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Tax Alert: Victorian payroll tax changes from 1 July 2017

Is your business’ principal place of business address located in regional Victoria? Do at least 85% of your employees reside in regional Victoria?

If you answer yes to these two questions, then from 1 July 2017 you may be eligible for a reduced payroll tax rate of 3.65%, rather than the standard 4.85%.

Payroll tax changes

In its 2017/18 State Budget, the Andrews Government in Victoria announced a number of changes to the payroll tax regime, including a major win for regional businesses. From 1 July 2017, the changes made to the payroll tax regime are as follows:

Threshold increase

  • From 1 July 2017, the Payroll Tax Threshold for All employers has been increased to $625,000 per annum, or $52,083 per month;
  • From 1 July 2018, the threshold will increase further, to $650,000 per annum, or $54,166

Reduction in the payroll tax rate for regional Victorian employers

From 1 July 2017, where a business meets the relevant criteria to be classified as a regional employer, it will be eligible for a 25% reduction in the rate of payroll tax, down to 3.65%. To be eligible for this reduced Payroll Tax rate, a regional Victorian business must meet the following two criteria:

  1. The employer must have an ABN and its registered business address must be located in regional Victoria; and
  2. At least 85% of its payroll must be paid to regional employees.

“Regional Victoria” has the same meaning as it does for the First Home Owner Grant. That is, both the registered business address, and at least 85% of the business’ employees must reside in one of a number of regional Victorian municipal councils.

The list of the applicable municipal councils can be found at the Victorian State Revenue Office website here:

What you need to do

If you operate a business in regional Victoria, please review the above criteria to ensure that it applies to your business and confirm your municipal council is classified as a regional council using the list found via the above link. If you meet the criteria, please apply the reduced payroll tax rate to your payroll tax calculations from 1 July 2017.

For all other businesses, please ensure that you utilise the increased payroll tax thresholds that apply from 1 July 2017.

Should you have any queries in relation to this matter, please do not hesitate to contact your Fordham Partner.

Download: Tax Alert-Payroll tax changes

This alert has been prepared by Fordham Business Advisors Pty Ltd (Fordham). Fordham is part of the Perpetual Limited group. The information in this alert is based on legislation passed by the Victorian State Parliament that received Royal Assent on 27 June 2017 and is believed to be accurate at the time of compilation. It has been provided in good faith, as general information only. The tax information contained in this document is not tax advice and should not be relied on as such. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.