There are several taxes that might affect you if you have employees:
- pay as you go (PAYG) withholding
- payroll tax
- fringe benefits tax
- employment termination payments
Pay as you go withholding (PAYG)
If you have employees, you usually withhold money for tax from any payments you make to them. This is called a pay as you go (PAYG) withholding.
As an employer, you'll need to:
- register for PAYG withholding with the Australian Taxation Office (ATO)
- calculate how much to withhold from payments and report your calculations
- pay the withheld amounts to the ATO
- record the amounts in your quarterly business activity statement (BAS) and annual tax return
Set your employees up for tax and super
When an employee starts work, you need to give them certain forms to set them up properly for payroll, tax and superannuation.
Find out what documents you need to get from every new employee and your ongoing record-keeping requirements.
Payroll tax
The State Revenue Office (SRO) collects and manages payroll tax, which is a Victorian state tax calculated on wages paid by an employer.
There's a different rate depending on where your business is located. Find out the current rates on the SRO website.
Who needs to pay payroll tax?
You must register for and pay payroll tax if you pay wages in Victoria if any of the following apply:
- Your total Australian wages exceed $54,166 a month (the Victorian general exemption level).
- Your total Australian wages exceed $650,000 over the full financial year.
- Your total Australian wages are grouped with other businesses and the combined Australian wages of the group exceed the Victorian general exemption level of $54,166 a month.
Some wages are exempt from payroll tax.
Fringe benefits tax (FBT)
Fringe benefits tax (FBT) is a tax paid on certain benefits that employers provide to their employees in place of, or in addition to, salary or wages.
The term 'benefit' includes any right, privilege, service or facility such as the:
- use of a company car
- ownership of something like discounted electrical goods, or
- enjoyment of a privilege – for example, a salary package arrangement
FBT is separate from income tax and is based on the taxable value of the fringe benefit.
Taxing termination payments
An employment termination payment (ETPs) is money paid out when someone stops working for you. These payments are taxed differently to other kinds of payments.
An ETP can include things like:
- unused rostered days off (RDOs)
- unused sick leave
- payments in lieu of notice of termination
- compensation for loss of job or wrongful dismissal
- certain payments after the permanent disability or death of an employee