There are certain situations where wages paid to employees engaged in certain activities or specific organisations can be exempt from payroll tax.
Payroll tax exemptions exist based on the type of:
- employer, where all wages paid or payable by the employer are exempt from payroll tax.
- wages, where some wages paid or payable by the employer are exempt from payroll tax.
Certain types of wages are also considered not taxable for payroll tax.
Exemptions may apply for specific types of employers, for types of organisations or specific types of wages.
What exemptions are available?
Some specific types of employers are exempt from paying payroll tax. This means that any wages paid by the employer will not attract a payroll tax liability, regardless of the employment duties. In some cases, the exemption is restricted to wages paid to employees who are engaged in certain activities.
There are also certain types of wages excluded from the taxable wages.
Basically, exemptions can be classed in to 4 categories:
- Employers that are not required to register for payroll tax.
- Employer must apply for an exemption.
- Exempt wages that can be excluded from the employer’s taxable wages used to calculate payroll tax.
- Wages are classed as non-liable, therefore they are excluded from the employer’s taxable wages used to calculate payroll tax.
1. Employers that are not required to register for payroll tax
Employers who are not required to register for payroll tax are:
All wages paid, or payable, by the Australian-American Fulbright Commission are exempt from payroll tax.
All wages paid, or payable, to official staff of a consular or other representatives of any country in Australia (other than a diplomatic representative) are exempt from payroll tax.
What is local government?
In South Australia, local government refers to Councils, such as the Port Adelaide Enfield Council, Onkaparinga Council.
What wages are exempt?
Wages paid, or payable, by local government are exempt from payroll tax. A number of specific activities are excluded from the exemption.
What wages are not exempt?
The exemption does not extend to wages paid, or payable, for or in connection with:
- the supply of
- electricity or gas
- water supply
- sewerage; or
- the conduct of:
- public markets
- parking stations
- cemeteries or crematoria
- public transport; or
- an activity prescribed by the regulations.
Additionally, wages paid, or payable, for or in connection with the construction of any buildings or works, or the installation of plant, machinery or equipment for use in or in connection with any of the activities listed above, are taxable.
All wages paid, or payable, by the Governor of a State or the Commonwealth are exempt from payroll tax.
All wages paid, or payable, to official staff of a Trade Commissioner representing any other part of the Commonwealth of Nations in Australia are exempt from payroll tax.
All wages paid, or payable, by the Commonwealth War Graves Commission are exempt from payroll tax.
2. Employers that must apply for an exemption
Wages paid or payable by certain employers may be exempt from payroll tax.
The exemption may be limited to wages paid or payable to an employee engaged exclusively in the work ordinarily performed in connection with the organisation's objectives.
Wages are exempt from payroll tax if they are paid or payable by a non-profit child care centre (as defined in the Child Care Act 1972 (Commonwealth).
The exemption is limited to wages paid, or payable, to an employee engaged exclusively in the work ordinarily performed in connection with the conduct of a child care centre.
Wages are exempt from payroll tax if they are paid or payable by a school or college that:
- is carried on by a non-profit organisation (body corporate, society or association) and is not carried on by or on behalf of the state/territory; and
- provides education at or below, but not above, the secondary level.
The exemption is limited to wages paid, or payable, to an employee engaged exclusively in the work ordinarily performed in connection with the conduct of schools or colleges providing education.
Wages are exempt from payroll tax if they are paid or payable by a motion picture production company, to an employee who is involved in the production of a feature film.
The motion picture production company needs to satisfy the Treasurer that:
- the film will be produced wholly or substantially within South Australia;
- the production of the film will involve or result in the employment of South Australian residents; and
- the production of the film will result in economic benefits to the State of South Australia.
Wages are exempt from payroll tax if they are paid or payable by non-profit health services providers.
The exemption is limited to wages paid, or payable, to an employee engaged exclusively in the provision of health services or work that is incidental to the provision of health services.
‘Health services’ means:
- a service designed to promote health
- any therapeutic or other service designed to cure, alleviate, or afford protection against, any mental or physical illness, abnormality or disability
- any paramedical or ambulance service
- the care of, or assistance to, sick or disabled persons at their place of residence; or
- a prescribed service.
Wages are exempt from payroll tax if they are paid or payable by a non-profit kindergarten.
The exemption is limited to wages paid, or payable, to an employee engaged exclusively in the work ordinarily performed in connection with the conduct of a kindergarten.
An exemption will generally apply to wages paid or payable by the following types of organisations:
- religious institutions
- public benevolent institutions
- non-profit organisations having as their sole or dominant purpose a charitable purpose (but not including a school, a college, an educational institution, an educational company or an instrumentality of the State).
