The Accountants

Payroll Tax on Bonuses in Queensland, New South Wales, and Victoria

Introduction

Bonuses are a common form of employee compensation, often used to reward performance, achieve retention goals, or provide incentives. However, many employers overlook the payroll tax implications of bonus payments. In Queensland (QLD), New South Wales (NSW), and Victoria (VIC), payroll tax applies not only to regular wages but also to bonuses, commissions, and incentive payments.

This article explains how bonuses are taxed under payroll tax laws, including which types of bonuses are taxable, how they are reported, and potential exemptions.

Are Bonuses Subject to Payroll Tax?

✅ Yes, bonuses are subject to payroll tax in QLD, NSW, and VIC. Payroll tax applies to all taxable wages, which includes:

• Performance-based bonuses (e.g., sales targets, KPI rewards).
• Retention bonuses (e.g., incentives to keep employees for a set period).
• Sign-on bonuses (e.g., one-time payments for new hires).
• Discretionary or goodwill bonuses (e.g., holiday or annual bonuses).
• Profit-sharing bonuses (if paid directly to employees).

Bonuses must be included in payroll tax calculations in the same period they are paid to employees.

Payroll Tax Rates and Bonus Calculations by State

If a business’s total wages—including bonuses—exceed the state threshold, it must register and pay payroll tax.

How to Report Bonuses for Payroll Tax

Bonuses are included in payroll tax returns just like regular wages. Employers must:

✅ Report bonuses in the payroll tax return for the month they are paid.
✅ Include bonuses in total taxable wages when calculating payroll tax liability.
✅ Lodge accurate records of bonus payments to avoid compliance risks.

Example Calculation:
A business in NSW has:

• $1.1 million in regular wages.
• $150,000 in bonuses.

Total taxable wages = $1.25 million → Exceeds the $1.2M NSW threshold → Payroll tax is payable on $50,000 at 5.45%.

Bonuses Paid to Contractors or Directors

1. Bonuses to Employees – Always taxable.
2. Bonuses to Directors – Director bonuses are considered remuneration and subject to payroll tax.
3. Bonuses to Contractors – If a contractor is deemed an employee under payroll tax laws, their bonuses may also be taxable.

Are There Any Exemptions?

Certain bonus payments may be exempt from payroll tax:

❌ Bonuses paid to genuine contractors (who are not deemed employees).
❌ Bonuses paid under exempt employment schemes (e.g., wages for apprentices or trainees).
❌ Certain redundancy-related bonuses (e.g., payments tied to genuine redundancy programs).

Common Mistakes Employers Make

❌ Forgetting to include bonuses in payroll tax calculations.
❌ Misclassifying contractor bonuses as non-taxable.
❌ Failing to register for payroll tax after bonuses push wages over the threshold.

Conclusion

Payroll tax applies to all bonus payments in QLD, NSW, and VIC. Employers must ensure bonuses are properly reported and included in taxable wages to comply with payroll tax laws. Businesses should also review bonus structures and seek professional advice if dealing with complex contractor or director arrangements.

The Team at The Accountants and The Finance Brokers are here to help you navigate your cash flow requirements in your business. We offer complimentary cash flow reviews and assist you in understanding your finance needs.