As part of the Victorian Government’s stimulus package to ease the economic impact of COVID-19, payroll tax measures have been introduced to assist businesses manage their obligations through these trying times.
As part of its $1.7 billion Economic Survival Package (Survival Package), the Victorian Government announced the following measures to assist businesses:
- Refund of payroll tax already paid for July 2019 – February 2020;
- Waiver of payroll tax payments for March, April, May and June 2020;
- Deferral of any payroll tax payable for July, August and September 2020 until 1 January 2021.
Who do the changes apply to?
The Package is aimed at employers whose annual taxable Victorian wages are up to $3 million for the 2019-2020 financial year. This is assessed on a per employer basis and is not determined on the basis of payroll tax grouping. The test for eligibility is based on the expected annual taxable wages for the 2019-2020 and uses the data collected in the earlier months to assess eligibility.
What do eligible employers need to do?
We understand that the State Revenue Office (SRO) has already notified those businesses it deems to be eligible via email correspondence.
However, there are circumstances where the SRO might not contact all eligible businesses such as where:
- The employer’s annual taxable Victorian wages would ordinarily be over $3 million, but given the changed economic conditions, the annual taxable Victorian wages are expected to reduce to under $3 million. Such employers may qualify for the Survival Package, but may need to wait until lodgement of their annual payroll tax return in July 2020 to confirm their eligibility; or
- Two or more employers are grouped for payroll tax purposes and are lodging via a single monthly payroll tax return that includes all employers in the group. As eligibility for relief measures is assessed on a “per employer” basis, there could be separate employing entities within the group with annual taxable Victorian wages under the $3 million threshold.
Calculation of maximum relief available for the 2019/2020 financial year for eligible businesses
There are two scenarios presented below:
- Scenario 1: illustrates the payroll tax relief payments for a single entity which has been entitled to claim the payroll tax tax-free threshold.
- Scenario 2: illustrates the payroll tax relief payments for a grouped entity which has not been entitled to claim the tax-free threshold.
Please note the following for the purposes of calculations:
- Tax-free threshold in Victoria is $650,000
- Payroll tax rate in Victoria is 4.85%
| Scenario 1 | Scenario 2 | |
| Single entity (entitled to tax-free threshold) | Grouped entity (not entitled to tax-free threshold) | |
| Taxable wages |
$3,000,000 |
$3,000,000 |
| Less tax-free threshold |
$650,000 |
0 |
| Wages subject to payroll tax |
$2,350,000 |
$3,000,000 |
| Payroll tax rate |
4.85% |
4.85% |
| Total payroll tax payable for 2019/2020 |
$113,975.00 |
$145,500.00 |
| Refund for 8 months (July 2019 – Feb 2020) |
$75,983.33 |
$97,000.00 |
| Waiver for 4 months (March – June 2020) |
$37,991.67 |
$48,500.00 |
Can employers defer lodgement of payroll tax returns?
Employers may apply for a refund of payroll tax through PTX Express and provide written reasons as to why they should receive a refund. Notwithstanding the payroll tax waivers, employers should note that payroll tax returns must continue to be lodged but do not need to make further payments for the remainder of the 2019-2020 financial year.
What if an employer receives a refund from the SRO but exceeds the $3 million limit for annual taxable Victorian wages?
While no public guidance is currently available regarding this circumstance, we expect that the ineligible employer would be required to pay the full payroll tax amount for the 2019-2020 financial year and repay any refund received to the SRO. It is unclear at this stage whether any interest or penalty would be imposed.
What if an employer has employees in other states?
Employees in other states are not relevant to the assessment of whether an employer is eligible for payroll tax relief in Victoria.
However, employers who employ in multiple states should note that the other states and territories have introduced their own relief measures aimed at supporting businesses in a similar manner to that in Victoria. There are subtle differences in the measures being passed by each state and territory, which makes it important that employers talk to their Pitcher Partners representative to discuss what options may be available to them.
What are the next steps?
The Pitcher Partners Employment Tax team can assist in determining whether employers that have not yet been contacted by the SRO qualify for relief under the Survival Package. We recommend taking a proactive approach in contacting the SRO to ensure that all eligible businesses participate in the Survival Package.
