RSM Australia

Employers to beware of hidden payroll tax and WorkCover costs of JobKeeper payments

Tax Insights

By and large, the JobKeeper Payment scheme is a much-welcome lifeline for employees and employers alike, especially now that the payments have started to flow. However, from an employer’s point of view, they need to be aware that they may be forced to bear some of the costs of administering the scheme.

Potentially, these on-costs of the JobKeeper Payment scheme, which are not insignificant, could mean the difference between joining / staying in the scheme or electing not to participate.


Ordinarily, payments made by an employer to an employee for services rendered are subject to payroll tax at rates of up to 6.5%, depending on the state or territory. The on-costs of the JobKeeper Payment scheme could mean the difference between joining / staying in the scheme or electing not to participate.Similarly, businesses are required to include the total wages paid to employees in determining the quantum of their workers’ compensation premium payable to the relevant WorkCover authority. The most reasonable view is that payments made by employers to employees which are subsequently reimbursed by the Federal Government through the JobKeeper Payment scheme are taxable wages for payroll tax purposes and subject to workers’ compensation insurance. 

The inclusion of these on-costs potentially adds another 5-10% to an employer’s cost – which they have to bear as this is not reimbursed under JobKeeper.  Also, the inclusion of wages paid to JobKeeper-eligible employees could also force a small business who is below the payroll tax threshold to have to register for, and pay, payroll tax for the first time.

As recognition of this, most states and territories have to provide, or at least announce, some form of specific relief to ensure eligible employers are not having to use their precious cash-flow to fund any payroll tax or workers’ compensation premium associated with passing on JobKeeper payments to their employees. 

However, as the following table notes (current to the date of the article), not all jurisdictions have announced exemptions and the exemptions themselves are not consistent across borders:

Jurisdiction

Payroll tax

Workers’ compensation premium

New South Wales

Exempt:

But only in respect of the “top-up” that an employer makes to bridge the gap between their employee’s normal wage and $1,500 a fortnight (e.g., applies to stood down and part-time employees)

Payments made to workers who perform no work are excluded, otherwise all payments are included

Victoria

Exempt:

But only in respect of the “top-up” that an employer makes to bridge the gap between their employee’s normal wage and $1,500 a fortnight (e.g., applies to stood down and part-time employees)

Payments to stood down workers are excluded as are payments above a part-time employee’s usual salary

Queensland

Exempt:

Applies to first $1,500 per fortnight of an employee’s wage

Only included in wages to the extent of payment above JobKeeper amount (e.g., not included for a stood down worker)

Western Australia

Exempt:

Applies to first $1,500 of an employee’s wage

Only included in wages to the extent of payment for work performed (e.g., not included for a stood down worker)

South Australia

Exempt:

Applies to first $1,500 of an employee’s wage

All passthrough of JobKeeper payments is excluded

Tasmania

Exempt:

Applies to first $1,500 per fortnight of an employee’s wage

Only included in wages to the extent of payment for work performed (e.g., not included for a stood down worker)

Northern Territory

Exempt:

Applies to first $1,500 per fortnight of an employee’s wage

Only included in wages to the extent of payment for work performed (e.g., not included for a stood down worker)

Australian Capital Territory

Exempt:

Applies to first $1,500 per fortnight of an employee’s wage

No specific exemption announced

All employers should be mindful of the associated on-costs of the JobKeeper Payment scheme, particularly those in jurisdictions which have not provided any exemptions such as New South Wales and the Victoria, so they do not get caught out during any subsequent Revenue Office audit.

How can RSM help?

If you need any further information on the interaction between the JobKeeper Payment scheme and state taxes, please get in contact with your local RSM advisor.

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