What are taxable wages in South Australia?
Wages liable to payroll tax in South Australia are wages that are paid or payable anywhere by an employer to an employee in a particular month (the “relevant month”) provided those wages:
- Are paid or payable in South Australia and relate entirely to services performed or rendered (or to be performed or rendered) wholly or partly in the State; or
- Are paid or payable in South Australia in the relevant month and are related in their entirety to services performed or rendered (or to be performed or rendered) outside Australia and the employee has, during the 6 months preceding the relevant month, performed or rendered services for the employer in the State; or
- Are paid or payable in Australia (but outside South Australia) in the relevant month and relate in their entirety to services performed or rendered (or to be performed or rendered) wholly in the State; or
- Are paid or payable outside Australia and relate in their entirety to services performed or rendered (or to be performed or rendered) mainly in South Australia; or
- Are not exempt from payroll tax under Division 9, Part 4 of the Payroll Tax Act 2009, refer to the Payroll Tax Guide to Legislation.
Find out which state or territory you need to declare your wages in for payroll tax on our Nexus Provisions page.
Definition of wages
The definition of ‘wages’ in the Payroll Tax Act 2009 is broad and is not restricted to wages or salaries.
The term ‘wages’ includes:
- salaries and wages
- employment termination payments and accrued leave paid on termination
- fringe benefits
- shares and options
- employer-funded (pre-income tax) superannuation contributions including non-monetary contributions;
- salary sacrifice; and
- any remuneration paid to or in relation to company directors or members of the governing body (for example, directors’ fees).
This list is not exhaustive.
Below is a list of payment types and a description of whether the payment type is subject to payroll tax:
‘Wages’ do not have to be paid directly by an employer to an employee in order to be taxable. Payments to a person other than an employee, or payments by a person other than the employer, are subject to tax where the payments are made in relation to an employee’s services. For example, an entertainment allowance paid to an employee’s spouse is taxable as it is a payment to a third party in relation to the employee’s services.
Taxable wages and salaries are the gross wages and salaries paid including any Pay-As-You-Go (PAYG) withholding amounts or other deductions made by an employer on behalf of an employee. Taxable wages include such payments as overtime pay, penalty payments, sick pay, holiday pay and leave loadings.
Payroll tax is not payable on the Goods and Services Tax (GST) component that may arise in payments to employees or deemed employees.
Annual leave, sick leave and long service leave payments made to an employee who will be continuing in the service of their employer and payments made in lieu of accrued annual, sick, long service or pro-rata leave at termination of employment, are liable to payroll tax where any such payment represents a reward for service to which the employee has a pre-existing enforceable right.
Payments relating to accrued leave entitlements are liable to payroll tax, whether paid on, before or after termination of the employee’s services.
Similarly, any payment of deferred or accrued wages, salaries, commissions, bonuses, allowances, etc. is liable to payroll tax whenever paid.
There is no exemption in respect of payments made to an employee who is on jury duty.
As a general rule, allowances are taxable in full even if they are paid to compensate an employee for an expense which may be (or has been) incurred in relation to work (for example, uniform allowances). This is the case even if an allowance is paid under an award or employment agreement (for example, overtime meal allowances).
For further information see Revenue Ruling PTA005: Exempt Allowances.
The only exceptions to the general rule that allowances are taxable in full are motor vehicle allowances, accommodation allowances and living away from home allowances.
Motor vehicle allowances
A motor vehicle allowance paid or payable to an employee is taxable only to the extent that it exceeds the exempt rate per kilometre, or an amount calculated as the exempt component.
Find out more about motor vehicle allowances and how the exempt component is calculated on our allowances page.
An accommodation allowance paid or payable to an employee is taxable only to the extent that the allowance exceeds the exempt rate. Wages do not include an accommodation allowance that does not exceed the exempt rate.
Find out more about accommodation allowances on our allowances page.
