Payroll taxes in New South Wales
Employers, or a group of related businesses, whose total Australian wages exceed the current NSW monthly threshold, are required to pay NSW payroll tax. Broadly speaking, the tax amount is a percentage of taxable wages paid within NSW. This percentage is called the payroll tax rate.
Shareholders of more than one business need to be aware that OSR NSW launch around 500 grouping actions per annum.
When a Grouping investigation commences, business owners can expect to write off at least 300 hours of owner time answering 50 questions aimed at finding a weakness exploitable under grouping provisions. OSR will delve deeply into your constitutions, shareholders agreements and other documents looking for grouping loopholes. The process can take up to a year to reach a conclusion. It's highly likely that the conclusion will be against the business and that you will be retrospectively taxed a large amount. There are limited avenues of appeal, all of which will cost the business additional large amounts of money. Your chances of success are slim. Experts who understand the archane law associated with Payroll Tax run to more than $500/hour in NSW so unless you cash-rich just rollover, payup and shut down.
An argument can be put that Payroll tax would be better merged with general collections available in Federal PAYG at a lower rate (perhaps 2%) to remove the random nature of grouping retrospectively on small growing businesses. Taking away large amounts of cash is essentially the same as cutting off the oxygen small business needs to survive and grow. PAYG is predictable and paid as you go so there is very little chance of the same retrospective penalties.
A grouping action is where more than one of your businesses are 'deemed' to be effectively the same business for Payroll taxation purposes and thus 'grouped' together. These grouping actions are difficult to defend against without very deep pockets. They can result in heavy fines and back tax with high rates of interest. To reduce the possibility of a grouping action, it is worth considering outsourcing work to sub-contractors rather employing people directly or alternatively using overseas people with specific skillsets. In both cases, you will reduce the possibility of a grouping action.
For more information on grouping look here: http://www.osr.nsw.gov.au/taxes/payroll/grouping
The following table lists the payroll tax rate and annual threshold in force for the indicated dates. The monthly threshold is the appropriate fraction of the annual threshold according to how many days there are in the month.
| Start Date | End Date | Payroll Tax Rate | Annual Threshold |
|---|---|---|---|
| 2007-07-01 | 2008-06-30 | 6% | $600,000 |
| 2008-07-01 | 2008-12-31 | 6% | $623,000 |
| 2009-01-01 | 2009-06-30 | 5.75% | $623,000 |
| 2009-07-01 | 2009-12-31 | 5.75% | $638,000 |
| 2010-01-01 | 2010-06-30 | 5.65% | $638,000 |
| 2010-07-01 | 2010-12-31 | 5.5% | $638,000 |
| 2011-01-01 | 2011-06-30? | 5.45% | $638,000 |
Each monthly payment or 'nil' remittance is due seven days after the end of each month or the next business day if the seventh day is a weekend (i.e., August payment is due by 7 September). The annual reconciliation and payment or 'nil' remittance is due by 21 July.
Effective July 2007 - In NSW, payroll tax is levied under the Payroll Tax Act 2007 and administered by the Taxation Administration Act 1996.
Prior to 1 July 2007 - In NSW, payroll tax was levied under the Pay-roll Tax Act 1971 and administered by the Taxation Administration Act 1996.