Payroll Tax – COVID And Its Unintended Consequences

By Glynn Flaherty, Director, Payroll Matters Pty Ltd. – 8 October 2021

Some 12 years ago the States and Territories banded together and agreed to harmonise most of their Payroll Tax laws much to the relief of employers. However, Covid and its impact on where people now work has meant that the spirit of harmonisation is showing some strain.

Payroll Tax is paid where?

Payroll Tax is usually payable in the State or Territory in which an employee works. In the majority of situations, this will also be where they live but in some locations employees may live in one jurisdiction but work in another. Where this occurs, the Payroll Tax obligation will be in the State in which the work is wholly done rather than where the employee lives. This is a common occurrence for organisations with staff working and living near one of the borders like Albury/Wodonga or Tweed Heads/Coolangatta.

As an example

Johnno lives in Albury NSW but only works in Wodonga Victoria. In this situation, the Payroll Tax liability is in Victoria. With Covid though, Johnno may now need to work temporarily from home in Albury which would mean the Payroll Tax obligation moves to New South Wales.

What do we do?

The Commissioners in New South Wales, Victoria and South Australia have taken a common sense approach to this dilemma and agreed that the wages should remain declared in the jurisdiction where the employee would have usually worked but for the Covid issue. However, the Queensland authorities do not seem to share the other States’ views. As an example, assume Cindy works in Tweed Heads, New South Wales but lives in Coolangatta, Queensland. Usually, the Payroll Tax obligation would be in New South Wales. Due to border closures, Cindy is now working from home in Coolangatta. The NSW authorities, following the administrative approach above, would seek to have the wages remain declared in NSW but QLD now also wants them declared in that State so there is a potential double up.

If Cindy instead lived in Tweed Heads, NSW and usually worked in Coolangatta QLD then working from home in Tweed Heads would mean that no wages are declared in NSW (usually would have worked in QLD) and no wages are declared in QLD as not actually working there.

Glynn Flaherty of Payroll Matters

Glynn Flaherty is the Director, Payroll Matters Pty Ltd.