What is the Mental Health and Wellbeing Surcharge? March 25, 2022

Victoria’s mental health system is set for a financial boost with the introduction of the Mental Health and Wellbeing Surcharge

From 1 January 2022, the Mental Health and Wellbeing Surcharge is payable on Victorian taxable wages. It is aimed at providing a “stable and dedicated form of additional funding for [Victoria’s] mental health system.” It was introduced following the 2021 Royal Commission into Victoria’s Mental Health System, which proposed the Surcharge as one of 65 recommendations in its Final Report. The Surcharge is forecast to raise more than $800 million, which the Victorian Government has committed to use solely for implementing the other recommendations to improve mental health services.

Who pays the Mental Health and Wellbeing Surcharge?

During the transition period of 1 January 2022 to 30 June 2022, you must pay the Surcharge if: 

1. You pay Victorian taxable wages; and 
2. Your Australian wages exceed $5 million in the transition period

You must pay an additional Surcharge if:

1. You pay Victorian taxable wages; and 
2. Your Australian wages exceed the second threshold of $50 million in the transition period

Following the six month transition period, these thresholds will become annual thresholds of $10 million and $100 million respectively. Alternatively, monthly thresholds of $833,333 and $8,333,333 may be used.

All wages that are subject to Victorian payroll tax are subject to the Mental Health and Wellbeing Surcharge.

The thresholds are applied at the group level for groups of employers. Further, the annual wage thresholds are adjusted proportionally for employers who employ for periods less than the full financial year. They are also adjusted if you are liable to pay wages in another Australian jurisdiction.

For example, if Company A employed only in Victoria for 200 days out of the 2022-23 financial year, the first and second annual thresholds are calculated as:

$10,000,000 x (200/365) =  $5,479,452.05

$100,000,000 x (200/365) = $54,794,520.55

Further, if Company B employs for the entire 2022-23 year, but pays $50 million in wages in Victoria and $30 million in wages in New South Wales, the first and second annual thresholds are calculated as:

$10,000,000 x ($50,000,000 / ($50,000,000+$30,000,000)) = $6,250,000

$100,000,000 x ($50,000,000 / ($50,000,000+$30,000,000)) = $62,500,000

How much is the Mental Health and Wellbeing Surcharge?

The Surcharge constitutes 0.5% of annual Victorian taxable wages over $10,000 (or $833,333 on a monthly basis). There is an extra Surcharge of an additional 0.5% of any Victorian taxable wages over $100 million (or $8,333,333 on a monthly basis).

The thresholds may be adjusted as explained above, but the Surcharge amount will remain the same.

When and how is the Mental Health and Wellbeing Surcharge paid?

The Surcharge is payable alongside payroll tax. If you pay payroll tax on a monthly basis, you will also pay the Surcharge on a monthly basis. If you pay payroll tax annually, you will pay the Surcharge annually. There is no need to separately register or lodge a separate return.

The final word

Although the Government has attempted to streamline the Surcharge requirements, many employers may find implementation complex or difficult. It’s a good idea to seek financial and legal help as soon as possible to avoid mistakes. Contact us for more information about the Mental Health and Wellbeing Surcharge.