Living away from home allowances
A living away from home allowance is paid to compensate an employee for additional expenses they may incur as a result of being required to temporarily live away from home in order to perform their duties of employment. This usually occurs where the employee has been required to work temporarily at another location, which necessitates a temporary change in residence. The allowance will include components designed to compensate for additional food and accommodation costs. It is distinguishable from a travel allowance which is paid to an employee to compensate for accommodation, meals and incidental expenses incurred while the employee is travelling on a short-term assignment not involving a temporary relocation of the employee’s place of employment.
Generally, a living away from home allowance is a fringe benefit under Section 30 of the Fringe Benefits Tax Assessment Act 1986 (Cwlth).
If the allowance falls within the definition of a living away from home allowance under Section 30 of the Fringe Benefits Tax Assessment Act 1986 (Cwlth), the taxable value of the benefit under the Fringe Benefits Tax Assessment Act 1986 (Cwlth), grossed-up by the Type 2 factor as shown on the Fringe Benefits Tax return is subject to payroll tax. However, if the allowance is not considered a living away from home allowance under the Fringe Benefits Tax Assessment Act 1986 (Cwlth), the treatment of the allowance for payroll tax purposes will be the same as the treatment of an accommodation allowance (see above).
Reimbursements of expenses incurred by employees on behalf of their employers are not taxable unless they have a taxable value under the Fringe Benefits Tax Assessment Act 1986 (Cwlth).
For a payment to be considered a reimbursement, it must have the following 2 characteristics:
- the expense must be incurred by the employee and the precise amount is reimbursed, or if the payment was made in advance, a receipt relating to the expense must be given to the employer along with any change; and
- the expense must be incurred in the course of the employer’s business.
If a payment does not have both characteristics, it is not considered a reimbursement and is generally taxable in full.
Certain payments made to an employee on termination of employment are subject to payroll tax. Specifically, the following payments are taxable:
- payments for actual services rendered up to the date of termination;
- accrued annual and long service leave; and
- employment termination payments.
Both accrued annual leave and long service leave payments are taxable when paid to an employee on termination of the employee’s services. It should be noted that leave payments paid to a continuing employee are also subject to payroll tax.
Employment termination payments
Payroll tax applies to an employment termination payment (ETP), as defined in Section 82-130 of the Income Tax Assessment Act 1997 (Cwlth), when paid by an employer as a result of an employee’s termination.
The amount subject to payroll tax is the whole of the employment termination payment (ETP) paid by the employer (whether paid to the employee or to a roll-over fund), less any component, which is exempt income when received by the employee. Employment termination payments (ETPs) paid by employers may include payments for:
- unused sick leave or rostered days off
- ex gratia payments or ‘golden handshakes’
- payment in lieu of notice or service contract payouts
- compensation for loss of job or wrongful dismissal; or
- bona fide redundancy or early retirement payments in excess of the income tax free limit. (The income tax free components of such payments do not form part of an employment termination payment (ETP) and are, therefore, not subject to payroll tax).
As a general rule, benefits that are taxable under the Fringe Benefits Tax Assessment Act 1986 (Cwlth) are also taxable for payroll tax purposes and must be declared as wages for payroll tax purposes. The only exception to this general rule is a tax-exempt body entertainment fringe benefit as defined in the Fringe Benefits Tax Act 1986 (Cwlth). Although tax-exempt body entertainment fringe benefits are subject to Fringe Benefit Tax (FBT), they are specifically exempt for payroll tax purposes.
If a benefit is exempt under the Fringe Benefits Tax Assessment Act 1986 (Cwlth) (for example, a laptop computer) it is also exempt from payroll tax. In addition, if a fringe benefit has a nil taxable value for Fringe Benefits Tax (FBT) purposes (for example, the taxable value is reduced to nil under the otherwise deductible rule), it also has a nil taxable value for payroll tax purposes.
Records used to substantiate Fringe Benefits Tax (FBT) claims made to the Australian Taxation Office are also acceptable for payroll tax.
