Daniel Hodgson and Andrew Larmour explain Western Australia's Payroll Tax exemption for the wages of all trainees and apprentices.
In the climactic scene of the film Spartacus, attempts to identify the real Spartacus are foiled as each captured individual proclaims himself to be Spartacus, making recognising the genuine Spartacus impossible. It is alleged that similar scenes might have been witnessed had the Western Australia (WA) Office of State Revenue gathered some organisations’ staff treated as trainees for payroll tax purposes and asked genuine trainees to step forward.
WA Payroll Tax legislation currently provides a payroll tax exemption for the wages of all trainees and apprentices paid under an approved training contract registered with the Department of Training and Workforce Development, to encourage employers to increase the skills of young West Australians to support the productivity of the WA economy.
However, earlier this year, it was reported that a group of companies claimed more than 80 percent of their wages as exempt from payroll tax under this concession. Certain organisations were also promoting services which sought to make employees trainees and therefore payroll tax free.
Due to the perceived misuse of the exemptions, the WA State Government will introduce a Bill into Parliament in 2018 to amend the legislation retrospectively from 1 December 2017.
Under the new legislation, if passed (and we expect it to be), exemptions will be restricted to traineeships undertaken by new employees with annual wages of $100,000 or less at the date of lodgment of the training contract with the Department of Training and Workforce Development (note that the payroll tax exemption for wages paid to apprentices will not be affected by these amendments).
Wages for this purpose includes salary and wages, allowances, bonuses, fringe benefits and superannuation contributions.
Transitional arrangements will apply for existing employees whose training contract was lodged before 1 December 2017, enabling the exemption to continue to apply until the contract ends or is modified, provided the employee’s annual wages did not exceed $100,000 at the lodgment date of the training contract.
Where trainees that have previously been treated as exempt are no longer eligible for exemption, there will be a requirement to pay payroll tax in respect of them from 1 December 2017. Employers impacted by these anticipated changes should budget for the additional payroll tax costs, and ensure that the wages can be easily identified from 1 December 2017, so that they can be included in payroll tax wages if and when the Bill is passed and receives Royal Assent.