Wages: Payroll Tax Employer Guide

Employees providing services solely in Western Australia

If you employ wholly in one state or territory during a calendar month, as is the case for the majority of employees, you pay payroll tax in the jurisdiction where those services are performed. In other words, if you work solely in WA during the calendar month, you pay payroll tax only in WA for that month.

Employees providing services in more than one jurisdiction and/or overseas

Revenue Ruling PTA 039 ‘Nexus Provisions’ explains the nexus provisions and clarifies when wages must be declared in WA for payroll tax purposes. The ruling includes a flowchart which provides a step by step diagram to assist employers to determine if payroll tax is payable in WA.

To determine whether the wages paid or payable in a calendar month are subject to payroll tax in WA, we apply these tests in succession until it can be determined in which jurisdiction payroll tax should be paid.

• Test 1 - where the employee’s principal place of residence is located
• Test 2 - where the employer’s registered ABN address or principal place of business is located
• Test 3 - where the wages are paid
• Test 4 - where the services were mainly performed.

Services performed wholly in another country

Wages received in WA by an expatriate employee who is working in another country, or countries, are exempt from payroll tax if the assignment is for a continuous period of more than six months. The exemption from payroll tax applies for the whole assignment, including the first six months.

If the assignment is less than six continuous months, wages are taxable in the Australian jurisdiction where the wages are paid or payable. For the purposes of this exemption, wages are taken to be paid in WA if they are credited to a bank account or sent to an address in WA.

Services performed offshore

Any wages that relate to services performed offshore and beyond the limits of any Australian jurisdiction, but not in another country, are taxable in the jurisdiction in which they are paid, irrespective of the duration of the assignment. This would typically apply to oil rig workers - employees working on an oil rig would not be considered as working in another country unless the oil rig is physically located in another country.

The indigenous wages rebate is paid to employers, with annual Australian taxable wages of up to $15 million, for WA wages paid in the first two years of employment to new indigenous employees for whom they also receive a Commonwealth Indigenous Wages Subsidy.

See information about this rebate.