Wages must be paid to a person engaged exclusively for work of a kind ordinarily performed in connection with the charitable, religious or benevolent purpose of the organisation. People engaged directly in the primary work or in administrative or management work which is predominately associated with the organisation’s charitable or similar work are accepted as being exclusively engaged in that work.
What is a charity?
To be recognised as a charity, an organisation must be non-profit, for the public benefit, and be for the:
- relief of poverty or sickness or the needs of the aged
- advancement of education
- advancement of religion; or
- other purposes beneficial to the community.
What is a public benevolent institution?
To be classed as a public benevolent institution, an organisation must be non-profit and set up, usually in perpetuity, for the:
- relief of sickness, suffering, distress, misfortune, destitution or helplessness; or
- benefit of members of a community or of a particular locality, who are suffering from a particular disadvantage.
The institution must provide services without discrimination to every member of that section of the public for which the institution was created according to its constitutional documents.
Wages are exempt from payroll tax if they are paid or payable by a public or non-profit private hospital.
The exemption is limited to wages paid, or payable, to an employee engaged exclusively in the work ordinarily performed in connection with the conduct of a public or non-profit private hospital.
Wages are exempt from payroll tax if they are paid or payable by a University College affiliated with the University of Adelaide or the Flinders University of South Australia.
How to apply for an exemption?
Employers, who believe that they are exempt from payroll tax, should apply to RevenueSA for a decision on their exempt status.
To apply for an exemption from payroll tax, you must submit an Application and provide:
- your organisation’s Constitution and/or Memorandum and Articles of Association or proof of incorporation under the Associations Incorporation Act 1985, including the organisation’s rules. This must show the organisation’s objectives and non-profit status.
- a copy of the organisation’s most recent audited annual report
- details of other jurisdictions where wages are paid; and
- any other relevant information in support of your application.
Complete the Apply for payroll tax exemption form.
What if the organisation's circumstances change?
You must advise RevenueSA anytime there is a change to the organisation’s governing rules, specifically the organisation’s objects and/or non-profit status, to confirm your exemption remains valid. These include the organisation’s:
- Memorandum/Articles of Association; and
- Organisation name.
3. Exempt wages that can be excluded from the employer’s taxable wages used to calculate payroll tax
Wages classed as exempt that may be excluded from taxable wages are:
Training contract commences on or after 1 July 2022
Wages paid to apprentices and trainees who commence a relevant training contract on or after 1 July 2022 are taxable and must be included in your taxable wages component.
Training contract commences between 10 November 2020 and 30 June 2022
Wages paid to apprentices and trainees who commence a relevant training contract between 10 November 2020 and 30 June 2022 (inclusive), will receive relief equivalent to a 12 month payroll tax exemption.
Wages paid to these employees do not need to be included in payroll tax calculations. You will need to declare the amount of wages paid separately in the monthly and annual returns.
What wages are eligible?
Wages paid to the apprentice or trainee during their first 12 months of employment.
For more details on wages see the Wages page.
Which apprentices/trainees are eligible?
The apprentice/trainee must commence a relevant training contract between 10 November 2020 and 30 June 2022 (inclusive).
My apprentice/trainee commenced their training contract before 10 November 2020 – are they eligible?
No, the apprentice/trainee must have commenced a relevant training contract between 10 November 2020 and 30 June 2022 (inclusive).
An existing employee has now commenced a training contract – are they eligible?
Existing employees that commence a training contract between 10 November 2020 and 30 June 2022 (inclusive) with your organisation are eligible for the exemption.
How does the trainee and apprentice exemption work – how is it calculated?
The trainee and apprentice exemption provides relief for the first 12 months of wages paid to eligible employees who commence a training contract.
The gross wages paid to employees (salaries and wages, bonuses, allowances, superannuation etc.) in the first 12 months would be subject to the exemption and should not be included in your payroll tax calculations. You will be required to report the amount paid separately when lodging your returns.
For example, in the first year an apprentice is paid $20,000 made up of wages, superannuation and allowances:
The amount of $20,000 would be exempt from payroll tax.
Any wages paid to employees in the second and subsequent years would be liable to payroll tax and these amounts would need to be declared in your returns.
What happens after the first 12 months?
After the first 12 months, wages paid to apprentices and trainees will become liable for payroll tax and any wages paid must be included in your monthly and annual returns.
Are government departments and agencies eligible for the exemption?
Government Departments and attached agencies are not eligible to claim this exemption. These wages will need to be included in your payroll tax returns.
What happens when I lodge my monthly payroll tax return?
If you have employees that qualify for the apprentice/trainee exemption, you will need to declare this in the return and account for their wages separately.
These wages should not be included in the calculation of the payroll tax liability for the month.
