Data matching of payment information between the various State Government revenue offices, the ATO, ASIC and Workcover is leading much greater scrutiny and generating more enquiries regarding payroll tax.
The three most common areas that are being targeted are contractor payments, interstate employees and grouping.
Contractor payments
Payments to contractors for services may be taxable. Many businesses assume that these payments are not included for payroll tax purposes. It does not matter if the contractor is a company or trust. The starting point is to assume all contractor payments for services are “relevant contracts” for payroll tax and then see if one of the 9 exemptions apply to exclude the payments.
Where an exemption is being claimed, it is essential that documentary evidence can be provided. Proper documentation includes written contractor agreements, records of the days worked during the year and confirmation if the contractor will be engaging others to provide the services they are contracting for. We recommend that businesses review their current contractor agreements and their “on-boarding” process to ensure adequate records exist to support any exemption claimed.
Interstate Employees
With the trend for many workers to work remotely, employers may not have considered if they also need to register for payroll tax in other states. Many employers incorrectly assume that they fall under the payroll tax threshold in the other state. The aggregation of total taxable Australian wages when working out your threshold means that even one employee interstate will require registration for payroll tax in that state. Monitoring employees home address where services are performed should be checked regularly.
Grouping
Whilst an employer may fall under the payroll tax threshold individually, careful consideration should be given to related or connected businesses which operate to group all the taxable wages to determine if payroll tax is payable. The grouping rules are complex and may often require specialist legal advice. For example a business can be grouped with another for payroll tax purposes simply by having a common employee who performs services for both businesses.
Payroll tax reviews will often look back at the last 5 years. Incorrect reporting can lead to substantial liabilities and penalties over many years.
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