Australian employers might be required to pay payroll tax depending on the amount of wages they’re obligated to pay. Payroll tax is a state and territory tax, so each state sets its own rates, turning what originally sounded like a simple idea into a nightmare for new business owners.
Due to this, it’s vital that you know your state’s primary threshold amount to know if you need to pay or not. Today we’re looking into everything you need to know about Queensland and its payroll tax rate.
What is the payroll tax rate in QLD?
- The payroll tax rate in Queensland is 4.75% for employers paying between $1.3 million and $6.5 million in Australian taxable wages.
- For Regional Queensland employers paying more than $6.5 million in wages, the payroll tax increases to 4.95%.
Bear in mind that these rates are subject to change depending on the tax year, and the above rates are accurate for the 2023 to 24 tax year.
When do I need to register for payroll tax?
It is the employer’s responsibility to register for payroll tax within seven days after the end of the month when they first hit the minimum threshold of $25,000 a week in Australian taxable wages.
You must register for payroll tax if you join a group of employers that collectively pay more than $25,000 a week in wages to all of your employees.
Payroll tax thresholds & rates in QLD
For the most recent tax year, Queensland payroll tax featured a certain threshold of $25,000 a week. When working things out monthly, the threshold was $108,333. This also equates to $1,300,000 per annum.
For employers or groups of employers who pay less than $6.5 million in Australian taxable wages, their payroll tax rate will be 4.75%. Employers paying over this annual threshold will pay a slightly higher rate of 4.95%.
Queensland’s payroll tax is calculated based on all wages an employer pays, which includes more than you might think. We’ve detailed everything included in this term below:
- Salaries
- Contractor payments
- Remuneration for management and directors
- Commissions
- Fringe benefits
- Superannuation
- Allowances
- Bonuses
- Employee termination payments
With so many payments falling into the category of taxable payroll, you might reach the minimum threshold sooner than you think.
Mental health levy
As of January 2023, a mental health levy is required to be applied to payroll tax. This helps fund mental health services. This levy is applicable to employers who pay over $10 million in Australian taxable wages. The levy rate is as follows:
- 0.25% for more than $10 million in Australian taxable wages
- 0.25% + 0.5% for more than $100 million in Australian taxable wages
Liabilities & exemptions
There are a number of exceptions worth knowing about when it comes to paying payroll tax in Queensland. We’ve detailed a few of the most important exemptions below:
Exempt allowances
You might be able to claim a payroll tax exemption for certain motor vehicle allowances or accommodation allowances, earning a discount on your tax rate. For example, if you pay an employee for using their own private vehicle for your business’s purposes, this may be exempt from your total taxable wages.
Learn more about exempt allowances in Queensland here.
Exempt leave
Some types of employee leave are exempt from Queensland’s payroll tax rate, so it’s important to keep this in mind when calculating your taxable wages. Some examples of exempt leave types are parental, adoption, and defence.
You can read about the exemptions regarding employee leave in Queensland here.
Exempt wages
There are a number of wages that can be exempt from Queensland’s payroll tax liability, including wages paid to apprentices or trainees, employees with special exemptions, and JobKeeper payments.
Check whether you can apply for an exemption on certain wages here.
According to the Taxation Administration Act 1953, charitable institutions can also claim payroll tax exemptions. You will need to apply for these, so it’s worth reading up on before the tax deadline.
Grouping provisions
Businesses connected or related to one another will often be treated as one unit when it comes to calculating payroll tax rates. This is otherwise known as grouping, and you may still be considered a grouped business even if you don’t employ in Queensland.
Grouped businesses are given the same thresholds as single businesses, so if you’re paying more than $25,000 in taxable wages across all businesses, you’ll be required to register for payroll tax.
Calculating payroll tax in QLD
Some employers prefer to work out their payroll tax before lodging returns online, so they have a better idea of how much they’ll need to pay at the end of the tax year. You can do this with the following formula:
(Total Queensland taxable wages – Deductions) × Payroll tax rate = Payroll tax liability
The deductions here will be calculated on your Australian taxable wages, so subtract this from your total wages before multiplying by your payroll tax rate.
Easier said than done, right?
Luckily, there are numerous online calculators that you can use to help with calculating your payroll tax, which you can find here.
Ultimately, you will need to lodge a tax return online so the numbers can be checked and calculated to confirm your payroll tax. These calculators and formulas are for employers’ information purposes only.
Common pitfalls and compliance tips
Non-compliance with the Queensland payroll tax obligations can land you in hot water, leading to penalties and interest charges. We’ve detailed some common penalties and pitfalls below, so you can avoid them as much as possible:
- Failure to register for payroll tax: You might be fined for not registering for payroll tax before the cut-off, which is seven days after the end of the month.
- Underpayment or non-payment: Businesses that fail to pay the correct amount of tax might be liable for penalties. You can be fined whether the incorrect payment was intentional or not, so it’s vital you pay the correct amount the first time around.
- Misleading statements: Submitting incorrect information regarding payroll tax can result in fines and penalties.
- Late lodgement: You will be required to lodge your tax returns by a certain due date, so missing this date and lodging late might increase the risk of earning a penalty or fine.
As you can see, compliance is vital in preventing higher payments and fines. To avoid falling victim to these, make sure you understand your tax obligations, keep your records up to date and accurate, and submit information before the deadlines set.
Unintentional mistakes can often be rectified to have fines waived or reduced, but this doesn’t always happen. So, to avoid the risk of penalties altogether, make sure you keep on top of your tax obligations.
FAQs
What is the payroll tax discount in QLD?
Queensland offers a discount on payroll tax to regional employers of 1%. The discounted rates are:
- 3.75% for employers or groups of employers paying less than $6.5 million in Australian taxable wages
- 3.95% for employers or groups of employers paying more than $6.5 million in Australian taxable wages
These rates are applicable until 30 June 2030. Regional employers are those with Queensland as their principal place of employment, with over 85% of taxable wages being paid to regional employees.
Is superannuation included in payroll tax?
Yes, employers still need to pay payroll tax rates on superannuation contributions for employees or directors. This includes any payment regarded as superannuation, including retirement pay.
Superannuation contributions can come in the form of monetary and non-monetary offerings, so any non-monetary contributions will need to be declared with suitable evidence so QRO can value them.
Does salary sacrifice reduce payroll tax in QLD?
Yes, salary sacrifice reduces the payroll taxable wages of a business, so you won’t have to pay as much. An effective salary sacrifice converts some of the employee’s wages into benefits, which are exempt from payroll tax.
However, if the salary sacrifice arrangement is ineffective, the whole salary sum will be treated as wages and will be taxed accordingly.
Are dividends included in payroll tax in QLD?
No, dividends are not included in payroll tax in Queensland. Make sure you clearly show dividends as profit distributions rather than business expenses to avoid being taxed on these payments.
