You must include amounts paid for the day of injury and for periods after the day of injury in your taxable wages, even if you expect WorkCover Queensland to approve your claim.

The compulsory excess required to be paid under the Workers' Compensation and Rehabilitation Act 2003 is not taxable.

Note: If WorkCover Queensland reimburses you for payments you made, the amount reimbursed is not taxable.

If the claim is subsequently approved, the wages you paid for periods after the day of injury will not be taxable. However, wages paid for the day of injury will still be taxable.

Write to us with the following details:

• the amounts you included in your taxable wages for periods after the day of injury
• the period/s in which you paid those amounts.

We will then reassess your pay-roll tax liability for those periods using the correct figure for your taxable wages. If you are entitled to a refund of pay-roll tax, we usually make the refund by cheque.

"Make Up" pay
If there is a difference between your employee's normal wages and the amount of compensation paid by WorkCover Queensland, and you pay the difference, the amount you pay ("make up") is taxable.

Do not confuse "make up" pay (taxable) with the compulsory excess (not taxable).

Yes. At the end of the financial year, you have to lodge an annual return which includes a breakdown of your wages for the financial year.

You also need to work out whether you have paid the correct amount of pay-roll tax for the year, and pay any tax shortfall when you lodge your annual return. If you are entitled to a refund of pay-roll tax, we will process the refund when we receive your annual return.

Your annual return must be lodged by 21 July after the end of the financial year.
Refer to the Annual returns section of our Pay-roll tax Information Kit for more detailed information about annual returns.

Fringe benefits
Do you provide Queensland fringe benefits? If so, and you included fringe benefits at estimated figures in your taxable wages during the financial year, adjust the estimates to actual value amounts in your annual return.

Important note:
At end-of-year, many employers reconcile their wage records. Some find that errors or omissions have occurred in periodic returns during the year. If you find at any time during the year that your taxable wages were incorrect, notify us of the discrepancy immediately. We will then reassess the pay-roll tax due, using the correct amount of taxable wages. You should pay any additional amount owing as soon as possible, as unpaid tax interest will be accruing daily on the unpaid amount.

No. You should notify us in writing immediately when you become aware of the error and tell us how it occurred. We will then reassess your pay-roll tax for that period using the correct figure for your taxable wages.

You should pay any additional amount owing as soon as possible, as unpaid tax interest will be accruing daily on the unpaid amount.

If the error was in a periodic return during a previous financial year, we will reassess your liability for that year (and/or for the particular period), using the correct figure for your total taxable wages. Do not include an adjusting amount in a return for the next year.

Make your claim in writing, within five years after the date of overpayment. State in your claim:

• how the overpayment occurred
• the amount of wages included in error
• the return in which you overpaid tax.

(If the refund is approved, we usually issue a cheque. Please note that instead of refunding the amount, we may apply it towards a current pay-roll tax liability or an amount owing under another revenue law, or hold the amount to be applied towards a liability expected to arise in the next 60 days. If we do this, we will let you know how the refund amount has been applied.)

You have to include the wages in your taxable wages, unless you know in advance that the period of continuous overseas service will definitely be longer than six months.

Wages paid or payable in Queensland for services performed entirely outside Australia are not taxable if the period of continuous overseas service is longer than six months. In this case, the wages for the whole period of overseas service after 1 July 1995 are not taxable.

The qualifying six month period runs from the date of first payment for the overseas service. If the period of continuous overseas service is six months or less, the wages paid are taxable.

If you exclude wages from your taxable wages and the period of continuous overseas service turns out to be six months or less, tell us in writing:

• the amount of the employee’s wages you excluded from your taxable wages
• the period/s when those amounts were paid or payable.

We will then reassess your pay-roll tax for the relevant period/s. In these circumstances, unpaid tax interest will apply and penalty tax may also be imposed. To prevent this situation, it is important that you only exclude your wages if you are certain that the period of continuous overseas service will be longer than six months.
If you include the wages in your taxable wages and the period of continuous overseas service turns out to be more than six months, tell us in writing:

• the amount of the employee's wages you included in your taxable wages
• the period/s when those amounts were paid or payable.

We will then reassess your pay-roll tax for the relevant period/s and make any necessary refund to you.

The difference between unpaid tax interest and penalty tax is in the type of non-compliance.

Unpaid tax interest (UTI)

UTI accrues if pay-roll tax is not paid on time to compensate the State for the period that tax remains unpaid.

UTI accrues on a daily basis (UTI current rate) on any unpaid pay-roll tax, from and including the day after the payment was due until payment is received in full.

If your payment is late, you need to work out and include in your payment the amount of UTI that has accrued up until that payment. You can use the calculator on our website to work out UTI.

The Commissioner may remit all or part of the UTI, but this will generally only happen in exceptional circumstances. Refer to (Revenue ruling taxation administration TA 1.2 - Remission of unpaid tax interest) for more information on remission of UTI.

Penalty tax

Penalty tax applies in addition to any UTI which may be imposed. It is an administrative sanction for certain conduct by taxpayers.

Penalty tax is imposed where we issue a:

• default assessment of pay-roll tax in certain circumstances (e.g. where the employer has failed to lodge a return)
• reassessment increasing an employer's pay-roll tax liability.

In most cases, the rate of penalty tax is 75% of the amount of pay-roll tax assessed or reassessed. The Commissioner may increase the penalty by up to 20% in certain circumstances.

