In Queensland, payroll tax is payable by employers if the “Australian Taxable Wages” paid by the business operator (or group, if it is a member of a group) exceeds $1.3M per annum.
The obligation to register occurs immediately after the end of a month in which the employer (or group) pays more than $25,000 per week in Australian taxable wages.
Obviously, Australian taxable wages would include salary and wages. Also, annual leave, sick leave and long service leave are included. But what of drawings in a partnership?
Drawings in a partnership are often characterised as loans made by the partnership to the partner until the share of profit is calculated, usually at the end of the financial year. As such, it is possible that a partner’s drawings might exceed their share of profit which would then give rise to the balance remain a loan from the partnership to the particular partner. In other years, the payments might be less than the partner’s share of profit. This is similar to payments made to shareholders, which are generally treated as loans until dividends are declared.
The Queensland Revenue Office has issued public ruling PTA016.1 to clarify whether payments are loans made to the owner of a business, who is also an employee of that business, are subject to payroll tax. The ruling provides that:
- For the payment to be subject to payroll tax, it has to be made to a person in their capacity as an employee and not in any other capacity (eg as a shareholder). As a result, distributions of profit to persons who are both owners and employees of the business are not wages under the Payroll Tax Act;
- Similarly, trust distributions and company dividends are not subject to payroll tax when paid to beneficiaries or shareholders even if they are also employees, and provided that they are shown as profit distributions and not expenses of the business;
- The taxable value of loan benefits will be regarded as being subject to payroll tax if they are regarded as a loan benefit under the Fringe Benefits Tax Assessment Act 1986;
- Payment to partners (whether described as wages or loans) are regarded as payments or drawings in respect of partnership profits and (according to paragraph 9 of the ruling) are not subject to payroll tax.
While the ruling was issued on 28 May 2013, it takes effect from 1 July 2008.
Get it from the horse’s mouth here https://qro.qld.gov.au/resource/pta016/