Tax rules for small businesses in Victoria have changed – here’s what you need to know

Image: Supplied.

From July 1 this year, small businesses in regional Victoria are being given a leg up from the Andrews Labor government after they decided to bring forward changes to the payroll tax-free threshold and payroll tax rate .

The 2017-18 state budget increased the payroll tax-free threshold to $625,000 for this financial year, and to $650,000 in the 2018-19 financial year.

This is expected to impact 38,000 businesses immediately, with the potential for more than 1600 businesses to be free of payroll tax in the next two years.

They’ve also reduced the payroll tax rate by 25% for regional employers, giving them close to the lowest payroll tax rate in Australia.

The rate changed on July 1, from 4.85 to 3.65%, and is expected to help more than 4000 regional businesses pay less tax.

Victorian Treasurer Tim Pallas said the government was cutting payroll tax for the second year in a row in the hopes that this will create more jobs in regional Victoria.

“We’re making sure that every region shares in our economic success – with a new regional tax cut that will help regional business grow, and encourage more businesses to set up shop and create jobs in regional Victoria,” Pallas said.

What does this mean for you

To be considered a ‘regional employer’ for the tax cut, the business must be based in regional Victoria, and pay at least 85% of its Victorian taxable wages to employees that perform the majority of their role in regional Victoria.

For example, if you have two offices, one in Melbourne and one in Shepparton, the payroll tax on the salaries of the employees based at the Shepparton office would now attract the lower rate – 3.65 % – and the Melbourne office would continue to pay 4.85%.

However, if you had 100 employees total (on the same wage), and only 10 of them are based in Melbourne, the business as a whole is now eligible for the lower rate, as it’s paying more than 85% of its taxable wages in regional Victoria.

Image: Supplied.

The government has also increased the annual payroll tax liability threshold for businesses from $10,000 to $40,000, which means small businesses may be able to pay their payroll tax bill annually, rather than monthly.

Philip Dalidakis, Minister for Small Business, Innovation and Trade, said; “This tax cut for small businesses helps them do what they do best – building their businesses and create jobs for Victorians.”

The government calculated the savings of up to $48 million for eligible businesses across regional Victoria, which can now reinvest those savings in growing their businesses and are encouraged to hire more people locally.

The Victorian Government is opening up opportunities for businesses in regional Victoria by cutting payroll tax and changing the tax-free threshold.
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