Calculating the fringe benefit value
Under the Fringe Benefits Tax Act 1986 (Cwlth), fringe benefits are categorised into two types depending on the GST implications:
- Type 1 fringe benefits for which the employer can claim a GST input tax credit; and
- Type 2 fringe benefits for which the employer cannot claim a GST input tax credit.
The fringe benefit taxable value for payroll tax purposes is determined by grossing up all fringe benefits by using only the Type 2 factor.
Gross-up rates for fringe benefits are available on the Australian Taxation Office website.
Please note that the Australian Taxation Office requires that certain fringe benefits, referred to as the ‘reportable fringe benefits amount’, must be shown on the employee’s payment summary if the benefits amount exceeds $2,000. These reportable fringe benefits may not include the value of all fringe benefits provided to employees and is not necessarily the amount to be used for payroll tax purposes.
Declaring fringe benefit value in your monthly return
Employers can declare the fringe benefits in one of 2 ways:
An employer must not use a combination of methods.
Declare in your monthly return the actual value of fringe benefits provided in each month.
Employers can include in each monthly payroll tax return from July to May, one-twelfth of the taxable value (for payroll tax purposes) of fringe benefits using the Fringe Benefits Tax (FBT) return, submitted to the Australian Taxation Office, for the year ending 31 March immediately preceding the start of each financial year. For example, use the fringe benefits declared for the year ending 31 March 2019 to determine the estimates for your 2019-20 payroll tax monthly returns.
Declaring fringe benefit value in your annual reconciliation
The annual reconciliation for each financial year will include the taxable value (for payroll tax purposes) of fringe benefits declared in the Fringe Benefits Tax (FBT) return, submitted to the Australian Taxation Office, for the year ending 31 March immediately before the annual reconciliation. For example, use the fringe benefits declared for the year ending 31 March 2020 in your 2019-20 payroll tax annual reconciliation.
The value of an employer’s contribution to any grant of a share or option to an employee or deemed employee, a director or former director, member or former member of the governing body of the company constitutes wages and is subject to payroll tax.
The granting of a share or an option occurs if a person acquires a share or, in the case of an option, a right to the share.
A value of the share or option becomes liable on the ‘relevant day’. The employer can elect to treat the relevant day as either the date that the share or option is granted to the employee, or the ‘vesting date’.
The vesting date for a share is the date when any conditions applying to the grant of the share have been met and the employee’s legal or beneficial interest in the share cannot be rescinded. From 1 July 2013, the vesting date for a share is the earlier of either the date as defined above or the date at the end of 7 years from the date on which the share is granted to the employee.
The vesting date for an option is the earlier of either one of two dates (and from 1 July 2013, one of the three dates). The dates are:
- when the share to which the option relates is granted to the employee;
- when the right under the option to have the relevant share transferred, allotted or vested is exercised by the employee; or
- from 1 July 2013, at the end of the period of 7 years from the date on which the option is granted to the employee.
If the granting of a share or option constitutes wages, the amount of the wages is the value of the share or option on the relevant day, less any consideration paid or given by the employee for the grant (excluding consideration in the form of services rendered). The value of a share or an option is the market value or the amount determined as provided for in Section 83A-315 of the ITAA 1997 and Division 83A of the Income Tax Assessment Regulations 1997 (Cwlth).
If an employer does not include the value of a grant of a share or option in its taxable wages for the financial year in which the grant occurred, the wages constituted by the grant are taken to have been paid or payable on the vesting date of the share or option.
Therefore, where a share or option granted after 1 July 2007 has not been declared for payroll tax purposes before 1 July 2013, that is, the employer elects the relevant date as the vesting date, the 7 year vesting date is the latest date for vesting unless the other specified vesting events occur before the end of the 7 years.
The employer may reduce the taxable wages declared by the value of any previously declared share or option value, if the grant of a share or option was rescinded because the vesting conditions have not been met. However, this reduction in the taxable wages would not apply in circumstances where the employee decided not to exercise the option.
