Employers in Australia usually have four primary payroll tax obligations towards their employees. These include:
- Federal income deductions
- Fringe benefits deductions
- Medicare deductions
- Superannuation deductions
Read on if you are new to this as a business owner or are an employee who needs an employment lawyer’s help to fight for your rights.
Federal Income or Individual Income Deductions
Australia imposes a graduated income tax on an individual’s income; the higher the individual’s income, the higher the tax rate must be paid. Employers withhold taxes during their payroll systems, and the individual reconciles their income taxes at year’s end, typically receiving a refund for any excess.
The amount of tax due depends on earned income, state, or territory, not including deductions. Australia’s graduated income tax rates vary from 19–45 percent of an individual’s income.
Fringe Benefits Deductions
Fringe benefits—or perks of the job—are treated as taxable income in Australia. Definitions can get confusing here, and taxation can be a stumbling block for multinational corporations not familiar with the structure. For one, defining what an employee is can be very broad when it comes to fringe benefits tax since it can cover anyone receiving a fringe benefit, including current, future, or past employees and directors or beneficiaries of a trust.
Fringe benefits can include any of the following:
- Special employee discounts on loans or merchandise.
- Gym memberships, event tickets, and other leisure passes.
- Tuition or education-related company reimbursements.
- Any salary substitution arrangement, such as a salary portion being exchanged for a car, shares, stocks, or gadget payments like a cell phone).
As of 2022, employers and employees are taxed at an astounding 47 percent on benefits (similar to fringe benefits). So, in reality, that new company-sponsored car or promo that comes with the job might not be a benefit after all. However, a portion of fringe benefit deductions can be refunded as a credit when reconciliations are filed!
Australia’s public healthcare program is divided into two taxes.
- First, the standard 2 percent deduction applies to all residents down to the federal level.
- However, if you’re a high-earner or are without appropriate private health insurance coverage, you could be required to pay a premium tax in addition to the standard 2 percent tax.
The surcharge rate can add an extra 1 to 1.5 percent to the typical 2 percent ordinary tax for around 3 percent to 3.5 percent.
Contact an employment lawyer for more clarity or rectification if your contributions have gone over the legal percentage threshold.
Lastly, superannuation (or just ‘super’ for short) is Australia’s social retirement fund. Like old-age social security systems in other countries, a compulsory withholding awaits every employee aged 18 or older, earning $450 or more every month. Super also applies to any individual below 18 who meets a minimum earning threshold amount and works full-time, calculated at more than 30 hours per week.
Thus, you have full access to this once you officially retire from corporate work. If you cannot access your super, you must talk to an employment lawyer to resolve that irregularity.
These payroll taxes aren’t meant to be burdens for employers and employees alike. They are compensatory deductions that go towards public rehabilitation, personal healthcare, and retirement funds for those who will no longer have a source of income. Thus, it is every employer’s responsibility to manage these payments for their staff and every employee’s right to enjoy these benefits when the time comes.
If your rights in these aspects have been infringed upon, it’s time to consult with an employment lawyer in Brisbane from Saines Legal. Our team is knowledgeable in employment law and will tailor our approach according to your needs, fighting for your rights or (if you’re an employer) helping you with compliances to remain an upstanding business. Learn more about our areas of practice on our website!