What if an employee has finalised their training contract and remains employed at my organisation?
If an employee has finalised their training contract and is still employed by the same organisation, any wages paid to that employee will no longer be eligible for the exemption and are required to be included in the payroll tax calculation.
I have multiple employees on training contracts, how do I determine what amount is exempt?
The exempt amount will be the wages paid to the eligible employees during the payroll tax period (month and/or financial year) during their first 12 months of employment.
For example, Company ABC has employed two trainees and one apprentice:
- Trainee one commenced employment and their training contract on 1 December 2020.
- Trainee two commenced employment and their training contract on 15 January 2021.
- Apprentice one commenced employment and their training contract on 5 June 2021.
All three are eligible for an exemption of payroll tax for the wages paid during the first 12 months of their employment. Company ABC would be required to advise the wages in their monthly returns as follows:
|Wages paid to:|
|Trainee One||Trainee Two||Apprentice One|
|January 2022||Taxable||1-14 January Exempt|
15-31 January Taxable
|June 2022||Taxable||Taxable||1-4 June Exempt|
5-30 June Taxable
|July 2022 onward||Taxable||Taxable||Taxable|
Company ABC would also be required to advise their wages in their Annual Reconciliations as follows:
2020-21 Annual Reconciliation
Wages paid between
Wages paid between
|Trainee One||1 December 2020 and 30 June 2021||n/a|
|Trainee Two||15 January 2021 and 30 June 2021||n/a|
|Apprentice One||5 June 2021 and 30 June 2021||n/a|
2021-22 Annual Reconciliation
Wages paid between
Wages paid between
|Trainee One||1 July 2021 and 30 November 2021||1 December 2021 and 30 June 2022|
|Trainee Two||1 July 2021 and 14 January 2022||15 January 2022 and 30 June 2022|
|Apprentice One||1 July 2021 and 4 June 2022||5 June 2022 and 30 June 2022|
Does the exemption apply to apprentices/trainees who work interstate?
This exemption only applies to apprentices/trainees employed within South Australia, where wages are required to be declared in South Australia. Any employee working elsewhere in Australia should be declared according to legislation relevant to that state or territory.
To determine where wages should be declared, please see the Nexus Provisions page.
I am an employer who employs apprentices/trainee across a number of states. How do I declare these wages in the annual return?
Wages paid to apprentices/trainees located in South Australia which meet the criteria for the exemption should not be included in the wages/salaries field. These wages should only be included in the separate apprentice/trainee wages section.
The South Australian exemption does not extend to wages paid to apprentices/trainees outside of South Australia. Wages paid to apprentices/trainees outside of South Australia should be declared in the relevant state or territory according to the legislation relevant to that state or territory. If wages are taxable in the relevant state or territory then they should be included in the interstate wages section of your annual reconciliation.
To determine where wages should be declared, please see the Nexus Provisions page.
If apprentices and trainees are employed through a group training organisation, how are the wages declared?
Apprentices and trainees employed through a group training organisation would not need to be included in your payroll tax returns as these would be reported by the Group Training organisation.
How do I apply for the exemption?
There is no application process.
You will be asked to specify the wages paid to eligible apprentice/trainees in RevenueSA Online.
What information do I need to provide?
You do not need to provide any information, however you should retain evidence (for example the training contract) that supports the validity of the exempt wages for a minimum of 5 years.
Evidence will be required should you be subject to a payroll tax audit in the future.
Training contract commences on or before 9 November 2020
Wages paid to apprentices and trainees who commence a relevant training contract on or before 9 November 2020 are taxable and must be included in your taxable wages component.
Wages paid to an indigenous person who is employed under a Community Development Program (formerly Community Development Employment Project) funded by the Commonwealth Department of Education, Employment and Workplace Relations, or the Torres Strait Regional Authority, are exempt from payroll tax.
Payments to employees who are absent from work due to being a member of the Defence Force of the Commonwealth or the armed forces of any part of the Commonwealth of Nations are exempt from payroll tax. It does not apply to employees who are on official leave (for example, recreation or long service leave).
JobKeeper payments are not subject to payroll tax. The amount payable does not need to be included in the total salaries and wages declared in your monthly return. However, your business will need to report the JobKeeper Payment amount separately in RevenueSA Online.
The JobKeeper wage subsidy amount is exempt from payroll tax. Any top up payments in addition to the JobKeeper payments are liable to payroll tax. Note if you only pay part of the JobKeeper subsidy amount to an employee, the partial subsidy amount paid would be classed as exempt wages.
For more information about this exemption refer to our COVID-19 Relief - JobKeeper Payment page.
