Payroll tax is a state or territory-based tax imposed on employers when their total taxable wages exceed a prescribed threshold. It is calculated on the wages paid or payable to employees and is self-assessed and lodged by the employer. Payroll tax rates and threshold amounts vary across Australian states and territories and are administered by the relevant state or territory revenue office. Since 2007, Australian jurisdictions have harmonised several key aspects of payroll tax administration to improve consistency across the country.
Payroll tax is different from PAYG (Pay As You Go) withholding tax. Payroll tax is a tax paid by the employer on the total wages they pay to employees once the applicable threshold is exceeded. In contrast, PAYG withholding tax is an amount withheld from an employee’s wages or salary by the employer and remitted to the Australian Taxation Office (ATO) on the employee’s behalf as a prepayment of the employee’s income tax liability.
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