Coronavirus relief - deferral and new jobs credit

New jobs payroll tax credit

Eligible employers will be entitled to a waiver of their 2020-21 and 2021-22 payroll tax after applying the New Jobs payroll tax credit against their liability for each of the financial years (designated financial year).

Eligible employers will receive a credit of 10 cents for every dollar of Victorian taxable wages paid in the relevant designated financial year that are above the previous financial year’s wages. The credit will be applied against the employer’s payroll tax liabilities at the end of the relevant designated financial year. The waiver may partially or fully extinguish the payroll tax liability for an eligible employer for the designated year.

An employer or a group of employers is eligible for the relief if their total Australian wages (i.e. Victorian taxable wages plus interstate wages) do not exceed $10 million in the financial year proceeding the designated financial year. There are other eligibility requirements which must be met and this will depend on whether or not the employer is a member of a payroll tax group as at 30 June of the relevant designated financial year.

Non-group employers

For an employer who is not a member of a payroll tax group as at 30 June of the relevant designated financial year, the eligibility requirements are:

1. the employer was an employer as at 30 June of the relevant designated financial year,
2. the employer paid or was liable to pay Australian wages before 1 January of the previous year,
3. the employer’s Australian wages in the previous year were no more than $10 million, and
4. the employer has lodged their annual returns in respect of the designated financial year and the previous financial year.

Eligible non-group employers shall be entitled to a tax credit of 10 cents for each dollar by which their total Victorian taxable wages paid or payable during the designated financial year exceed the total Victorian taxable wages paid or payable by the employer during the previous financial year.

The employer will not have to make a claim for the credit. It will be applied after the employer has lodged their annual return for the designated financial year and any resulting overpayment will be subsequently refunded to the employer.

Examples

Example 1

• the month during which the employer’s Victorian total taxable wages exceed their total Victorian taxable wages paid in the previous year, and
• all following months in the designated financial year.

Example 2

Continuing from example 6, Delicious Food Cafe has opted not to defer payment of their 2020-21 payroll tax liabilities as provided in accordance with the relief measure announced on 13 September 2020. Therefore, the business should continue to lodge and pay its monthly payroll tax returns and pay payroll tax until their 2020-21 taxable wages exceed $3.5 million. If this occurs during March 2021, the business will be able to defer payment of its March, April and May monthly returns until 21 July 2021. Upon the lodgment of the 2020-21 annual return by Delicious Food Cafe, the tax credit will be applied against its 2020-21 payroll tax liability and any further refund will then be paid. The tax credit cannot exceed the total payroll tax liability for the designated financial year.

Example 3

ABC Hotel is a non-group Victorian regional employer and paid $2.5 million in taxable wages in 2019-20. The business employed additional workers during 2020-21 and pays $3 million in taxable wages in 2020-21. As its Victorian taxable wages in 2020-21 exceeded its Victorian taxable wages in 2019-20 by $500,000, the business will be entitled to a New Jobs tax credit of $50,000. ABC’s payroll tax liability for 2020-21 before the application of the New Jobs tax credit is $47,470 (i.e. $3 million less $650,000 = $2,350,000 x 2.02%), which is less that the New Jobs tax credit of $50,000. In this case, the credit applied will be $47,470 and ABC will have any payroll tax paid for 2020-21 fully refunded. The excess credit is not refundable and cannot be carried forward to the next financial year.

Group employers

For an employer that constitutes a member of a payroll tax group as at 30 June of the relevant designated financial year, the eligibility is based on the total group Australian wages. The eligibility requirements differ slightly depending on whether or not the membership of the group changed composition during either the designated financial year or the previous financial year.

Groups whose membership has remained constant

Where the composition of the group membership has remained constant during the designated financial year and previous financial year, the eligibility requirements are:

1. At least one member of the group is an employer as at 30 June of the relevant designated financial year.
2. The group paid or was liable to pay Australian wages before 1 January of the previous financial year.
3. The total Australian wages paid or payable during the previous financial year by the group were no more than $10 million.
4. The group has lodged their annual returns in respect of the designated financial year and the previous financial year.

Eligible groups shall be entitled to a tax credit of 10 cents for each dollar by which the total Victorian taxable wages paid or payable by all the members of the group during the designated financial year exceed the total taxable wages paid or payable by all the members of the group during the previous financial year.

The credit will be applied after all members of the group have lodged their annual returns for the designated financial year and will be applied to the designated group employer’s annual return. The resulting overpayment will be refunded to the designated group employer.

Example 4

ABC Holding Coy Pty Ltd and XYZ Subsidiary Pty Ltd constitute a group as at 30 June 2021. The composition of this group remained unchanged throughout 2019-20 and 2020-21. The group paid $5 million in taxable wages in 2019-20. The group increased its workforce during 2020-21 and pays $5.5 million in taxable wages in 2020-21. As the group’s Victorian taxable wages in 2020-21 exceeded the group’s Victorian taxable wages in 2019-20 by $500,000, the group will be entitled to a New Jobs tax credit of $50,000. This will reduce the group’s payroll tax liability for 2020-21 from $235,225 to $185,225 and any resulting overpayment will be refunded to the designated group employer.

