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
- 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.
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.