Payroll Tax for Residential Builders in WA

What it is

Payroll tax in Western Australia is a state tax on wages paid in WA and the Indian Ocean Territories. It is administered by RevenueWA, inside the Department of Treasury and Finance, under the Pay-roll Tax Assessment Act 2002 (WA). It is a self-assessed tax, so the onus sits on the builder to work out the liability and lodge.

Western Australia is not part of the harmonised payroll tax scheme. It does not run the Payroll Tax Act 2007. Two differences matter to a residential builder, and both cut against the instinct of anyone who has done payroll tax on the east coast. The threshold tapers away rather than sitting flat, and there are no contractor deeming provisions at all.

Threshold and rate

The WA payroll tax rate is 5.5 per cent. The annual threshold is 1 million dollars of Australian taxable wages.

Above 1 million dollars the threshold does not vanish at once, it diminishes. The deductable amount falls by 2 dollars for every 13 dollars of Australian taxable wages above 1 million dollars, so it runs out completely at 7.5 million dollars. A builder sitting between those two figures gets a partial deduction, and every extra dollar of wages costs more than 5.5 cents because it also shaves the deduction. Above 7.5 million dollars the rate applies to every dollar of WA taxable wages with no deduction at all.

There is no large-employer surcharge in the current RevenueWA rate table. The rate is a flat 5.5 per cent at every wage level from 1 July 2023. Higher tiers of 6 per cent and 6.5 per cent applied to very large employers up to 30 June 2023 and no longer appear in the current table.

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 brings in site utes, fuel cards and entertainment
• Termination payments, excluding the tax-free part of a genuine redundancy
• Director fees, working-shareholder salaries and employee share acquisitions
• Payments to workers who are common law employees, whatever the paperwork calls them

Super at 12 per cent quietly enlarges the base. A builder with 1.9 million dollars of salaries is already well over the threshold once super and grossed-up fringe benefits are added.

The contractor question in WA

This is where WA departs hardest from the eastern states. The Pay-roll Tax Assessment Act 2002 contains no relevant contract provisions. There is no deeming rule, and there is no 90-day or 180-day exemption to argue about, because there is nothing to be exempt from.

Employee is not defined in the Act, so it carries its ordinary common law meaning. The Commissioner applies the common law multi-factor test to decide whether a subcontractor is in truth an employee. Revenue Ruling PT 6, Guidelines on Subcontracting Arrangements and Employment Agents, sets out how the Commissioner approaches contracting arrangements, and form FPRT6, Questionnaire: Contractor Payments, is what RevenueWA sends out to gather the facts. It goes to both the builder and the worker.

Builders read that as good news. It is not. An ABN, an invoice and a subcontract agreement decide nothing on their own. What decides it is the totality of the relationship: who controls how the work is done, who supplies the tools and plant, whether the worker can delegate, who carries the commercial risk and whether the worker is running their own business or simply working in yours. A carpenter on one builder's sites full time for two years, driving the builder's ute, told when and where to start, is an employee no matter what the contract says.

Employment agency provisions do still apply where a worker is on-hired to a client through an agency.

Grouping

Businesses under common control are grouped, and a group shares one threshold and one diminishing deduction, claimed by a single designated group employer. Grouping follows corporate holding relationships, common controlling interests, shared employees and tracing through trusts.

A builder that runs a construction company and a separate development or plant entity should assume they are grouped. Two entities each on 900,000 dollars of wages have no liability apart. Grouped, they have 1.8 million dollars, they are over the threshold and their deduction is already tapering.

Lodgement and what to do

Return frequency follows the estimated annual liability. Monthly returns are required where the estimate is $150,000 or more, quarterly where it is under $150,000 and annual where it is under $20,000. Monthly and quarterly returns are due seven days after the end of the return period. The annual reconciliation, together with the June return, is due on or before 21 July.

The practical WA task is different. Do not spend the year hunting for a contractor exemption, because none exists. Spend it testing whether your regular subbies would survive the common law test, and fix the ones that would not, either by putting them on the books or by changing how the relationship actually works on site.