Employers who pay wages in Tasmania are required to register for payroll tax if their total Australia-wide (including Group members') wages exceed:

• the threshold of $1 250 000 during any financial year; or
• $24 038 per week during a month.
  

Some employers entitled to claim the threshold do not always do so. Others do not update their registration details when lodging their annual adjustment return, so Tasmanian Revenue Online does not apply the threshold. Check these before submitting.

When employers are a member of a group, it is common for some members not to claim the threshold correctly. For example, if Employer A and Employer B are grouped, the threshold is shared between them. However if Employer B assumes Employer A (as the designated group employer) will claim the threshold, Employer B may not claim its share.

Taxable wages for payroll tax include more than wages and salaries. They also include employer superannuation contributions, commissions, bonuses, allowances, directors' fees and fringe benefits. The taxable component of termination payments and payments to relevant contractors are included.

Grants of shares or options to employees are also taxable.

Refer to the Employe​rs guide to payroll tax for further information.

The most common errors are:

• failing to deduct Workers' Compensation payments ​(excluding any 'make up' payments made by the employer - which are taxable); and
• including the income tax exempt component of Eligible Termination payments (for example the 'lump sum D' payments).

Workers' Compensation payments that are approved and claimed from the insurer may be deducted for payroll tax purposes. This includes the related first 5 days excess payment.

All allowances are taxable unless they are a direct reimbursement of employment related expenses. The only exceptions are accommodation and per kilometre travel allowances, which are exempt up to the prescribed limit.

An accommodation allowance applies when an employee is temporarily away from home and is paid an  allowance to cover meals, incidentals, and accommodation.

Only the amount above the prescribed rate is included in taxable wages. The prescribed rate is the ATO daily travel allowance rate for the lowest capital city and lowest salary band. Refer to the ATO website for current rates.​​​​​​​​​

Motor vehicle allowances are paid to employees who use their own vehicles for work purposes. These allowances are usually paid on a per kilometre rate, or a flat rate basis.

The cent per kilometre rate is determined and adjusted each year by the ATO. Any amount paid above this rate must be included in the taxable wages total. It is important to keep sufficient records to justify claiming this exemption.

Generally, the full amount of the motor vehicle allowance must be included in the total taxable wages if the allowance is paid as a flat rate. However, the exempt component may be calculated and deducted where the employer produces records to verify the number of business kilometres travelled.

If a motor vehicle allowance is paid as a combination of a fixed amount plus a kilometre rate, the total amount of the allowance that exceeds the exempt component will be taxable.

Some businesses engage contractors instead of employees. Payments to these contractors may still be subject to payroll tax.

To detemrine if the contractor provisions apply, the employer must first decide whether the worker is an employee or contractor.

• If the worker is an employee, all payments must be included as taxable wages.
• If the worker is a contractor, the contractor provisions apply unless one of the seven exclusions apply.

Under the Act, wages include amounts paid or payable to contractors under these provisions.

For more information, refer to Revenue Ruling PTA038 - Determining whether a worker is an employee.

Payments for services under a contract are usually subject to payroll tax. They remain taxable unless one of the contractor exclusions applies. If no exclusion applies, payroll tax is payable on the GST exclusive labour component of the contract.

For more information refer to Revenue Ruling PTA008 - GST Considerations for the Calculation of Payroll Tax Liability.

Payments for the labour content of relevant contracts are taxable whether the services are provided by:

• an individual;
• a company;
• a trustee (incorporated or unincorporated); or 
• a partnership.

Termination payments to contractors who are deemed to be employees under these provisions are also taxable.

The Commissioner has issued a series of payroll tax rulings to explain how the contractor provisions apply. Refer to​ Ru​lings for more information.

Employment agency provisions

Under the employment agency provisions, the agency is treated as the employer of on-hired workers. As a result, then agency, not the client, must pay payroll tax on these workers.

Another common error is failing to register as a group and include all group members' wages. This often affects subsidiaries of overseas holding companies that may not be aware of related entities operating in Australia. 

 A payroll tax group exists where:

• companies are related under section 50 of the Corporations Act 2001 (Cth).
  
• businesses are under common control (where a person or persons have control of two or more businesses); or
• common employees (where they are shared between businesses).

Tracing provisions aggregate direct and indirect interests of entities and associated persons when determining who has a controlling interest in a corporation.

A member may be excluded from a group where:

• common control - the business operates substantially independent of the other group members; or
• common employees - the employee works in the other business at arms-length; eg. services are charged at commercial rates.
  

The power to exclude is not available where the group member is related under the Corporations Act 2001 (Cth).

Employers sometimes fail to include superannuation payments for directors or board members as wages, This can occur where:

• directors are separate from the general payroll records;
• payroll records are kept separately from general payroll records; or
• lump sum payments are made directly to a superannuation fund.

These payments must be included as wages for payroll purposes.

Amounts sacrificed under a salary sacrifice arrangement are taxable wages because they are considered remuneration  "payable in cash or in kind".

This includes:

• salary sacrificed and paid to an employee's superannuation fund (treated as a paymnet "in kind"); and
• salary sacrificed during a contribution holiday where no employer contributions were made.

In all other cases, the full value of salary sacrificed to obtain a benefit that is exempt or excluded under FBT legislation must be included as taxable wages.

Employers sometimes incorrectly report fringe benefits by declaring:

• the grossed-up value;
• the pre grossed-up taxable value; or
• the tax paid on fringe benefits.

For payroll tax purposes, you must include the grossed-up taxable value of fringe benefits provided to Tasmanian employees.

If all benefits are provided to Tasmanian employees, this amount should match the figure reported on your ATO fringe benefits return.

For payroll tax, all fringe benefits are grossed up by using the lower (Type 2) gross-up.

When wages are connected to more that one jurisdiction, two tests determine where payroll tax is payable.

Where services are performed

If an employee performs services entirely in one jurisdiction during a whole calendar month, payroll tax is payable in that jurisdiction. For example, if an employee works only in Tasmania for a full month, payroll tax is payable in Tasmania for that period. ​

Where wages are paid

If an employee performs services in more than a calendar month, payroll tax is payable in the jurisdiction where the wages are paid. For example, if an employee works one week in Victoria and three weeks in Tasmania, but their wages are paid into a Victorian bank account, payroll tax is payable in Victoria.​

The nexus provisions of the Act determine in which Australian jurisdiction (State or Territory) payroll tax is paid. The nexus provisions were updated effective from 1 July 2009.

To determine whether wages are payable in Tasmania, first consider where the employee performs their work. If the employee performs all services in Tasmania during a calendar month, payroll tax is payable in Tasmania (Section 11 of the Act).

If the employee does not perform all services in Tasmania in the month, the nexus provisions provide four-tiered tests, which require the following factors to be considered in order:

• the employee's principal place of residence;
• the employer's registered ABN address or principal place of business;
• the place where the wages are paid to the employee; or
• the place where the services are mainly performed.