Financial Services

Payroll Tax Policy

Further information

Payroll Tax is imposed on fringe benefits (such as hospitality that is subject to Fringe Benefits Tax. Payroll Tax will be charged to account 681 in the Project Grant which the original expenditure is debited.

Under the Payroll Tax Assessment Act (WA) 1971 (PTAA) payroll tax is payable by all employers in Western Australia on the gross amount of 'wages' paid to employees, once wages exceed a certain threshold.

  1. Checklist of wages
  2. Fringe benefits
  3. Exemption for overseas service
  4. Interstate appointments
  5. Overseas appointments
  6. Visiting fellows
  7. Anti-avoidance measures
  8. Section 11E
  9. Payroll tax rates

Checklist of wages

  • Accident pay
  • Holiday pay
  • Accommodation
  • Housing
  • Allowances (including LAHA)
  • Long service leave payments
  • Annual leave payments
  • Meals and sustenance
  • Back pay
  • Meal allowances
  • Bonuses
  • Overtime
  • Cash benefits
  • Prescribed benefits which are not fringe benefits
  • Clothing allowances
  • Prizes
  • Commissions
  • Salaries and wages
  • Certain contracting arrangement payments
  • Shift work payments
  • Compensation payments
  • Sick pay
  • Directors' fees
  • Superannuation contributions by employers
  • Eligible termination payments (includes SGC shortfall payments)**
  • Entertainment allowances
  • Study expenses
  • Fringe benefits*
  • Travelling and accommodation allowances***

* provided on and from 1 July 1997; from 1 January 2002, the grossed-up amount

** on and from 1 July 1997

*** that exceed certain prescribed levels

Back to top

Fringe benefits

The University is required to declare in the monthly payroll tax return the actual taxable value of fringe benefits provided during that month. Alternatively, the University may elect, on an appropriate form, to estimate the taxable value of the fringe benefits to be declared in the monthly payroll tax return.

The estimated method of declaring fringe benefits requires the University to declare in each monthly payroll tax return, for the months July to May, one-twelfth of the adjusted fringe benefits taxable amount declared in the FBT return for the year ending 31 March immediately before commencement of the current financial year.

For the final month of June, the amount included in the monthly return should represent the difference between the adjusted fringe benefits taxable value declared in the FBT return for the year ending 31 March of the current financial year and the total amount of estimated fringe benefits included in each payroll tax return for the months July to May.

The taxable value of fringe benefits under the Fringe Benefits Tax Assessment Act 1986 are treated differently under the PTAA in respect of:

  • benefits reduced by the 'otherwise deductible rule'
  • living away from home allowance (LAHA)
  • remote area fringe benefit exemptions.

Back to top

Exemption for overseas service

An exemption from payroll tax applies to University employees performing or rendering services wholly in another country or countries. However, this exemption only applies after the services have been performed for a continuous period of six months or more. Wages paid in the first six months are still liable to payroll tax.

While there is no definition of 'employee' in the PTAA, the term 'employer' is defined to mean "Any person who pays or is liable to pay wages...".

Thus, in a similar vein to the PAYE provisions of the ITAA 1936, the liability of the University to payroll tax under the PTAA tax depends on the existence of an employer/employee relationship.

An employer/employee relationship is determined based on similar tests as those used for the PAYE and Superannuation Guarantee provisions of the ITAA 1936. Therefore, it must be determined if the person being paid for the work or services is an employee as such.

Back to top

Interstate appointments

Payroll tax is payable in Western Australia on wages paid or payable:

  • in Western Australia for services rendered in Western Australia
  • elsewhere other than in Western Australia for services rendered in Western Australia.

Where an employee performs service in another state on behalf of the University, the University is required to register for payroll tax and remit payroll tax to the relevant Government authority in that state.

Time spent in another state attending meetings or courses is not considered to be the performance of services in that other state.

The following chart may be used in respect of University employees:

     
Type of employee service Wages paid in Western Australia Wages paid in another state
Employee performs service in Western Australia Payroll tax is payable in Western Australia Payroll tax is payable in Western Australia
Employee performs services in another state (wholly) Payroll tax is payable in another state Payroll tax is payable in another state
Employee performs services which are not rendered wholly in another state Payroll tax is payable in Western Australia Payroll tax is payable in another state

Back to top

Overseas appointments

Payroll tax is payable by the University on gross wages paid to employees performing services outside Australia only if the wages are paid or payable in Western Australia. For example, if wages are physically handed to the employee in Western Australia or paid into his or her bank account held in Western Australia, then they are treated as being paid or payable in Western Australia.

Payroll tax is payable regardless of any exemption the employee may receive from income tax in Australia. The employee must be performing services wholly in another country or countries for a continuous period greater than six months before the payroll tax exemption will apply.

Back to top

Visiting fellows

Wages paid to visiting Fellows in respect of services provided in Western Australia are subject to payroll tax regardless of their income tax treatment or where they are physically paid.

Back to top

Anti-avoidance measures

Payroll tax does not fall on payments made to an independent contractor. However, the Commissioner of State Taxation has an extended power under section 11E of the PTAA to disregard any agreement, transaction or arrangement entered into whereby payments by an employer for the services of the employee are paid to another entity with the effect of avoiding payroll tax. That is, a tax avoidance purpose is not required so long as the result is the avoidance of payroll tax.

Back to top

Section 11E

Section 11E is a measure designed to combat the increasing use of subcontractors and employment agents under arrangements which do not fall within the strict legal definition of an employer/employee relationship.

Any party to the arrangements may be deemed to be an 'employer' for the purposes of the PTAA and payments made are deemed to be within the definition of 'wages' under that Act. Thus, if the Commissioner of State Taxation is of the opinion that the transaction results in the avoidance of payroll tax, he has the power to disregard the form of the transaction and impose payroll tax on the amount of those payments.

Back to top

Payroll tax rates

From 1 July 2003 and subsequent tax years, the maximum rates and annual wages threshold for Western Australia is:

Maximum rate
5.5 per cent
Annual wages threshold
$750,000

Back to top