Payroll tax in Western Australia works similarly to other states, but each has different rules, rates and thresholds for when your business needs to start paying. Understanding your obligations as an employer is an important part of payroll management.
In this guide, you'll learn about WA's payroll tax, how much you might have to pay and what exemptions are available.
What is the payroll tax threshold and tax rate in Western Australia?
The payroll tax threshold in Western Australia is $83,333 a month, or $1 million in taxable wages annually. This means if your wage bill is less than this, you aren't required to pay payroll tax.
The standard payroll tax rate in Western Australia and Indian Ocean Territories for annual total wages of above $1 million is currently 5.5%. The other states and territories have different rules, rates and thresholds for payroll tax.
How is payroll tax calculated in Western Australia?
Payroll tax is calculated in Western Australia and Indian Ocean Territories on the total taxable wages you pay to your employees. As you pay more in wages, the proportion of those wages that are taxable will increase. Calculate what you might need to pay here (you'll need to register).
When do you need to have paid payroll tax?
You'll need to have paid payroll tax by the 7th day for the previous month's wages. So, for wages paid in January, you'll generally need to have paid payroll tax by 7 February.
Annual reconciliation for Western Australian businesses
Annual reconciliation is essential for Western Australian businesses to complete at the end of each financial year and lodgement is due by 21 July. To do this, you'll verify and finalise how much payroll tax you should have paid based on your wages. This helps you ensure you've paid the right amount throughout the year.
Employer groupings for payroll tax in Western Australia
Employer groupings for payroll tax in Western Australia affect how the tax-free threshold is applied and can impact how much you might have to pay. If you own or control two or more businesses, the ATO may calculate your total wages across all your businesses.
Similarly, it may group two or more businesses if they share employees or are financially dependent on one another. This means if you own two companies that each pay $500,000 in wages each year, they'll be considered together as over the threshold, and you’ll be liable for payroll tax.
Payroll tax exemptions
Payroll tax exemptions are available for some kinds of organisations, wages or employees:
Charitable organisations and benevolent institutions are exempt from payroll tax.
Employers can claim payroll tax rebates on wages paid to indigenous employees in their first two years with you.
Wages paid to people on parental leave aren't included in your total wage bill.
Wages paid to apprentices and trainees aren't included in your total wage bill.
How to register for payroll tax in Western Australia
Registering for payroll tax in Western Australia is best done online. Follow the steps to complete the registration form, then hit submit.
Penalties if you don't register or submit returns
There may be penalties if you don't register for payroll tax or submit returns when required. Here's what you need to be aware of.
Penalty tax
Penalty tax is imposed if you don't register or lodge returns and payments on time, underpay or provide misleading information.
Estimate assessment
Estimate assessments are made if you don't register and lodge your payroll tax returns correctly and in full.
Audit
Audits are full investigations by the government to determine your liability.
Revenue WA compliance activities
Revenue WA compliance activities ensure that revenue law and grant and subsidy schemes are fair and efficient. It’s also responsible for minimising tax evasion and avoidance, so it'll audit and investigate organisations and run awareness and education programmes.
To stay compliant with Revenue WA, you must understand your tax obligations, keep detailed records and register for and pay relevant taxes on time.
Payroll tax FAQs
What is the difference between payroll tax and PAYG?
The difference between payroll tax and PAYG comes down to who pays the tax and why. PAYG is when your employees pay income tax to the ATO. As an employer, you keep this money back from their wages to pay it on their behalf. On the other hand, liable employers pay payroll tax to Revenue WA, which is calculated on how much they pay in wages each month.
Are superannuation contributions subject to payroll tax in WA?
Yes, superannuation contributions are subject to payroll tax in WA, as are most other employee benefits.
What is a payroll tax exemption?
A payroll tax exemption is when your business may be exempted from paying payroll tax.
What is the arrangement between Western Australia and the Commonwealth?
The arrangement between Western Australia and the Commonwealth (the Australian federal government) dictates the share of tax collected by each entity and what decisions each can make.
Get rolling with payroll tax
While getting registered and paying payroll tax sounds complicated, it's important to know your obligations as an employer. If you don't you could be liable for penalties.
Luckily, technology can come to your rescue. Cloud payroll software can make it simple to calculate payroll tax, along with streamlining other tasks like onboarding, rostering, paying and managing staff entitlements.
MYOB payroll software automates and optimises your payroll so your team can focus on growing your business – get started here.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.
MYOB is not a registered entity pursuant to the Tax Agent Services Act 2009 (TASA) and therefore cannot provide taxation advice to clients. If you have a query concerning taxation including filing your BAS return or annual tax statements then you should consult with your accountant or other registered tax adviser.