Recent changes to WA Payroll Tax 

You may have read this headline and thought to yourself, “what now?! What will be the negative impact on my business?”, however, we can happily say that the recent changes are positive (that is correct, positive).

Let’s go back to basics: what exactly is payroll tax?

Payroll tax is payable when an employer’s total Australian wages exceed the tax-free annual threshold.¹ It is a self-assessed tax meaning that the onus is on you as the employer to assess your total wages. Note that when you are completing this assessment, it is important to consider wages and superannuation paid to business owners.

If you are an employer registered for Payroll tax, you’ll declare wages through a monthly, quarterly, or annual return.  As part of the return lodgement process, the Office of State Revenue (OSR), will calculate your liability as an employer.

A note on apprentices and trainees.

Unfortunately apprentices are no longer exempt from payroll tax. There are transition provisions in place for apprentices that were already employed. Wages to new apprentices will be subject to payroll tax. Contact your Client Manager if you’d like to discuss this further.

Payroll Tax Relief in Western Australia

In late October 2019 the McGowan Labor Government announced changes to WA Payroll Tax. The changes will provide relief for many WA small businesses.

Comments made by Premier Mark McGowan:

“This Payroll tax cut reflects my Government’s commitment to growing our State’s economy, supporting small business and creating more jobs for Western Australians.”

“This package will deliver real incentives for thousands of local businesses to hire additional staff and is the latest in a series of measures announced to stimulate WA’s economy.”

Currently, if your WA business, (with Australia wide wages), does not exceed $850,000, then you are exempt from Payroll tax.

• From 1 January 2020, the annual threshold will be increased to $950,000
• From 1 January 2021, the annual threshold will be increased again to $1,000,000.

Although the proposed bill has not yet received Royal Assent, the OSR will address the changes by applying tapering values to each half-year in the threshold transition period.

As an employer, you will need to refer to the Bill and work through the specific dates, taking into consideration applicable thresholds to correctly calculate your Payroll tax liability. Incorrect calculations will lead to penalties and/or interest. Your Client Manager may be able to assist you with this.

In brief, tax thresholds and tapering values will be as follows:

From 1 July 2019 until 30 June 2021, the threshold amounts for each half-year in the threshold transition period are as follows:

• For the half-year beginning on 1 July 2019 — $425 000;
• For the half-years beginning on 1 January 2020 & 1 July 2020 — $475 000;
• For the half-year beginning on 1 January 2021 — $500 000.

From 1 July 2019 until 30 June 2021, the monthly threshold amounts for each half-year in the threshold transition periods are as follows:

• For the half-year beginning on 1 July 2019 — $70 833;
• For the half-years beginning on 1 January 2020 & 1 July 2020 — $79 167;
• For the half-year beginning on 1 January 2021 — $83 333.

Without doubt these changes are a welcome update to existing thresholds, resulting in reduced payroll tax liabilities for all WA Employers.

Please contact your Client Manager, Melissa McKenzie or Cheryl Murdock, or Gavin Smith, on (08) 9071 2173 or contact us using the form below if you would like to discuss how these soon to be enacted changes may impact your bottom line.

¹Australian wages are comprised of WA wages and interstate wages, interstate wages are those wages subject to Pay-roll tax in the other jurisdictions under their equivalent Pay-roll tax legislation.