Groups where the members have changed

Where the composition of the group membership has changed during either the designated financial year or the previous financial year (e.g. the group was previously part of a larger group or one of the members was previously not a member of the group), the eligibility requirements are:

1. At least one of the members of the group is an employer as at 30 June of the designated financial year.
2. At least one members of the group as at 30 June of the designated year paid or was liable to pay Australian wages before 1 January of the previous financial year.
3. The total Australian wages paid or payable during the previous financial year by the members of the group as at 30 June were no more than $10 million.
4. The members of the group as at 30 June of the designated year have lodged their annual returns in respect of the designated financial year and the previous financial year.

Eligible groups shall be entitled to a tax credit of 10 cents for each dollar by which W1 exceeds W2, where:

• W1 is the sum of:
  • the Victorian taxable wages paid or payable during the designated financial year by each employer who is a member of the group as at 30 June of the designated financial year, and
  • for any employer who was previously a member of the group at any time during the designated financial year or previous financial year, and ceased to employ before 30 June of the designated financial year — the Victorian taxable wages paid or payable during the designated financial year by that employer while they were a member of the group or before they were a member of the group.
• W2 is the sum of:
  • the total Victorian taxable wages paid or payable during the previous financial year by each employer who is a member of the group as at 30 June of the designated financial year, and
  • for any employer who was previously a member of the group at any time during the designated financial year or previous financial year, and ceased to employ before 30 June of the designated financial year — the total Victorian taxable wages paid or payable during the previous financial year by that employer while they were a member of the group or before they were a member of the group.

The credit will be applied, after all the members of the group have lodged their annual returns for the designated financial year, to the designated group employer’s annual return. Any resulting overpayment will be refunded to the designated group employer.

Example 5

ABC Travel Melbourne Pty Ltd and ABC Traveland Pty Ltd constitute a group as at 30 June 2021 and have been a group throughout 2020-21. ABC Travel Mornington Pty Ltd was a member of the group during 2019-20 but it ceased to be a member of the group and ceased employing from 1 July 2020. The group (including ABC Travel Mornington Pty Ltd) paid $4.5 million in taxable wages in 2019-20. During 2020-21, the group (i.e. ABC Travel Melbourne Pty Ltd and ABC Traveland Pty Ltd) increased its workforce and pays $5 million in taxable wages in 2020-21. As the Victorian taxable wages in 2020-21 of the group exceeded its Victorian taxable wages in 2019-20 by $500,000, the group will be entitled to a New Jobs tax credit of $50,000. This will reduce the group’s payroll tax liability for 2020-21 from $210,975 to $160,975 and any resulting overpayment will be refunded to the designated group employer.

Example 6

Geelong Manufacturing Pty Ltd and Geelong Sales Pty Ltd (both regional employers) constitute a group as at 30 June 2021. They paid Victorian taxable wages totaling $4 million and $6.5 million during the 2019-20 and 2020-21 financial years respectively. The two companies were previously part of a larger group, which also included Ballarat Manufacturing Pty Ltd and Ballarat Sales Pty Ltd (also regional employers). Ballarat Manufacturing and Ballarat Sales paid total taxable wages of $4 million during 2019-20 financial year.

These two employers also paid a total taxable wages of $2 million during 2020-21 financial year but ceased employing and ceased to constitute a group with Geelong Manufacturing and Geelong Sales from 31 December 2020. The group shall be entitled to a tax credit of 10 cents for each dollar by which W1 exceeds W2.

• W1 is made up of the total taxable wages paid by Geelong Manufacturing and Geelong Sales during 2020-21 ($6.5 million) plus the total taxable wages paid by Ballarat Manufacturing and Ballarat Sales during 2020-21 whilst they were part of the group ($2million) = $8.5 million.
• W2 is made up of the total taxable wages paid by Geelong Manufacturing and Geelong Sales during 2019-20 ($4million) plus the total taxable wages paid by Ballarat Manufacturing and Ballarat Sales during 2019-20 whilst they were part of the group ($4million) = $8 million.

As W1 exceeds W2 by $500,000, the group will be entitled to a credit of $50,000. This will reduce the group’s payroll tax liability for 2020-21 from $158,570 to $108,570 and the resulting overpayment will be refunded to the designated group employer.

How the credit is calculated

We calculate the credit by subtracting the wages you paid in the previous financial year from those you paid in the current financial year (for example your 2019-2020 wages subtracted from your 2020-2021 wages) and multiply this amount (the increase in your wages) by 10% (representing 10 cents for every dollar your wages have increased). The credit may partially or fully extinguish your payroll tax liability.