Planning for State Taxes
The three most common State taxes that businesses need to be aware of and plan for are:
Transfer Duty
Across Australia the thresholds, rates and other characteristics of all three of the above taxes differ, however the basic concept is similar. Commentary in relation to each type of tax is set out below, with specific commentary on the application of the tax in NSW.
Payroll Tax
A business is liable for Payroll Tax when the wages it pays exceed a certain level. The rate of tax and threshold at which it commences being payable differs across Australia, however the rates applicable to NSW are located NSW payroll tax rates and thresholds.
Of importance with this tax is being able to plan for when it will become payable by a business, which in turn requires an understanding of what is included in wages. In NSW some of the items that can be included in wages are:
- Salaries and Wages
- Allowances
- Commissions
- Annual Leave
- Directors Fees
- Fringe Benefits
- Long Service Leave
- Sick Leave
- Superannuation Contributions
- Some Subcontractor payments
Whilst there may be a possible imposition of Payroll Tax due to an increase in wages from a growing business, this does not necessarily mean that a business should not grow. However the business owner should understand the additional cost the business may have to bear and thus cover with the margin from its sales.
Other areas that need to be considered with this tax are: The requirement to group wages of related businesses in assessing liability.
- Interaction of each States Payroll Tax regime when workers are employed interstate.
- Any wages which may be exempt from Payroll Tax.
We suggest that you seek advice concerning this tax to ensure you do not have an obligation you are unaware of, especially as you will lose the opportunity to pass the cost on in a sales price increase if the tax is imposed on previous years trading. Also the Office of State Revenue have a regime of penalties for the non declaration of wages for payroll tax purposes, where they should have been declared.
Talk to the team at Bentleys at we can assist you to determine if this tax is applicable to you, and the degree to which it will be imposed.
Land Tax
As the name suggests Land Tax is a tax imposed, based on the value of land holdings in an entity. In ascertaining the value of the land to be assessed it is only the Unimproved Value of the land that is taxed (i.e. the value of structures on the land is not taken into account).
Thresholds and rates vary from State to State, however the current thresholds can be located at: NSW Land tax rates and thresholds .
In addition to the ordinary rates there are two other possible rates applicable to land holdings in NSW:
- Premium land tax rates for land in excess of certain values.
- Higher rates imposed on “Special Trusts” , often these are Discretionary Trusts.
In addition to being aware of the value of your land holdings in relation to the thresholds applicable for land tax, other areas of importance are:
- The fact that land tax is based on holdings at one time of year ie 31st December
- What types of land holdings are exempt from the tax e.g. your personal residence
- Grouping of entities to ascertain total land holdings
- How various entities are treated for land tax
Initial registration for Land Tax is based on self assessment, however the Office of State Revenue (OSR) can register an entity if they consider land holdings exceed the relevant threshold.
After initial registration assessments will be issued for each 31st December, after which the entity is able to advise the OSR of any changes in land holdings compared to the assessment issued.
In order to avoid penalties for late registration, and to enable the tax to be passed on to a tenant in some instances, we suggest that you seek advice on the applicability of this tax.
Talk to the team at Bentleys as to how we can set your mind at ease with the applicability of this tax.
Transfer Duty
Upon the transfer of certain property from one party to another stamp duty can be applicable subject to the applicable law in the State in which the property is held.
In NSW there are two main forms of property that are subject to Stamp Duty, being:
- Land and Buildings
- Business Assets including Land and buildings
It is important to note that it is the purchaser who pays the stamp duty on a transfer of property. Hence a purchaser should factor in the funding of the Transfer Duty when considering the acquisition of a property.
Further Transfer Duty is levied on the GST inclusive value of the property, hence managing the GST on a property can also have impacts for Transfer Duty.
OSR NSW has a calculator to determine the level of Duty, located at: NSW Transfer Duty Calculator.php
Should you require advice on the imposition of Transfer Duty we would recommend you initially contact your legal advisor, however the team at Bentleys are able to assist if needed.