New data has shown how businesses across regional Victoria have taken advantage of the Victorian Government’s regional payroll tax cuts.  The numbers show businesses have saved more than $31 million in the first financial year it was introduced.

Since 1 July 2017, a lower Victoria payroll tax rate of 3.65% has applied to wages paid by regional employers. This rate further reduced to 2.425% from 1 July 2018.

Who is eligible?

Recapping the eligibility criteria, regional employers who are based in regional Victoria (First requirement) and pay at least 85% of Victorian taxable wages to regional employees (Second requirement) are eligible for the regional payroll tax rate.

First requirement: Based in regional Victoria

An employer is based in regional Victoria if it either has an ABN and a registered business address in regional Victoria or has its principal place of business in regional Victoria.

In general, the location requirement is determined with reference to the business’ location in the month the wages were paid. Where a business moves addresses during a month, location is determined by looking at where the business was located on the last day of the month.

Regional Victoria is defined as specified local government areas. You will need to be in one of the qualifying regional councils listed below to meet this requirement.

Second requirement: 85% of wages paid to regional employees

This requirement means the employer must pay at least 85% of its monthly Victorian taxable wages to regional employees under both its monthly and annual payroll tax return.

A regional employee is an employee who performs services for their regional employer ‘mainly’ in regional Victoria during the relevant month. Statutory guidance on what ‘mainly’ might mean is lacking, however the State Revenue Office indicates this would be satisfied where more than 50% of an employee’s services are performed in regional Victoria during a month.

Restructuring your business

Any business that has a Victorian regional presence but is below the 85% threshold could consider a restructure to ensure the regional part of their business is eligible to access the discounted regional payroll tax rate.  However like any restructure, careful consideration should be had to anti-avoidance provisions and other issues that could reduce or remove any overall benefit of such a strategy. 

To discuss this further, please contact:

Paul Gray
Principal Lawyer
T  03 5225 5231
E  pgray@ha.legal

or 

Rod Payne
Principal
T: 03 5226 8541
E: rpayne@ha.legal

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