In light of the recent COVID-19 pandemic, the New South Wales Government has announced two stages of payroll tax relief for businesses as part of its economic stimulus package to support jobs and businesses.

What is payroll tax?

Payroll tax is a form of taxation which is assessed on the wages paid (or payable) by an employer to its employees. An employer whose total Australian taxable wages exceed the relevant monthly threshold must be registered for payroll tax.

It is a state based taxation with each state and territory implementing its own payroll tax legislation, which varies in rates and thresholds.

In NSW, the payroll tax threshold for the 2019/20 financial year is $900,000. As part of the economic stimulus announcement, the payroll tax threshold will increase to $1 million commencing on 1 July 2020.

Payroll tax relief for small businesses ($10 million or less)

In NSW, businesses will have their annual tax liability reduced by 25% when lodging their annual reconciliation on 28 July 2020. This will apply to businesses with total grouped Australian wages for the 2019/20 financial year of $10 million or less.

These businesses, which had previously been granted a three-month deferral on payroll tax in the first stage of economic relief, will now also receive an additional three month deferral, bringing the total deferral period to six months.

Payroll tax deferral for businesses (over $10 million)

Businesses with total grouped Australian wages for the 2019/20 financial year in excess of $10 million will now have the option of deferring the payment of payroll tax for up to six months.

These businesses will not be required to make their payment for the March period, which was due on 7 April 2020.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.