If your initial thought when reading a headline stating “Changes to WA Pay-Roll Tax” was…What now?! What will be the negative impact on my business? You would probably not be alone. However, we can happily say that the recent changes are positive (that is correct, positive).
Pay-roll tax is payable when an employer’s total Australian wages exceed the tax-free annual threshold. Australian wages comprise 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.
Pay-roll tax is a self-assessed tax meaning that the onus is on the employer. Employers registered for Pay-roll tax declare wages by way of a monthly, quarterly, or annual return. As part of the return lodgement process, the Office of State Revenue will calculate the employer’s liability.
In late October 2019, the McGowan Labor Government announced changes to WA Pay-roll Tax. The changes will provide relief for many WA small businesses.
Comments made by Premier Mark McGowan:
“This Pay-roll 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 Pay-roll tax. From 1 January 2020, the annual threshold will be increased to $950,000, and further again to $1 million from 1 January 2021.
Albeit yet to receive Royal Assent, our review of the proposed changes highlight how the OSR will address the changes taking effect from the dates prescribed.
You will need to ensure that you correctly apply the tax thresholds and tapering values with respect to half-years for each respective period applicable.
An extract from the Bill below highlights the importance of ensuring you refer to the Bill and work through the specific dates taking into consideration applicable thresholds to correctly calculate your Pay-roll tax liability. Incorrect calculations will lead to penalties and/or interest.
In brief, tax thresholds and tapering values as follows:
- Half-years between 1 July 2019 and 30 June 2021:
– The threshold amount for a half-year in the threshold transition period is 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.
– The monthly threshold amount for a half-year in the threshold transition period is 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 a doubt these changes are a welcome update to existing thresholds, resulting in reduced payroll tax liabilities for all WA Employers.
Please contact Linken Fragomeli if you would like to discuss how these soon to be enacted changes may impact your clients.