As part of its COVID Debt Repayment Plan, from 1 July 2023, a levy on payroll will apply to businesses with annual Australia-wide taxable wages above $10m.

From 1 July 2024, the payroll tax-free threshold will increase from $700 000 to $900 000, and subsequently increase to $1m from 1 July 2025.

From 1 July 2024, the payroll tax exemption for high-fee non-government schools will be removed.

COVID Debt Levy – Payroll tax

The COVID Debt Levy relating to payroll tax has been introduced as a temporary measure as part of the COVID Debt Repayment Plan.

The levy will apply from 1 July 2023 to 30 June 2033 as a surcharge on Victorian wages paid by businesses with annual Australia-wide wages over $10m.  Those businesses with annual Australia-wide taxable wages over $10m will pay a surcharge of 0.5% on their Victorian wages, to the extent they exceed the relevant threshold.

For example, a business with an annual payroll of $13m, that employs wholly in Victoria, will be subject to a surcharge of $15,000 (i.e., $3m x 0.5%).

Those businesses with annual Australia-wide taxable wages above $100m will be subject to a further surcharge of 0.5% on their Victorian wages to the extent they exceed this higher threshold.  For example, a business with a payroll of $120m, that employs wholly in Victoria, should expect a total surcharge of $650,000 being calculated as follows:

• $120m – $10m = $110m x0.5% = $550,000; and
• $120m – $100m= $20m x0.5% = $100,000.

Remove the payroll tax exemption for high fee, non-government schools

Currently, wages paid by public schools are subject to payroll tax.

However, wages paid by all non-government schools registered under the Education and Training Reform Act 2006 are currently exempt from payroll tax.  From 1 July 2024, the Victorian Government will remove the payroll tax exemption for high-fee non-government schools.

The schools that are required to pay payroll tax in a given year will be informed by a well-established delineation between ‘high fee’ and ‘low fee’ non‑government schools for the purposes of allowing access to a range of programs.  This takes into account private schools fees, as well as other contributions, and compulsory levies.

This definition of high fee was set at $7,500 in 2020-21 based on school fees in 2019 and will be indexed.The change will come into effect from 1 July 2024.  In that financial year, with indexation, the figure is likely to be above $8,000.

Payroll tax liable schools will be determined based on this definition of high fee by the Minister for Education, with the consent of the Treasurer.  The Budget Papers indicate that around the top 15 per cent by fee level, will lose their exemption, all other schools will be unaffected.