Summary
The deduction is the amount to be subtracted from Victorian taxable wages to determine the amount subject to tax.
The deduction is available to all employer types except Ordinary Members of a Group. This is because the deduction applies to the group as a whole and is claimed only by the Designated Group Employer.
The deduction is based on the payroll tax threshold.
The maximum Victorian deduction for the current full financial year is listed on our website. However, this amount is reduced if you pay wages in another state or territory of Australia (interstate wages) or if you did not employ for the entire financial year.
If you pay wages in another state or territory of Australia, the amount of your Australian wages (Victorian plus interstate) must be supplied to obtain a proportion of the deduction.
Deduction sliding scale
From 1 July 2024, employers and groups with total annual taxable Australian wages between $3,000,000 and $5,000,000 are eligible for a reduced deduction, where the deduction is subject to a degree of phasing out.
The phase out rate for the financial year commencing on 1 July 2024 is 45%, and for the financial year commencing on 1 July 2025 and each subsequent financial year it is 50%.
Employers and groups with total annual taxable Australian wages above $5,000,000 are not eligible for any deduction.
For more information on these changes, please visit our website.
Monthly returns
A deduction is pre-populated on the Lodge Monthly Return application. If the employer's wages for that month are less than the deduction amount, no tax is payable for that month. The deduction amount that is not claimed in a month is included in the reconciliation when the total actual deduction is calculated.
For payroll tax groups, if there are no members that have wages consistently greater than the monthly deduction, the group can be changed to a scheduled group if required.
The pre-populated deduction amount can be changed using the Amend Deduction button in the following circumstances:
1. Change in Employer Type
Employer types can be Designated Group Employer, Ordinary Member or Non Group Employer. Sufficient details must be entered into the Deduction Variation comments to facilitate the change to your records by the SRO. Details include date of change and group details, if applicable. Ordinary group members are not entitled to claim the deduction and therefore will not be given the option to amend the deduction.
2. Change to Interstate Employment
Commencing or ceasing employment in states other than Victoria will change the eligible deduction entitlement. Sufficient details must be entered into the Deduction Variation comments to facilitate the change to your records by the SRO. Details include interstate start date and amended estimates (Victorian and Australian) or interstate cancellation date.
3. Actual wages used in Calculation
For an interstate employer, the deduction shown on monthly returns is based on that employer's (or employer group's) estimated Victorian and Australian wages for that year (as disclosed in the previous Annual Reconciliation or on the payroll tax registration form for new employers). Alternatively you can amend the deduction amount based on your actual wages for that month.
4. Deduction deferred until Annual Reconciliation
Employers wanting to claim the deduction on their Annual Reconciliation only, rather than on their monthly return lodgements.
Please Note: Employers and groups with total annual taxable Australian wages between $3,000,000 and $5,000,000 will not be able to amend their deduction when lodging a monthly return.
If any change to the deduction is required, your estimated wages need to be updated to reflect any changes which will update the deduction. To do this, log into PTX Express and select ‘Update Your Records’ and ‘Employer Details’.
Deduction denied
Customers with a deduction denied will not be able to amend the deduction.
Annual reconciliation
Nil Deduction
If your deduction is NIL and you are not an Ordinary Member of a Group or have a Deduction Denied, you can claim a deduction by going back to the Enter Wages page, and enter interstate wages.
Deduction for group employers
Where employers are members of a group, the deduction is available to the Designated Group Employer on behalf of the group. Other members of the group are not eligible to claim a deduction and will pay tax on each dollar of their Victorian wages.
Interstate employers
In the case where interstate wages are paid, the deduction is reduced to reflect the proportion of Victorian wages to Australian wages. This proportional calculation occurs in other states and territories as well, so the employer effectively receives a full deduction Australia wide.
Calculation for full-year employers
The Victorian deduction calculation for full-year employers is based on the following formula:
(Victorian wages ÷ Australian wages) × maximum deduction = actual deduction
[Australian wages are the sum of Victorian wages plus interstate wages]
Based on this formula, employers who operate solely in Victoria for the full financial year are able to claim the maximum deduction, whereas employers who pay interstate wages are entitled to less than the maximum deduction based on the proportion of their Victorian wages to their total Australian wages.
Calculation for part-year employers
Employers who do not employ for the whole of the financial year are known as Part-year Employers and the deduction is calculated on a pro-rata basis taking into account the actual number of days the employer operated.
The pro-rata calculation is:
(Number of days employed ÷ days in the financial year ) × (Victorian wages ÷ Australian wages) × maximum deduction = actual deduction
For more information see liability calculation.
Assistance
If you need more information on this topic, contact our payroll tax enquiry service on 13 21 61.