Mental Health and Wellbeing Payroll Tax Surcharge (surcharge) commences in the new year and is forecast to raise over $800 million for Victoria each year. From 1 January 2022 the surcharge is payable when an employer or a group of employers pays Victorian taxable wages and the Australian wages exceed $10 million.
Why is this being introduced?
This program has been put in place following the recent Royal Commission into Victoria’s Mental Health System. The Royal Commission made 65 recommendations in its Final Report, that was handed down in March 2021, and the Victorian Government has committed to implementing all recommendations with this additional funding.
Whilst this payroll tax surcharge places additional financial pressure on business, it is positive to see that the mental health and wellbeing of Victorians is now becoming a key priority.
Who pays the surcharge?
The surcharge will apply to Victorian employers and groups whose annual Australian wages exceed $10 million, with a first monthly threshold of $833,333.
You must also pay an additional surcharge if you pay Victorian taxable wages and your Australian wages exceed the second annual threshold of $100 million, with a second monthly threshold of $8,333,333.
Existing payroll tax exemptions for private schools, hospitals, charities, local councils, and wages paid for parental and volunteer leave will apply for this levy.
When does the surcharge need to be paid?
Employers will pay the surcharge when they lodge their January 2022 monthly return due on 7 February 2022.
The surcharge is payable at the same time that payroll tax is payable. Therefore, if you pay payroll tax monthly, you will also pay this surcharge monthly; however, you will pay this surcharge annually if you pay payroll tax annually. Note, you will not need to lodge separate returns.
How much is the surcharge?
The mental health and wellbeing surcharge is 0.5% of your Victorian taxable wages over $10 million and an additional 0.5% of your Victorian taxable wages over $100 million.
For a transitional period between 1 January 2022 to 30 June 2022, the respective thresholds are $5 million and $50 million.
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.
Please get in touch with your Morrows One Team specialist with any questions regarding the mental health and wellbeing surcharge and how to prepare for it in the new year.