Payroll tax eligibility in Victoria is a crucial aspect for businesses navigating the state’s tax landscape. Understanding your payroll tax obligations can be tricky. However, understanding the criteria and thresholds for payroll tax is essential to ensure compliance and manage financial obligations effectively
In Victoria, businesses become liable for payroll tax when their total annual Australian wages exceed the annual threshold. For the financial year beginning 1 July 2023 this threshold is $700,000.
Geographical location can play a pivotal role in determining how much payroll tax you are liable to pay. Victoria distinguishes between metropolitan and regional areas, offering different rates for businesses operating in these regions. Regional employers, typically in areas outside metropolitan Melbourne, may benefit from more favourable thresholds and reduced tax rates, aiming to encourage economic growth and job creation in regional Victoria. As of 1 July 2023, the payroll tax rate for Metropolitan employers is 4.85% and the payroll tax rate for Regional employers is 1.2125%.
Are you eligible for regional payroll tax rates?
From 1 July 2019 you are considered to be a regional employer if you pay at least 85% of your Victorian taxable wages to regional employees. Regional employees are employees who perform their services mainly (more than 50%) in regional Victoria during the month.
The list of regional councils can be found on the State Revenue Office website:
Further to that the employer must also pass an 85% rule, being:
- You pay at least 85% of your monthly Victorian taxable wages to your regional employees for the purposes of your monthly returns, and
- At least 85% of your Victorian taxable wages to your regional employees during a financial year for the purposes of your annual return.
It is not necessary for an employer to meet the monthly rate reduction threshold every month during a financial year for the purpose of determining that they meet the annual rate reduction threshold.
If you satisfy these conditions, you will be eligible for the favourable payroll tax rate of 1.2125%.
Do you have a regional presence but don’t quite meet the criteria?
If your business has a Victorian regional presence but does not meet the above criteria, you could consider a restructure to ensure the regional part of your business is eligible to access the discounted regional payroll tax rate.
Any restructure should be carefully considered as there are various issues to be considered when doing a restructure.
If you have any questions or for further information regarding your payroll tax obligations, please contact your Bentleys’ Advisor.