- What is payroll tax?
- Payroll tax is a State or Territory Government tax on wages paid by employers.
- Each State or Territory has its own threshold and rate for payroll tax.
- If your wages are below the threshold then you don’t pay payroll tax.
- Details of each State and Territory threshold and rate of tax can be found here https://www.tobinpartners.com.au/how-payroll-tax-is-calculated-in-australia/
- Is payroll tax also paid on contractor payments?
Unfortunately, yes – where the payments are essentially for the contractor’s labour. However, where the payments fall within one of the exemptions under the Payroll Tax Act then no payroll tax is payable.
Some of the main exemptions under the Payroll Tax Act are where:
- The services of the contractor are ordinarily required for less than 180 days in a financial year. An example might be a ski lodge that engages a ski instructor for less than 180 days in a financial year or a scuba school company that engages an instructor for less than 180 days in a financial year. In both these cases the services of the contractors are required for less than 180 days in a financial year because the seasonal nature of the businesses.
- The services of a contractor are provided for no more than 90 days in a financial year. As long as the contractor is engaged for no more than 90 days then you don’t have to pay payroll tax on the payments to the contractor. However, once you have engaged the contractor for more than 90 days then you must pay payroll tax on all the payments you have made to the contractor throughout the financial year.
- Where the services of a contractor are performed by two or more people. However, both people must be engaged in the actual work. It is not sufficient for one person to carry out the work and the other person to be engaged in administrative work for the business.
- When are businesses grouped for payroll tax?
Two or more businesses may be grouped for payroll tax where:
- If they are companies, they are related to each other such as one is a subsidiary or holding company of the other;
- They share common employees;
- They are controlled by one or more persons whether as directors or shareholders
- What happens where businesses are grouped for payroll tax?
The businesses pay more in payroll tax where they are grouped because only one of the businesses is allowed to claim the threshold. Where the businesses are not grouped they can each claim the threshold amount for payroll tax.
- Is it possible to get around the grouping provisions?
Yes, any member of the group can make an application for exclusion from the group (also known as a de-grouping application). However, you must demonstrate that the business is independent of and is not connected with the carrying on of the business by any other member of the group. It’s not sufficient to say that the businesses are completely different types of businesses such as a service station and a child-care centre. It is more complex than that. Equally, it is possible to succeed on a de-grouping application even though both businesses are in the same type of business such as the restaurant business.
To discuss any of your payroll tax concerns, contact us at Tobin Partners, Lawyers by email or call Peter Tobin 0438 001 809 directly for a confidential discussion.
Disclaimer: This article contains general information only. It should not be relied upon as legal advice. Formal legal advice should be sought on particular matters canvassed.