Wages paid to employees on maternity or adoption leave are exempt from payroll tax. The exemption applies as follows:
- all wages (other than fringe benefits) paid to female employees taking maternity leave and male or female employees taking adoption leave are exempt
- the exemption does not apply to paid sick leave, recreation leave, long service leave or similar leave taken while the employee is absent due to a pregnancy or adoption
- the exemption is limited to a maximum equivalent of 14 weeks full-time pay for full-time employees and 14 weeks part-time pay for part-time employees; and
- the exemption applies irrespective of whether the leave is taken before or after the birth or adoption.
For further guidance on the treatment of maternity and adoption leave, please refer to Revenue Ruling PTA012: Exemption for Maternity and Adoption Leave Pay.
Employers who claim the exemption for maternity leave must obtain a medical certificate or statutory declaration from the employee in relation to the pregnancy or birth of the child. Similarly, employers who claim the exemption for adoption leave must obtain a statutory declaration from the employee that an adoption order has been made or that the child is in the employee’s custody pending such an order.
Payments made by an employer to an employee under the Commonwealth Paid Parental Scheme are not taxable for payroll tax as they are not payments for services performed by the employee.
For further guidance on the treatment of payments made under the Commonwealth Paid Parental Scheme, please refer to Revenue Ruling PTA037: Paid Parental Leave.
Payments to employees who are absent from work to volunteer as fire fighters, or to respond to other emergencies, are exempt from payroll tax. This exemption may apply to emergency workers volunteering for organisations such as the South Australian:
- Country Fire Services (CFS)
- Metropolitan Fire Services (MFS); and
- State Emergency Services (SES).
It does not apply to employees who are on official leave (for example, recreation or long service leave).
Evidence must be kept by the employer to substantiate that the wages meet the exemption criteria.
4. Wages are classed as non-liable, therefore they are excluded from the employer’s taxable wages used to calculate payroll tax
Wages classed as non-liable that may be excluded from taxable wages are:
Construction Industry Long Service Leave Contributions made under the Construction Industry Long Service Leave Act 1987 are exempt from all taxes and other charges imposed under the law of South Australia and therefore not taxable for payroll tax purposes.
A genuine redundancy payment or early retirement payment paid to an employee on termination is exempt from payroll tax if it is exempt from income tax. However, the exemption applies only to the income-tax-free component of such a payment. Any amount of a genuine redundancy payment or early retirement payment, paid in excess of the income-tax-free limit, is subject to payroll tax.
An employer is not liable to payroll tax in respect of payments made to an employee under the provisions of the Return to Work Act 2014, including compensation payments made by a ReturnToWorkSA exempt employer and income maintenance payments of not more than 2 weeks wages made under the provisions of the Return to Work Act 2014.
In relation to self-insurers, all compensation made pursuant to the provisions of the Return to Work Act 2014 is exempt from payroll tax, regardless of whether the compensation is paid by the employer (or their insurer) or ReturnToWorkSA. However, compensation paid to incapacitated workers by the employer (or their insurer), in excess of the amount prescribed by the Return to Work Act 2014 (‘make-up pay’), will be subject to payroll tax.
The above list of exempt employers is not exhaustive. If you require confirmation or clarification that your organisation is exempt from payroll tax, please contact RevenueSA.
Not taxable wages
There are a number of wage payments that are not taxable, these include:
- dividends and partnership drawings paid to employees due to ownership in the business
- trust distributions and profit distributions to employees who are also owners in the business
- Good and Services Tax (GST) payments
- reimbursements to an employee for a specific expense they paid and were reimbursed for, this is a business expense
- paid parental leave (this is money received from the Commonwealth and paid to employees on maternity leave).
Information Circulars and Revenue Rulings
Latest version appears in this list. Previous versions can be accessed from current version by navigating to Previous Versions section and selecting the link to the version you would like to view.
|IC054||Employee Share Schemes / Maternity and Adoption Leave Exemption *NEW*||6/12/2012||Information Circular|
|IC043||State Budget 2012-13 - Exemption for Wages Paid to Apprentices and Trainees||31/5/2012||Information Circular|
|IC021||Payroll Tax Exemption for Wages Paid to Apprentices and Trainees||Replaced by IC043||19/1/2011||Information Circular|
|PTA036[W]||Payroll Tax Exemption for Wages Paid to Apprentices and Trainees|
This Revenue Ruling has been withdrawn
Replaced by IC021
|PTA012||Exemption for Maternity & Adoption Leave Pay||1||1/7/2009||Revenue Ruling|
|PTA009||Charitable Exemptions – Meaning of Exclusively|
This Revenue Ruling has been withdrawn
When contacting us please provide your South Australian Taxpayer Number (if known), ABN, and organisation name.
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