If the grant of a share or option is withdrawn, cancelled or exchanged before the vesting date for some valuable consideration (other than the grant of other shares or options), the date on which that occurs is deemed to be the vesting date and the taxable amount is taken to be the value of the consideration.
The 7 year vesting date still applies to shares and options that have been forfeited or lapsed prior to seven years from the grant date if the other specified events have not occurred for those cases where the employer has elected the vesting date as the relevant date. However, as such shares/options have been forfeited or lapsed prior to 7 years from the grant date, the value of the shares/options at the 7 year vesting date is regarded as being nil because the share/option does not exist at that time.
The definition of wages includes all employer-funded superannuation contributions.
Superannuation subject to payroll tax includes employer contributions paid or payable:
- to a superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cwlth);
- as a superannuation guarantee charge within the meaning of the Superannuation Guarantee (Administration) Act 1992 (Cwlth);
- to or as a form of superannuation, provident or retirement fund or scheme, including to the Superannuation Holding Accounts Special Account within the meaning of the Small Superannuation Accounts Act 1995 (Cwlth), and a retirement savings account within the meaning of the Retirement Savings Accounts Act 1997 (Cwlth);
- involving the crediting of an account of an employee, or any other allocation to the benefit of an employee (other than the actual payment of a contribution), or the crediting or the debiting of any other account, or any other allocation or deduction, so as to increase the entitlement or contingent entitlement of the employee under any form of superannuation, provident or retirement fund or scheme; or
- in respect of an employee who is a member of the old or new scheme of superannuation under the Superannuation Act 1988 (Cwlth) or of any other unfunded or partly funded scheme of superannuation. The Treasurer may estimate the contingent liability of an employer for contributions that will be payable and that estimate may be treated as a contribution paid or payable by an employer in respect of an employee for the purposes of the definition of a superannuation contribution.
Please note that taxable superannuation contributions include:
- superannuation contributions paid or payable in respect of a company director (including a non-employee director), or in respect of a person taken to be an employee under the contractor provisions in Division 7;
- non-monetary contributions to a superannuation fund on behalf of an employee, a contractor deemed to be an employee or a director. The value of these contributions is to be worked out in accordance with Section 43.
In respect of contribution holidays, where it is determined that an employer is on a contribution holiday, as a result of a superannuation fund being in surplus, and the trustee(s) during that period nonetheless credit amounts to accounts of individual members of the fund, such crediting will be considered a superannuation benefit, and therefore will constitute wages liable to payroll tax.
Employers who make payments to a superannuation fund(s) of its employee’s or director’s choice as part of a salary packaging arrangement (salary sacrifice arrangements) are subject to payroll tax.
A salary sacrifice arrangement refers to an arrangement between an employer and the employee whereby the employee agrees to forego part of their future salary or wage in return for some other form of non-cash benefits of equivalent cost to the employer.
The non-cash benefits provided may include pre-tax superannuation contributions, the provision of a motor vehicle, a laptop computer or similar portable computer, car parking fees, payment of school fees or the payment of membership fees and subscriptions.
The Australian Taxation Office treats ‘effective salary sacrificing arrangements’ and ‘ineffective salary sacrificing arrangements’ differently.
Please contact the Australian Taxation Office for further information about the income tax treatment of ‘effective’ and ‘ineffective’ salary sacrifice arrangements
Under an effective salary sacrifice arrangement:
- the employee pays income tax on the reduced salary or wage;
- salary sacrificed (pre-tax) superannuation contributions are classified as employer contributions (not employee contributions); and
- the employer may be liable to pay Fringe Benefits Tax (FBT) on the fringe benefits provided.
The payroll tax treatment under an effective salary sacrifice arrangement is as follows:
- the reduced salary or wage on which the employee pays income tax is treated as taxable wages;
- the pre-tax superannuation contribution classified as the employer contribution is taxable; and
- the taxable value of the benefit under the Fringe Benefits Tax Act 1986 (Cwlth), grossed-up by the Type 2 factor as shown on the Fringe Benefits Tax (FBT) return is taxable.
