Victoria’s new Mental Health surcharge levy

Employers with a payroll that exceeds $10m and that pay Victorian wages will soon be paying an additional levy to fund Victoria’s mental health system.  The final report into mental health and wellbeing in Victoria states that we now have “a mental health system that fails to support, and in some instances even harms, those who turn to it.  Demand has outstripped supply; the system reacts to mental health crises, rather than preventing them…

What is it?

In response to the Royal Commission into Victoria’s mental health system, the Victorian Government has introduced a mental health and wellbeing surcharge, which it describes as “a revenue mechanism that will provide a stable and dedicated form of additional funding for the mental health system”.

There are two surcharges based on Victorian taxable wages of $10m and $100m.  Each surcharge is 0.5% over the threshold.

When does it start?

The additional levy is applicable from 1 January 2022 and applies to taxable wages paid or payable from this date.

How much is it?

The surcharge is applicable if you pay Victorian taxable wages, and your Australian wages exceed the first and second thresholds. The surcharge is payable on the amount over the thresholds.  The thresholds apply at the group level if you are a member of a group.

The first surcharge is 0.5% of Victorian taxable wages if your Australian wages exceed $10,000,000 ($833,333 per month).  The second additional surcharge is another 0.5% of Victorian taxable wages if your Australian wages exceed $100,000,000 ($8,333,333 per month).

The period of 1 January 2022 to 30 June 2022 is considered a transitional period, where the relevant thresholds for this 6-month window are $5,000,000 and $50,000,000.

The definition of wages is consistent with payroll tax, so wages subject to payroll tax will be subject to the surcharge and wages exempt from payroll tax will be exempt from the surcharge. 

Finally, there are adjustments for employers who operate for part of the year and for employers with employees in other States.

Who pays it and how?

Employers with Victorian taxable wages need to pay the surcharge if they exceed the thresholds.  

The surcharge is payable at the same time as payroll tax is. If you pay payroll tax monthly, then you pay the surcharge monthly.  If you pay payroll tax annually, then you pay the surcharge annually.  There will be no need to lodge separate payroll tax and mental health levy returns.

The Victorian State Revenue Office has established an FAQ about the surcharge here. Alternatively contact your Accru advisor for assistance with surcharge enquiries.

About the Author
Daniel Arnephy
Daniel is our technical expert for all your taxation needs. His diverse network and client base allows him to continuously build his knowledge and analyse every situation he is faced with an experienced outlook.
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