From 1 January 2022, the Mental Health and Wellbeing Surcharge will come into effect and is estimated to raise over $800 million for the Australian state of Victoria each year. The new levy has been designed to provide a stable and dedicated form of additional funding for the mental health system.

The levy is payable on Victorian taxable wages paid or payable from 1 January 2022 by an employer or a group of employers and is payable at the same time that payroll tax is payable. This means that if an employer pays payroll tax monthly, they will also pay the surcharge monthly. If they pay payroll tax annually, they will pay the surcharge annually. There is no need to lodge separate returns.

Employers must pay a 0.5% surcharge if they pay Victorian taxable wages and their national wages exceed the first annual threshold of $10 million, with a first monthly threshold of $833,333.

Employers must pay an additional 0.5% surcharge if they pay Victorian taxable wages and their national wages exceed the second annual threshold of $100 million, with a second monthly threshold of $8,333,333.

If an employer is part of a group of employers, these thresholds apply at the group level.

If an employer has not been an employer for a full financial year, the annual thresholds are adjusted proportionately. In respect of the period from 1 January 2022 to 30 June 2022 (known as the transitional period), the respective annual thresholds are $5 million and $50 million.

Any wages that are subject to Victorian payroll tax will also be subject to the surcharge and any wages exempt from payroll tax (this would include wages paid or payable to an employee who is taking primary or secondary caregiver leave or who is absent from work to volunteer as a firefighter or respond to other emergencies) will also be exempt from the surcharge.

If you are interested in doing business in Australia, find out everything you need to know about payroll, tax, social security, employee benefits, work permits, employment law, and more in the activpayroll Guide to Doing Business in Australia. This is available as a free PDF to download.

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