Payroll tax is assessed in each state and territory in Australia based on total Australian taxable wages paid or payable to employees.
In broad terms, payroll tax is payable in a particular state or territory when wages are paid for services undertaken by an employee or certain contractor in that particular state or territory.
Payroll tax is payable in a particular state or territory when the total Australian taxable wages paid exceeds the particular threshold of that state or territory.
The thresholds in most states are apportioned based on the total wages paid in that particular state or territory as a proportion of total Australian wages paid.
The term “employee” is not defined in the Payroll Tax Act 2007 (Vic).
Accordingly, the term takes its ordinary or common law meaning.
There are various factors considered by the courts as to whether a particular individual is considered an employee, ranging from control and direction of the employer over the worker, power to delegate, who carries the risk, provision of tools and equipment and contractual terms.
The relevant contract provisions are complex in nature as not all payments are caught under the contractor regime.
But, they’re also quite wide-ranging and include most service agreements.
So, if a payment to a contractor falls under these rules, it usually means you have to pay payroll tax.
However, if a payment is taxable, you should also check if any of the contractor exemptions or reductions apply.
The employment agency regime deems an employment agent to be an employer and the service provider or on-hired worker an employee for payroll tax purposes.
It is important to note that if the employment agency provisions apply, then the contractor exemptions/concessions do not apply.
There are specific exemptions for the employment agency provisions where wages are paid by certain organisations. However, the exemption only applies if relevant declarations in the correct form are provided by such organisations.
The SRO takes a strict view on the timing requirements of a declaration, so it is important to ensure that if you are entitled to an exemption under the employment agency provisions, that such declarations are provided within the specified timeframes to minimise the risk of a dispute.
The payroll tax grouping rules exist to stop businesses from avoiding payroll tax by splitting their activities into separate entities, each aiming to qualify for a tax-free threshold.
These rules apply when any of the grouping conditions come into play.
It’s important to understand that payroll tax grouping applies no matter where a business operates in Australia. This means that even if different parts of a business are in different states, they can still be grouped together for payroll tax.
The Commissioner has the power to remove businesses from a group if specific conditions are met. You can request to be removed from a group either proactively or by objecting to a payroll tax assessment.
While medical and allied health practices do not have any special payroll tax rules per se, it is important to note that there have been increased audits and reviews into whether medical and allied health practices have been paying payroll tax to medical practitioners and allied health practitioners. In light of recent tribunal and court decisions in this space.
At PCL Lawyers our tax lawyers have substantial experience in handling payroll disputes and providing advice to businesses, accountants, and organisations. Payroll tax is state specific in Australian state and we can assist you in any Australian jurisdiction.
We provide concise legal advice with commercial understanding and work with our clients to ensure that they achieve the best outcome, quickly and cost-effectively.
Our advice and attention to detail, particularly in these nuanced practice areas, is of the highest quality. We robustly defend our clients in any disputes. Our legal team works diligently alongside our clients and their advisors to ensure that stakeholders in your business or organisation can navigate the complexities of Victorian Payroll tax.
You want to know that you are getting advice and real solutions. You not only want a lawyer who has strong experience and knowledge in legal matters, but a lawyer who can also navigate you through the commercial realities.Request a meeting