Are you running a business in Victoria, and have you hired employees? If your answer is yes, you  should know about payroll tax regulations in Victoria. 

Have you ever questioned whether the payroll tax includes superannuation? Then you are not  alone. Most business owners question whether to include superannuation contributions when  calculating payroll tax. 

This article will help you to understand whether to include superannuation contributions when  calculating your payroll tax liability. 

What is a payroll tax? 

Before finding whether payroll tax includes superannuation, let’s find out what payroll tax is. This  is a tax imposed on the total wages paid by the employer or the business to its employees or  contractors. A payroll tax must be paid by every employer who passes the specified wage threshold  (discussed later). 

This is a state-regulated tax. Therefore it will be managed and collected by different authorities in  each state. The State Revenue Office (SRO) manages Victoria’s payroll tax on the Victorian  Government’s behalf. 

The State Governments have worked together to make the regulations similar across the country,  although the tax rates could differ. The current payroll tax rate in Victoria is at 1.2125% 

What should be included in calculating payroll tax 

The payroll tax will be imposed on the wages paid by the employer to their employees. However,  when talking about wages, it is not the salaries paid alone. Along with the salaries, there are various  components to consider when calculating the total wages. These components are 

  • Salaries and wages 
  • Bonuses 
  • Commissions 
  • Allowances 
  • Remuneration 
  • Fringe benefits 
  • Employer superannuation contributions 
  • Payments to contractors etc. 

All of this should be added up together when deriving the final figure for the wages paid to the  employees. 

Read more: SRO 

Does payroll tax include superannuation? 

Yes, payroll tax includes superannuation. However, only the superannuation contributions made  by the employer will be considered for payroll tax.

You should pay payroll tax on superannuation contributions (including non-monetary  contributions) payable or paid in respect of: 

1. Employees – Superannuation contributions made by the employer on behalf of the  employee. 

2. Deemed employees – Certain individuals or parties will be considered employees for  payroll taxes. These include: 

∙ A contractor who does work concerning a service provided to another person under  a particular contract. 

∙ A service provider who does work concerning a service provided to a client under  an employment agency contract. 

3. Company Directors – The superannuation contributions made to a company director  irrespective of whether the director is a non-working or a working director. 4. Non-monetary super contributions – Non-monetary employer-funded super  contributions are liable for payroll tax. The said taxable value will be the agreed value or  the value attributed to the contribution, whichever is greater. 

Read more: SRO 

Should every business pay payroll tax? 

Payroll tax is another common tax that many businesses should pay in Australia. However, the  Victorian Government has specified a threshold to pay the payroll taxes. 

As said before, the payroll tax liability will be calculated on the total wages paid by the business.  This wage component includes various payments, including super contributions made to  employees or contractors. You should pay payroll tax if the total wages paid to these individuals  exceed $700,000 per year or $58,333 per month. 

If the total wages paid are below this threshold, then you don’t have a payroll tax liability. However, these values can change from time to time. So, it would help if you stay updated. 

Wrapping up 

As we said before, calculating and paying your exact tax liability is crucial to avoid legal issues  and financial losses. For example, you should include all the wage components when calculating  the payroll tax liability of the business. 

That also includes super contributions made by the employer to the employees, contractors, and  directors. It is crucial maintain proper records and calculate the tax liabilities if you exceed the  threshold. 

This can be a hectic process. That is why SPS Consultants are stepping in to help you. We have  tailor-made packages designed according to the specific needs of your business. Our expert team  has helped hundreds of clients to manage their tax liabilities and pay them on time over the years.  Don’t hesitate to contact our team to schedule a consultation session.