On 28 November 2019, the Payroll Tax Assessment Amendment (Thresholds) Bill 2019 (“the Bill”) was introduced to the Legislative Assembly. The Bill proposes to increase the current payroll tax threshold from $850,000 to $950,000 from 1 January 2020 and to $1m from 1 January 2021.
The changes are proposed to apply from 1 July 2019 once the Bill has received Royal Assent and will provide welcome relief to small and medium businesses in Western Australia. The proposed cuts will bring the WA threshold in line with the majority of the other states in Australia.
Practically, this will work as follows for the 2019-20 and 2020-21 income years (as extracted from the Western Australian government website):
Employers will be required to calculate their payroll tax liability for each half-year, resulting in an annual liability which is the sum of the liability for each half-year.
An employer will calculate their annual threshold by adding together the two six-month taxable thresholds to arrive at their annual threshold amount.
As illustrated in the table above, the upper threshold amount will not change.
Under the proposed changes the monthly thresholds will be as follows:
- For the half-year beginning 1 July 2019 - $70,833
- For the half-years beginning 1 January 2020 and 1 July 2020 - $79,167
- For the half-year beginning 1 January 2021 - $83,333.
Once the changes are fully enacted, the annual threshold amount for a financial year beginning on or after 1 July 2021 will be $1m, the monthly threshold will be $83,333 and the upper threshold amount remains at $7,500,000.
There are provisions under the new legislation which allow the Commissioner to amend the payroll tax assessment if an employer’s payroll tax liability works out to be greater than the liability would have been had the thresholds not changed. For illustration of how this would occur in practice, click here for an example.
For more information on the Western Australian payroll tax thresholds, please contact your local RSM adviser.