Payroll tax is the obligation growing businesses discover late. It is not an ATO tax, so it does not appear on your BAS or in your tax return planning, and there is no reminder in your accounting software. It arrives when your wages bill crosses a state threshold — and for many Perth businesses, that happens quietly during a good year.
What is payroll tax and who administers it?
Payroll tax is a state and territory tax on the wages an employer pays. In Western Australia it is administered by RevenueWA under state legislation, entirely separate from PAYG withholding and superannuation. Each state sets its own threshold and rate, and each measures your liability against your Australia-wide wages, not just the wages paid to your WA staff. That means a Perth business with a Sydney employee or two needs to think about more than one jurisdiction.
When does a business become liable?
Liability begins once your total Australia-wide taxable wages exceed the WA threshold. Registration is required within seven days after the end of the month in which you first cross it, and returns are then lodged periodically with an annual reconciliation at year end. Because thresholds and rates are adjusted by the state from time to time, always confirm the current figures with RevenueWA before relying on a number you remember from a previous year — the mechanics stay the same, the amounts do not.
What counts as taxable wages?
Far more than the salary line in your accounts. Taxable wages generally take in wages and salaries, allowances, bonuses and commissions, directors' fees, superannuation contributions, the grossed-up taxable value of fringe benefits, employment termination payments, and shares or options granted to employees. Businesses that estimate their exposure using gross wages alone routinely underestimate it, because super and fringe benefits can add a meaningful percentage on top before the threshold test is even applied.
Do contractor payments get caught?
Frequently. The relevant contract provisions are designed to stop businesses avoiding payroll tax by engaging labour through contracts rather than employment. Payments under such contracts are taxable unless an exemption applies — for example where the contractor provides the same services to the public generally, engages their own employees to perform the work, or works for you only for a limited number of days in the financial year. This overlaps closely with worker classification, and it is a leading source of reassessments. A worker can be a genuine contractor for ATO purposes and still generate a payroll tax liability.
What is grouping and why does it matter?
Grouping is the rule that most often turns a small liability into a large one. Related businesses are treated as a single group sharing one threshold, rather than each claiming a full threshold of its own. Grouping can arise from common control, from businesses using the same employees, or from tracing of interests between entities. Family groups with an operating company, a service entity, and a property trust are prime candidates. Two companies each paying wages comfortably under the threshold can be well over it once combined — and the group's designated employer is responsible for lodgement.
What are the consequences of getting it wrong?
RevenueWA can assess unpaid payroll tax retrospectively, with interest and penalty tax on top. Investigations often start with data matching against ATO records, WorkCover data, or an audit of a related entity. The exposure is compounding: a business that crossed the threshold three years ago and never registered faces three years of tax plus interest, all payable at once. Voluntary disclosure generally produces a better penalty outcome than being found.
How should a growing business stay on top of it?
Track total remuneration, not just base wages, and review it monthly against the current threshold rather than annually in hindsight. Model the effect before you hire — an extra role can trigger registration for the whole wages bill, not just the increment. Map your related entities honestly and get grouping assessed once, properly, so you are not guessing. And if you operate across borders, understand that each state applies its own rules to the same total. Accurate payroll and bookkeeping records make all of this a five-minute check rather than a reconstruction exercise.
Payroll tax rewards businesses that plan for it and punishes those who discover it in an audit. The Metier Group helps Perth employers assess their threshold position, work through grouping, and keep their payroll obligations in order. Contact us if your wages bill has been growing and you are not certain where you stand.