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Wages paid or payable by an employer to a trainee under a training contract registered from 1 July 2019 under the Vocational Education and Training Act 1996 are liable to payroll tax.

Commissions, bonuses and allowances paid to employees are liable to payroll tax. These payments are also liable if paid or payable by someone acting on behalf of the employer.

Generally the full amount of an allowance is taxable. However, exemptions are provided for reasonable motor vehicle and overnight accommodation allowances. For more detailed information, see Revenue Ruling PTA 005 ‘Exempt Allowances - Motor Vehicle and Accommodation’.

Reimbursements of expenses incurred by an employer, but paid up front by the employee, are not taxable unless they have a taxable value under the (Cth).

A reimbursement of an expense is not subject to payroll tax if the reimbursement has all the following characteristics:

• at the time of payment, the expense has already been incurred by the employee
• the expenditure by the employee was incurred in the course of the employer’s business and
• the precise amount is reimbursed.

Revenue Ruling PTA 011 ‘Allowances and Reimbursements’ explains the difference between an allowance and a reimbursement for payroll tax purposes.

Remuneration paid or payable to a director, whether as a working or nonworking director, is liable to payroll tax. The definition of a director under the payroll tax legislation includes a member of the governing body of the company.

Distributions of profit (i.e. paid from after-tax profits) to directors in their capacity as shareholders are not wages under the PTA Act. For more information on profit distribution see Revenue Ruling PTA 016 ‘Profit Distributions and Loan Accounts’.

Wages do not have to be paid directly by an employee’s employer in order to be taxable. 

Third party payments are subject to payroll tax when they are made in relation to an employee’s services. For example, an entertainment allowance paid to an employee’s spouse is taxable as it is a payment to a third party in relation to the employee’s services.

Payroll tax is not payable on any component of wages that is directly attributed to the Goods and Services Tax (GST), other than wages comprising of fringe benefits.

Where a taxable wage includes a GST component, payroll tax is not payable on that GST component.

For example, where a payment is to a contractor for $2,200 (inclusive of GST), only $2,000 will be included as wages for payroll tax purposes.

Wages include payments made to an employee in the form of goods, services or other benefits.

Remuneration foregone by an employee in return for some form of non-cash benefit falls within the definition of wages paid or payable in cash or in kind.

For example, an employee may enter into a salary sacrifice arrangement with their employer in which they reduce their gross wages in return for the employer agreeing to pay a higher superannuation contribution for them. This arrangement will attract payroll tax.

These benefits are not fringe benefits and are therefore subject to payroll tax.  Liability for payroll tax occurs at the time the contributions are paid or payable by the employer.

Industry redundancy fund

Employer contributions to a fund that operates to provide redundancy benefits for employees on their retrenchment, leaving the industry or retirement, are liable for payroll tax. 

Portable paid long service leave scheme

Employer contributions to a portable long service leave fund are liable for payroll tax.

Long service leave wages the employer pays directly to the employee are exempt from payroll tax to the extent of the amount the employer is entitled to recover from the fund.