Case Studies: Payroll Tax – Employment Agency Provisions

An employment agency contract is a contract under which a person (an employment agent) procures the services of another person (the worker) for a client of the employment agent.

The Payroll Tax Act says that the employment agent under an employment agency contract is deemed to be the employer and the payments are subject to the payroll tax provisions. Conversely, the worker who provides services to the client become the employee of the employment agent.

However, the payments are not subject to payroll tax where they would be exempt from tax had the worker been paid by the client as an employee but to claim the exemption the client must provide a declaration to the employment agent as required by the Commissioner’s Public Ruling. In Queensland the public ruling can be found at

Generally, it is sufficient to obtain the declaration once every year. But failure to obtain the declaration can result in the wages to the worker being subject to payroll tax.

Case Study One – Cleaning business supplies cleaners to multiple retailers

Client referred to us by his accountant.

A large cleaning contractor provided cleaners for a large chain of supermarkets and other retailers across multiple sites in Queensland and other States.

The cleaners were a mixture of employees, ‘mum and dad operators’, contractors and staff from other smaller cleaning businesses.

The OSR alleged that the cleaning contractor was deemed to be an employment agent for the retailers and the retailers who benefited from the labour were the clients of the cleaning contractor.

Assessments were issued against our client claiming several millions of dollars in payroll tax, arrears, penalties and interest.

We objected to the assessments on the basis that our client’s cleaners did not comprise nor were added to the workforce of our client’s customers for the conduct of their businesses. It was an important distinguishing feature and one that had already recently been decided in favour of the taxpayer in the New South Wales Supreme Court in JP Property Services Pty Ltd v Chief Commissioner of State Revenue 2017 ATC 20-634; [2017] NSWSC 1391.

We lodged an objection against the assessments and our objections were upheld.

Several millions of dollars saved by the client.