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NSW Payroll Tax: What Businesses Need to Know

Revenue NSW is stepping up its efforts to make sure businesses pay the right amount of payroll tax. Using data and smart analytics, they are identifying cases where businesses might not be fully compliant. Here’s what you need to know:


1. Using Data to Spot Issues

Revenue NSW compares payroll tax filings with data from the ATO, WorkSafe, and icare. They look for things like:


  • Employee share schemes

  • Fringe benefits

  • Bonuses, commissions or director’s fees reported through Single Touch Payroll (STP).


If something doesn’t match, Revenue NSW may send emails or letters asking for clarification.


2. Focused, Risk-Based Audits

Not every business is audited. Revenue NSW targets audits where they see the most risk, such as businesses that:


  • Should be registered but aren’t

  • Have underpaid or undeclared payroll tax

  • Miss lodgement or payment deadlines

  • Belong to industries with emerging compliance risks.


3. Healthcare Sector Under the Spotlight

Audits have recently increased for medical practices, especially GP practices using contractors. A 2023 NSW Supreme Court ruling means many GPs are now treated as employees for payroll tax purposes.


Revenue NSW has:

  • Assessed payroll tax in arrangements previously assumed exempt

  • Paused audits, penalties, and interest for GP practices for 12 months to allow consultation with medical groups.


4. Why Audits Are Increasing

Audit activity is driven by budget pressures. The payroll tax threshold has remained at $1.2 million since 2020. As wages grow, more businesses fall into taxable brackets—creating “bracket creep.” This is expected to generate significant revenue over the next few years for the NSW Government.


5. Penalties and Compliance Incentives

If audits find errors:


  • Penalties start at 25% of underpaid tax

  • They can go up to 75% depending on circumstances

  • Late lodgement penalties may also apply.


However, Revenue NSW encourages voluntary disclosure. Reporting errors before an audit can reduce or even eliminate penalties.


Tips for NSW Businesses

To stay on top of payroll tax:


  • Reconcile payroll tax returns with ATO, FBT and STP data

  • Check contractor vs. employee classifications carefully

  • Make voluntary disclosures if you find errors

  • Keep strong internal processes to stay compliant.


Audits are increasing by design, not by chance. Revenue NSW’s data-driven, risk-based approach aims to keep things fair while making sure everyone pays their share.


Contact you Client Manager if you have any questions regarding Payroll Tax.

 
 
 
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