Towards the end of the 2020 year (and what a year it was!), the Victorian Government announced that the State Budget would include a New Jobs Tax Credit for small and medium-sized businesses employing new staff in Victoria.
The incentive program is designed to encourage businesses to re-employ staff, restore staff hours or hire new staff following the COVID-19 lockdowns, by reducing the payroll tax burden through a payroll tax credit. The way it works is that the credit will automatically apply to the future payroll tax liabilities of your business for the 2020–21 and 2021–22 income years.
Under the scheme, businesses will get a non-refundable payroll tax credit of 10% of the increase in Victorian wages compared to the prior year. For example, if the Victorian wages of your business increase by $100,000 in 2020–21 compared to 2019–20, you will get a $10,000 payroll tax credit.
Is Your Business Eligible to Receive the New Jobs Tax Credit?
Your business is eligible to receive the Victorian Government New Jobs Tax Credit if it has less than $10m in annual Australian group wages for payroll tax purposes.
Your business must have a higher dollar figure of Victorian wages compared to the same period in the prior year. This applies for the 2020–21 and 2021–22 payroll tax years. For example, if a company’s Victorian wages for payroll tax are higher in August 2021 compared to August 2020, you will qualify for the credit on the monthly installment.
What are the Benefits of the New Jobs Tax Credit?
Just to reiterate, eligible businesses will receive a non-refundable credit against their payroll tax liability for 2020-21 and 2021-22 payroll tax years. The credit is equal to 10% of the additional Victorian wages and will be applied automatically through usual payroll tax arrangements.
Businesses will be in a better position to hire staff, improving growth potential and employment prospects within the SME space.
The Victorian Government anticipates that the incentive program, alongside previously announced payroll tax measures, will support up to 9,400 jobs, and stimulate the economy by providing tax relief to 14,000 businesses in 2020-21, and 21,000 businesses in 2021-22.
With the current deferral of payroll tax in place, the New Jobs Tax Credit may not affect you and your business until July 2021, when some liabilities become due. However, our BlueRock Accounting advisors would be happy to assist you in understanding the specific timing of your future obligations and the way the New Jobs Tax Credit scheme will affect you.
Please get in touch with our Melbourne-based accountants to talk through your business scenario and how we can help.