The history of pay-roll tax plays a part in this.

Pay-roll tax was originally a federal tax, collected by the Australian Government. The tax was based on an employer's total Australian pay-roll, so it did not matter where in Australia the employer paid wages - the location did not affect the payment of tax.

When the states and territories took over administration of pay-roll tax, the collection and distribution of the tax changed, but not the basic principle - the liability for pay-roll tax is still determined by the level of an employer's total Australian pay-roll. We therefore have to take into account not only your Queensland wages, but also the wages you pay in the other states and territories, to decide whether you are liable for tax in Queensland.

If liable, you pay tax to us on the Queensland component of your total Australian pay-roll. The other states and territories will collect the tax on wages taxable within their jurisdictions. Where tax is payable depends on where the wages are paid and where the services are performed.

No. The amount of exemption that can be deducted varies.

Full deduction is allowed when annual wages are equal to, or below, the exemption threshold, which is currently $1,000,000 per annum. For every $4 of wages over the threshold, the deduction reduces by $1. When wages reach five times the exemption threshold, the deduction is zero.

Several factors affect the answer to these questions.

Because of the different factors involved, we cannot answer this question fully unless we know which factors apply in your case. Refer to the Periodic returns section of our Pay-roll tax Information Kit for more information about who is eligible to claim a deduction.

How to work out the amount to claim
The deduction is calculated using a formula in the Pay-roll Tax Act 1971. The Periodic returns and Annual returns sections of our Pay-roll tax Information Kit gives examples of how to work out the deduction for your:

• periodic returns during the financial year
• annual return at the end of the financial year.

Claiming the deduction for periodic returns
If you pay wages only in Queensland and are not grouped with any other employer for pay-roll tax purposes, you may calculate and claim the deduction for your periodic returns during the year based on your actual wages for each period. This is called an actual periodic deduction, because you work out your deduction at the end of each return period based on actual wages for that period.
But if you:

• pay wages both in Queensland and outside Queensland, or
• are a member of a group of employers and have been nominated by the group to claim the deduction,

then you may instead calculate and claim a deduction for your periodic returns based on your (or the group's) estimated wages for the financial year. This is called a fixed periodic deduction, because your deduction is fixed for each return period during the financial year based on your estimate of wages for the year. If certain changes happen during the year, you will need to recalculate your deduction.

Refer to the Periodic returns section of our Pay-roll tax Information Kit for more information on these periodic deductions.

Claiming the deduction in the annual return
Whether you claim actual or fixed periodic deductions during the year, a calculation of your total deduction is still necessary at the end of the financial year. The purpose is to find the exact amount deductible from your annual wages.

In your annual return, you:

• subtract your annual deduction from annual wages
• work out your total pay-roll tax for the financial year on the balance
• then subtract any pay-roll tax paid or payable with your periodic returns during the year.

The result of this calculation may be a shortfall or a refund of tax. You have to pay any shortfall amount when you lodge your annual return. If a refund is due, we will process the refund when we receive your annual return.
Typically, variations in an employer's wage levels during the financial year will change the amount of deduction that can be claimed each return period during the year.

Those differences are resolved at the end of the financial year by calculating the exact amount deductible from the annual wages.

Refer to the Annual returns section of our Pay-roll tax Information Kit for more information on the annual deduction.

No. The amount you claimed during the year is based on your estimate of your Australian wages for the financial year.

In your annual return, you work out your exact deduction for the year using the total of your actual Australian wages for the financial year. If the actual total is different from your estimate, the deduction will be different. This can result in a tax shortfall or refund at the end of the financial year.

If there is a tax shortfall, you have to pay the shortfall amount when you lodge your annual return. If a refund is due, we will process the refund when we receive your annual return.

Some businesses are related or connected to each other and are therefore regarded as a unit (group) for pay-roll tax purposes.

Grouping was introduced to prevent pay-roll tax avoidance - the practice of creating multiple 'businesses' (instead of one business) and splitting the pay-roll among them so all were eligible to claim the deduction, and thereby reduce their pay-roll tax or avoid it entirely. In reality, the businesses were not separate. They remained linked through common ownership, trading connections or shared employees.

As a result of grouping, there is no longer any tax benefit to an employer from artificially splitting its pay-roll.

For example:
A business with an annual pay-roll of $2 million divides its operations into three smaller businesses, which remain connected. The pay-roll of each business is below the exemption threshold. The group members are still liable because the total group wages of $2 million are above the exemption threshold.

Employers who are grouped cannot each claim the exemption from wages; it can be claimed by only one nominated member of the group called the designated group employer (the DGE). Other members of the group pay pay-roll tax on the full amount of their wages, without deduction.

The amount of the DGE's deduction is calculated having regard to the total Australian taxable wages of the group.

Exclusion from grouping
Part 4 of the Pay-roll Tax Act 1971, which provides for grouping of businesses, also allows exclusion from grouping in certain circumstances.

We may exclude your business from grouping depending on the facts of the case. You cannot exclude yourself from grouping.

Applications for exclusion must be in writing, and contain all relevant information. In deciding whether to grant or refuse exclusion, we look at many factors, such as the extent of any dependency or connection between the businesses of the group.

We cannot exclude parent and subsidiary companies from grouping. Part 4 of the Pay-roll Tax Act 1971 prohibits exclusion of these related corporations.

More information
Refer to the Grouped employers section of our Pay-roll tax Information Kit for more information about grouping and exclusion from grouping.