The Office of State Revenue (OSR) has discreetly made a significant changes to Payroll Tax Assessment Act. From 1 July 2015, the annual tax-free threshold gradually phases out for employers with annual taxable wages in Australia between $800,000 and $7.5 million. Employers with annual taxable wages of $7.5 million or more will pay payroll tax on their entire taxable wages from 1 July 2015.
Calculating Your Payroll Tax Liability 
In Western Australia, payroll tax is calculated at the rate of 5.5% on the difference between the taxable wages paid by an employer in WA and the deductible amount of the tax-free threshold to which the employer is entitled.
Your payroll tax liability is calculated by the OSR after you have declared your taxable wages through Revenue Online (ROL).
Due to the complexity of the new formula, to calculate your Payroll Tax, we suggest you use the online Payroll Tax Calculator to estimate your payroll tax liability.
Annual threshold amount
Payroll tax becomes payable when the total Australia-wide taxable wages paid by an employer, or group of employers, exceed the annual threshold amount.
The tax-free annual threshold amount is $800,000 or apportioned (pro-rata) for part periods if applicable.
Upper threshold amount
The upper threshold is the amount at which the tax-free threshold phases out.
The upper threshold amount is $7.5 million or apportioned for part periods if applicable.
Once the total Australia-wide taxable wages are equal to or exceed the upper threshold amount, payroll tax is payable on the employer’s total taxable wages without any deduction.
Deductible amount
The deductible amount is the amount employers may be entitled to deduct from their WA taxable wages and is calculated by using a tapering value formula.
Tapering Value
A tapering value formula is used to calculate the gradual reduction in the deductible amount which employers may claim against their WA taxable wages between the annual threshold amount of $800,000 and the upper threshold amount of $7.5 million.
Subcontractors
Please be aware that subcontractors can be caught in the Payroll Tax web even though they trade through a company or trust. OSR applies a “look through” approach when reviewing subbies. If they are principally remunerated for their labour, they will be caught.
It’s my opinion that Payroll Tax is a wicked evil. Employers are punished for employing people. There are ways to minimise the amount of Payroll Tax payable. Please contact Optima Partners to discuss further or to review your payroll, if need be.
Enrico De Pietro CPA
DIRECTOR – OPTIMA PARTNERS
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