual threshold will increase to $700,000 by 2022-23.
Even after the increase, Victoria’s annual payroll tax-free threshold is less than the annual thresholds in the other states, which are: Northern Territory ($1.5 million), New South Wales ($900,000), Queensland ($1.3 million), South Australia ($1.5 million), and Western Australia ($850,000).
Regional Victorian employers
A lower payroll tax rate applies to taxable wages paid by regional employers to their regional employees. For 2018-19 and 2019-20, the payroll tax rate for regional Victorian employers is 2.425%.
Over the next three years, the regional payroll tax rate will be reduced to:
- 2.02%, effective 1 July 2020
- 1.62%, effective 1 July 2021
- 1.2125%, effective 1 July 2022
As of 1 July 2019, a business is a regional employer if it pays at least 85% of its Victorian taxable wages to regional employees (those employees who perform more than 50% of their services within the region of Victoria during the month).
To qualify as a regional employer, the business also must pay: at least 85% of monthly Victorian taxable wages to regional employees for the purposes of the employer’s monthly returns, and at least 85% of the employer’s Victorian taxable wages to regional employees during a financial year for the purposes of the employer’s annual return.
Note: It is not necessary for an employer to meet the monthly rate reduction threshold every month during a financial year in order for it to meet the annual rate reduction threshold.
An employer registered to lodge and pay on a monthly basis must submit wage details every month, even if it does not have a payroll tax liability. Employers self-assess liability on a monthly basis and pay by the seventh day of the following month (or the next business day if it falls on a weekend or holiday).
All employers must lodge an annual reconciliation by 21 July each year.
The Victorian State Revenue Office provides additional resources in the
payroll tax section of its website.
Mavanee Anderson, Esq., is Editor of Payroll Information Resources for the American Payroll Association.