From 1 July 2024, the payroll tax free threshold lifted from $700,000 to $900,000 for annual returns, and from $58,333 to $75,000 for monthly returns.
From 1 July 2025, the payroll tax free threshold will be lifted from $900,000 to $1,000,000 for annual returns, and from $75,000 to $83,333 for monthly returns.
From 1 July 2024, employers and groups with total annual taxable Australian wages between $3,000,000 and $5,000,000 are eligible for a reduced deduction, where the deduction is subject to a degree of phasing out.
The phase out rate for the financial year commencing on 1 July 2024 is 45%, and for the financial year commencing on 1 July 2025 and each subsequent financial year it is 50%.
Employers and groups with total annual taxable Australian wages above $5,000,000 are not eligible for any deduction.
What the changes mean for you
Employers with Australian wages below $3 million
These employers are entitled to the entire threshold amount of either $900,000 (from 1 July 2024) or $1,000,000 (from 1 July 2025), unless the employer also pays wages interstate, or has employed for less than the full financial year.
In these instances, the threshold amount reduces to reflect the portion of Victorian over Australian wages and/or the portion of the year the employer has employed.
For example, if an employer has employed for half the year, they are entitled to half the threshold, or if an employer’s Victorian wages are 30% of total Australian wages, they are entitled to 30% of the threshold, and so on.
Employers with Australian wages between $3 million and $5 million
The threshold amount for these employers will reduce to the point where the threshold is zero once Australian wages exceed $5 million.
To determine the threshold amount for these employers, the following calculations need to be made:
STEP 1: Prorate the threshold amount based on the number of days in the year the employer has employed. For example, if the employer has employed for 182 days, the full threshold amount should be multiplied by 182/365.
STEP 2: Prorate the threshold determined by following Step 1 by the proportion of Victorian wages to total Australian wages by the new prorate threshold amount.
STEP 3: Deduct the result from Step 2 from the total threshold amount.
Example
In the 2024-25 financial year, a metropolitan employer employed for 182 days, and paid Victorian wages of $1,000,000 and Australian wages of $2,000,000.
First you need to calculate the part period deduction calculations:
Victorian payroll tax deduction $900,000 × (182 ÷ 365) = $448,767 (pro-rated Payroll tax deduction)
Sliding scale deduction $3,000,000 × (182 ÷ 365) = $1,495,890 (pro-rated sliding scale deduction)
STEP 1: $448,767 × (1,000,000 ÷ 2,000,000) (Victorian ÷ Australian wages) = $224,384
STEP 2: $1,000,000 (Victorian wages) – [$1,495,890 (pro-rated sliding scale deduction) × ($1,000,000 ÷ $2,000,000) (Victorian ÷ Australian wages)] = $252,055 × 45% = $113,425
STEP 3: $224,384 (Step 1 answer) – $113,425 (Step 2 answer) = $110,959 (sliding scale deduction entitlement)
The lower amount of Step 1 or Step 3 is your sliding scale deduction entitlement, so in this case $110,959. If Step 3 gives you a negative result, then you are not entitled to a deduction.
Use our calculator to determine your threshold amount
Employers with Australian wages above $5 million
These employers will not receive any tax-free threshold.
We’re here to help
If you require more information, contact our Customer Education team for further assistance or book into a payroll tax webinar or seminar.
