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Payroll Tax

Payroll tax is a state tax, payable at the rate of 5.45 percent (effective from 1 July 2001)

Payroll tax is calculated on wages paid by an employer to its employees and collected and administered in Victoria by the State Revenue Office (SRO) in accordance with the Payroll Tax Act 1971.

Frequently asked questions

How do employment agents deal with pay-roll tax?

For the period from 1 February 1999 - 31 December 2004:

When an employment agent provides staff to a client, any pay-roll tax liability that may arise is imposed on the client. Special collection arrangement exist enabling employment agents to be authorised by the SRO to collect the appropriate amount of pay-roll tax from clients and make monthly payments. For more information on this subject, refer to the Employment Agency Contracts brochure.

From 1 January 2005 onwards:

Employment agency will be liable for pay-roll tax for their on-hired workers rather than the clients of the agency. An exemption will apply to wages paid in respect of workers on-hired to a client that is exempt under Section 10 of the Pay-roll Tax Act 1971 (Vic).

When is an employer liable for Victorian payroll tax?

An employer that employs in Victoria must register for and pay payroll tax when its total Australian wages exceed the Victorian general exemption level of $42,917 a month or $515,000 over the full financial year.

When is payroll tax paid?

Pay-roll tax is payable monthly, by the seventh day of the month following the month in which an employer's wages have exceeded the Victorian general exemption level. If the estimated tax payable by an employer is relatively low, approval may be given to pay annually.

Are there any exemptions from payroll tax?

Government schools, educational institutions or instrumentalities of the State are not exempt from Payroll Tax.  However wages paid by the following categories of employers are exempt:

  • on-government schools providing education at or below secondary level
  • public benevolent institutions
  • charitable bodies.

What payments are included as wages?

The definition of wages is very broad and includes wages, salaries, allowances, commissions, bonuses, employer (pre-tax) superannuation contributions, fringe benefits (within the meaning of the Fringe Benefits Tax Assessment Act 1986), payments to some contractors, certain payments to employment agencies, and remuneration paid to company directors.

What is not taxable?

Some payments are not subject to payroll tax.  These include compensation payments to injured workers (eg WorkCover payments) but not amounts paid in excess of the amounts prescribed as compensation (eg make-up pay), and some termination payments, such as unused leave which accrued before 1 January 1996.

Although allowances are generally fully taxable, travelling, accommodation and living away from home allowances may be fully or partially exempt in some circumstances.

More information

    Tax legislation is included in the Victorian Taxation Administration Act 1997, which covers the collection and administration of pay-roll tax, financial institutions duty and debits tax.

    For more information about the treatment of payroll tax on Agency employed staff, see for following Departmental Circular - Payroll tax on agency employed staff (RTF - 6Kb).

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