The Mental Health and Wellbeing Payroll Tax Surcharge commences from 1 January 2022

The State Taxation and Mental Health Acts Amendment Act 2021 was passed on 8 June 2021 and received royal asset on 16 June 2021. Relevantly, it:

• amended the Mental Health Act 2014 to provide for the proceeds of the mental health and wellbeing surcharge to be used for the provision of mental health outputs; and
• introduced a mental health and wellbeing surcharge on payroll tax that will commence from 1 January 2022.

The introduction of this mental health and wellbeing surcharge represents one of the recommendations made by the Royal Commission into Victoria’s Mental Health System.

The rate of the surcharge is:

• 0·5% for employers or groups of employers who pay Victorian taxable wages with total Australian wages of more than $10m[1] (the first surcharge threshold amount) but not more than $100m[2]; and
• 1% (an additional 0.5%) on the relevant proportion for employers or groups of employers who pay Victorian taxable wages with total Australian wages of more than $100m (the second threshold amount).

Given the first year it commences will only be 6 months (1 Jan to 30 June 2022), the thresholds are halved for this first applicable period; namely the first surcharge threshold amount will be total taxable wages of more than $5m, and the second threshold amount will be total taxable wages of more than $50m.

If you are a member of a group, these thresholds apply at the group level and are claimed by the designated group employer.

These thresholds are adjusted proportionately if you are an employer for only part of a financial year, or if you are also liable to pay wages in another Australian jurisdiction.

By way of example, assume that in the 2022-23 financial year an employer paid $80m in wages in Victoria and $70m wages in NSW.[3] The two thresholds would apply as follows:

• First threshold: $10m x ($80m / $150m) = $5,333,333.33
• Second threshold: $100m x ($80m / $150m) = $53,333,333.33

The surcharge is payable at the same time that payroll tax is payable. Therefore, if you pay payroll tax monthly, you will also be required to pay the surcharge monthly. If you pay payroll tax annually, you will be required to pay the surcharge annually. You will not need to lodge separate returns.

Any wages exempt from payroll tax (such as wages paid or payable to an employee who is taking primary or secondary caregiver leave or who is absent from work to volunteer as a firefighter or respond to other emergencies) will also be exempt from the surcharge.

Queries

For further information regarding the above, please contact the author, or any member of our Tax or Corporate & Commercial team.

Disclaimer

This information and contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.

[1] Monthly threshold of $833,333

[2] Monthly threshold of $8,333,333

[3] This example is taken from the SRO at: https://www.sro.vic.gov.au/mentalhealthsurchargefaq