Payroll tax debt: funding to clear what you owe your state revenue office

Why is payroll tax debt different from ATO debt?

Most business tax goes to the ATO. Payroll tax doesn’t. It’s a state and territory tax on wages above a threshold, and each jurisdiction runs it separately:

• New South Wales: Revenue NSW
• Victoria: State Revenue Office
• Queensland: Queensland Revenue Office
• Western Australia: RevenueWA
• South Australia: RevenueSA
• Tasmania, the ACT and the Northern Territory: their own revenue offices

That means a separate set of rules for thresholds, rates, grouping, lodgement and collection, and a separate creditor. A business can be on a perfectly good ATO payment plan and still be in arrears with its state revenue office, or the other way round.

Payroll tax tends to catch growing businesses. You hire, wages cross the threshold, and a tax that didn’t exist last year suddenly does, often backdated through an annual reconciliation. Grouping rules can also pull related businesses together so that a combined payroll crosses the threshold.

What happens if payroll tax isn’t paid?

Each state has its own process, but the broad pattern is similar:

1. Interest and penalty tax on the late amount, set by each state’s law.
2. Reminders and contact from the revenue office’s debt team.
3. Firmer recovery action, which can include garnishee-style notices to banks or customers, and legal proceedings.
4. Director exposure in some states, where payroll tax law can make directors personally liable for a company’s unpaid payroll tax.

Several revenue offices say plainly that they’re more flexible if you contact them before the due date. RevenueSA’s published policy, for example, says longer instalment arrangements are generally only granted when you ask before the payment falls due.

Payment arrangement or loan?

Approach	Suits	Watch out for
State payment arrangement	Short-term gap, asked for early	Interest continues; conditions vary
Loan to clear payroll tax only	One creditor, larger balance	Loan costs and repayments
Loan to clear payroll tax and ATO debt	Arrears with both	Size it on the real total, not a guess
Arrangements with both offices	Smaller debts, steady cash flow	Two sets of rules and deadlines

The common problem is that payroll tax debt rarely arrives alone. A business that’s behind on payroll tax is usually behind on PAYG withholding and super guarantee too, because they all come from the same wages. Juggling two tax collectors, each with its own plan conditions, is where many owners come unstuck.

One loan that clears both, with funds paid directly to each at settlement, replaces two sets of rules with one repayment schedule.

How does funding payroll tax work?

Property-secured. First mortgages, second mortgages and caveat loans over residential or commercial property, from $20,000 to $5,000,000. This suits larger combined balances and tight deadlines.

Unsecured. Typically $5,000 to $500,000, sized on turnover and bank statements. This suits trading businesses with steady deposits and a moderate balance.

Lenders will want the revenue office’s statement, the ATO statement of account, and recent payroll reports. Being upfront about every tax creditor makes the loan the right size the first time.

An illustrative example

A Sydney aged-care staffing agency grows from 20 to 45 workers in a year. Its annual reconciliation shows $118,000 of payroll tax owing to Revenue NSW. It’s also $96,000 behind with the ATO on PAYG withholding. The director contacts Revenue NSW before the due date and gets a short arrangement while finance is arranged. A second mortgage over the director’s investment property clears both debts at settlement, paid directly to Revenue NSW and the ATO. The agency then builds payroll tax into its hourly charge-out rate.

This example is illustrative and simplified, not a real client.

Before you borrow to pay payroll tax

• Check the assessment is right. Grouping, contractor and exemption rules are complex. An adviser may find the figure can be reduced or objected to.
• Price it in. If payroll tax keeps falling behind, your pricing may not account for it. A loan clears the past, but it doesn’t fix the margin.
• Don’t trade one tax for another. Paying payroll tax with money set aside for PAYG withholding creates director penalty risk with the ATO. See PAYG withholding debt.

Behind on payroll tax, ATO debt, or both?

If you owe your state revenue office, the ATO or both, see if you qualify for funding to clear them. There’s no credit check to enquire. Your details stay with one team rather than going to a list of lenders, and a specialist will help you work out whether a loan, arrangements or a mix of both makes the most sense.