If the benefit provided to the employee is exempt from Fringe Benefits Tax (FBT) (for example, laptop computer) no payroll tax is payable in respect of the amount sacrificed for that benefit. Payroll tax is payable only on the reduced salary on which the employee pays income tax.
Some employees agree to make regular donations to charitable organisations of their choice under a ‘Workplace Giving’ program. This arrangement is not a salary sacrifice arrangement because the Australian Taxation Office requires that the normal gross salary must be stated on the employee’s payment summary. Payroll tax is payable on the normal gross salary.
For examples outlining the payroll tax treatment of various salary sacrifice arrangements refer to the Payroll Tax Guide to Legislation.
Remuneration to directors or members of the governing body, such as director fees, superannuation, allowances, fringe benefits and shares and options, are subject to payroll tax. This applies to both directors or members of the government body whether working or non-working.
Please refer to the checklist of taxable items for further guidance on the types of payments that are subject to payroll tax.
If you are uncertain on whether a particular class of worker or payments made to them is subject to payroll tax please contact RevenueSA.
Exempt wages and other non-liable payments
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.
Below is a list of payment types and a description of whether the payment type is exempt or not liable for payroll tax purposes:
Contract for Training commences on or before 9 November 2020
Wages paid to apprentices and trainees who commence a relevant contract of training on or before 9 November 2020 are taxable and must be included in your taxable wages component.
Contract for Training commences between 10 November 2020 and 30 June 2021
Wages paid to apprentices and trainees who commence a relevant contract of training between 10 November 2020 and 30 June 2021 (inclusive), will receive relief equivalent to a 12 month payroll tax exemption.
What wages are eligible?
Wages paid to the apprentice or trainee during their first 12 months of employment.
Which apprentices/trainees are eligible?
The apprentice/trainee must commence a relevant contract of training between 10 November 2020 and 30 June 2021 (inclusive).
If the apprentice/trainee was employed on or before 9 November 2020, their wages are not eligible for the exemption.
How do I apply for the exemption?
There is no application process.
You will be able to specify the wages paid to eligible apprentice/trainees in RevenueSA Online, details on how will be available soon.
My apprentice/trainee commenced before 10 November 2020 – are they eligible?
No, the apprentice/trainee must have commence a relevant contract of training between 10 November 2020 and 30 June 2021 (inclusive).
What information do I need to provide?
You do not need to provide any information, however you should retain evidence (for example the contract for training) 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.
Contract for Training commences on or after 1 July 2021
Wages paid to apprentices and trainees who commence a relevant contract of training on or after 1 July 2021 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 for July and August 2020. 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).
Information Circulars and Revenue Rulings
Information Circulars and Revenue Rulings include decisions on the interpretation of legislation administered by RevenueSA and of changes in administrative practices or taxation laws.
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.
|PTA003||Fringe Benefits||2||1/7/2016||Revenue Ruling|
|PTA015||Workers' Compensation Payments||2||14/6/2016||Revenue Ruling|
|PTA013||Fees Paid to Golf Professionals by Golf Clubs||2||17/7/2013||Revenue Ruling|
|IC054||Employee Share Schemes / Maternity and Adoption Leave Exemption||6/12/2012||Information Circular|
|PTA037||Paid Parental Leave||1||19/1/2011||Revenue Ruling|
|PTA030||Penalty Charged Under Superannuation Guarantee Charge||1||1/7/2009||Revenue Ruling|
|PTA010||Wage Subsidies||1||1/7/2009||Revenue Ruling|
|PTA008||GST Considerations for the Calculation of Payroll Tax Liability||1||1/7/2009||Revenue Ruling|
|PTA004||Termination Payments||1||1/7/2009||Revenue Ruling|
|PTA003||Fringe Benefits||2||1/7/2016||Revenue Ruling|
|PTA001||South Australian Payroll Tax Liability for Wages Paid by an Employer|
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