Daniel Hodgson and Andrew Larmour discuss the impact of an increase in payroll tax on employers of Western Australia.
It’s been called a ‘dud tax’ that kills jobs, and the increase to the top rate of Western Australia (WA) payroll tax to 6 percent and 6.5 percent for large employers has been poorly received by the business community, with the common view being that it will act as a further impediment to employment growth.
As employers plan for the changes required to operate under the Australian Taxation Office’s (ATO) Single Touch Payroll environment, it is an ideal time to review payroll tax processes to ensure that obligations are dealt with efficiently and payroll tax wages are not over stated, which if rectified through review, will help reverse the impact of the payroll tax rate increases (and provide the opportunity for refunds from amending prior year payroll tax returns).
Payroll tax compliance is commonly managed outside of the company’s tax team, and as a consequence, it is not part of the evolving transformation of the tax function, and does not receive the level of technical oversight applied to other corporate tax obligations.
For example, WA-specific payroll tax exemptions exist for a number of benefits provided to employees living in remote areas even though such benefits are only partially ‘exempt’ for Fringe Benefits Tax (FBT) purposes. In such cases, simply transposing FBT figures into payroll tax returns means the payroll tax exemption is missed.
Another example of employers leaving money on the table is in relation to salary-sacrifice arrangements. In what is a classic double up, employers may mistakenly pay payroll tax on both the pre-sacrifice wages and also the benefit provided under the sacrifice arrangement e.g. superannuation contributions.
The use of analytics will help focus your review, providing fact-driven insights across multiple pay codes, over multiple periods incorporating data from many sources.
These matters impact employers of all sizes and of course, any review undertaken should also focus on any gaps in process or tax policy that could result in an under disclosure of payroll tax wages, to ensure that any amendment, either retro or prospective is complete and correct.