Payroll Tax for Residential Builders in Queensland

What it is

Payroll tax in Queensland is a state tax on wages. It is administered by the Queensland Revenue Office under the Payroll Tax Act 1971 (Qld). A residential builder that pays Australian taxable wages above the threshold must register, lodge periodic returns and pay the tax.

Queensland never adopted the harmonised Payroll Tax Act 2007 that New South Wales, Victoria and Tasmania run. It kept the 1971 Act and amended it over time. The relevant contract and grouping concepts now look much like the harmonised ones, but the rate structure, the deduction, the regional discount and the mental health levy are Queensland inventions. A New South Wales calculation does not carry north.

Threshold and rate

The threshold is 1.3 million dollars in annual Australian taxable wages. Above it, Queensland steps the rate up:

• 4.75 per cent where Australian taxable wages are $6.5 million or less
• 4.95 per cent where Australian taxable wages are more than $6.5 million

Queensland does not simply tax the excess over the threshold. It grants a deduction, and that deduction shrinks by 1 dollar for every 7 dollars of Australian taxable wages above 1.3 million dollars. It reaches zero at 10.4 million dollars, and from that point the full rate applies to the entire Queensland wage bill.

Regional employers take 1 percentage point off the rate, so 3.75 per cent or 3.95 per cent, and that discount runs to 30 June 2030.

Then there is the mental health levy. It adds 0.25 per cent on Queensland taxable wages once annual Australian wages exceed 10 million dollars, and a further 0.5 per cent once they exceed 100 million dollars. The levy is worked out in each periodic return and reconciled in the annual return.

What counts as wages

• Gross wages, salaries, overtime, commissions and bonuses
• Allowances paid in cash
• Superannuation contributions, including the 12 per cent Super Guarantee and salary sacrifice amounts
• Fringe benefits grossed up at the Type 2 rate, which sweeps in site utes, fuel cards and entertainment
• Termination payments, excluding the tax-free part of a genuine redundancy
• Director fees and working-shareholder salaries
• The labour component of contractor payments caught by the relevant contract rules

Super at 12 per cent is easy to forget because it never lands on a payslip. On a 3 million dollar wage bill it adds another 360,000 dollars to the taxable base.

Contractor deeming rules

Section 13B of the Payroll Tax Act 1971 (Qld) sets out the relevant contract provisions. Parties to a relevant contract are taken to be employer and employee, and the payments are taken to be wages. For a builder running a subcontract model, that turns the trade spend into a payroll tax base.

Section 13B(2) then excludes certain contracts. The exclusions a residential builder actually uses:

• The contractor performed the work on no more than 90 days in the financial year
• The service is one the builder ordinarily needs for less than 180 days in the financial year
• The contractor ordinarily performs services of that kind to the public generally
• The contractor engages employees or their own subcontractors to carry out the work, under section 13B(2)(c)
• The contract is ancillary to the supply of goods, or is an owner-driver arrangement

The section 13B(2)(c) exclusion is the one most builders reach for, and it is conditional. The Queensland Revenue Office expects the contractor to be carrying on a business, to hold overall responsibility for the contract, and to engage the workers directly rather than have the builder engage them. It fails outright if the Commissioner considers the arrangement was set up to avoid payroll tax.

Where no exclusion applies, only the labour component of the payment is taxable.

Grouping

Grouping combines the wages of related businesses. A group gets one threshold and one deduction, claimed by a single designated group employer. Grouping arises from common control, from corporate holding relationships, from shared employees and from tracing interests through trusts.

A builder that runs a construction company, a development entity and a plant-owning trust should assume all three are grouped. Combined wages can shift the group from 4.75 to 4.95 per cent and strip the deduction.

Lodgement and what to do

Periodic returns, monthly for most builders, are lodged and paid within seven days of the end of the return period. The annual return is due 21 July.

Once total Australian wages including super, fringe benefits and contractor labour get near 1.3 million dollars, run the numbers every quarter. List every related entity and treat the group as one taxpayer. Keep the paperwork behind every contractor exclusion, particularly the day counts and the evidence that a subcontractor engaged their own workers, because that is exactly what the Queensland Revenue Office asks for on audit.