The payroll tax liability of many Victorian businesses is set to increase due to the introduction of the Mental Health and Wellbeing Payroll Tax Surcharge (the surcharge) from 1 January 2022.
The surcharge will be levied on businesses with payrolls over $10 million, for the purpose of generating sustainable and dedicated funding to be invested in the mental health system.
The surcharge, introduced by the State Taxation and Mental Health Acts Amendment Act 2021, is estimated to raise $387 million in the 2021-22 income year, and an average of $843 million each year over the forward estimates.
Which employers are liable to pay the surcharge?
The surcharge, at the rate of 0.5%, will apply to Victorian employers whose annual Australian wages exceed $10 million, with a first monthly threshold of $833,333.
An additional surcharge of 0.5% will be imposed on Victorian employers whose annual Australian wages exceed $100 million, with a second monthly threshold of $8,333,333.
The above annual thresholds are adjusted proportionately if an entity is not an employer for a full financial year. In respect of the period from 1 January 2022 to 30 June 2022 (transitional period), the respective annual thresholds are $5 million and $50 million.
If an employer is part of a group of employers, these thresholds apply at the group level.
When is the surcharge payable?
The surcharge is payable at the same time that payroll tax is payable. This means that if an employer pays payroll tax on a monthly basis, they will also pay the surcharge monthly. If payroll tax is paid annually, the employer will pay the surcharge annually.
For example, the first due date for monthly remitters will be 7 February 2022, being the lodgment date of their January 2022 monthly returns.
Are there any exemptions?
Any wages which are exempt from payroll tax (for example, wages paid to an employee who is taking primary or secondary caregiver leave) will also be exempt from the surcharge.
Existing payroll tax exemptions for private schools, hospitals, charities, local councils, and wages paid for parental and volunteer leave will also apply to the levy.
Please contact the Tax team if you would like to discuss your liability to the surcharge in planning for 2022.
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