Medical and Allied Health Practices

Payroll tax applies to wages paid or payable to common law employees. Common law employees is a phrase which covers most employees in a typical employment situation, but exceptions apply. Payroll tax is payable by a company where its total wage bill (including bonuses and allowances) exceeds $750,000 per quarter.

In New South Wales, relevant contracts can trigger payroll tax obligations even where there is no traditional employer-employee relationship.

Payments under contracts where one party supplies services, is supplied with services or resupplies goods, may be deemed wages and subject to payroll tax.

However, not all relevant contracts trigger tax, and exemptions exist for short-term contracts, subcontracting and where the services are not ordinarily required.

The unique nature of employment agents’ work creates specific considerations
for payroll tax, as employment agents become a person’s employer for payroll
tax purposes when they are engaged to provide work for their client.

The employment agent is responsible for payment of payroll tax for wages,
fringe benefits and super paid to a worker, even though they don’t receive the
benefit of the work.

Limited exemptions exist, but are complex and failure to properly identify the
party responsible for payroll tax can result in penalties.

Companies may be grouped together for payroll tax purposes and treated as one unit for calculating and paying payroll tax, even if they operate separately. This usually occurs when companies are part of a related body corporate, they have common employees or a single controlling interest, or are part of a merged group after a merger or acquisition.

Grouping companies results in a reduced administrative burden and allows the companies to share deductions and liabilities within the group.

Companies may be de-grouped if they can demonstrate that they do not share significant resources or control with others and operate independently from other companies.

De-grouping allows for greater financial independence and operational independence, reducing the risk of being liable for the unpaid tax of other group members.

Grouping and de-grouping are complex matters with potential tax implications, and which require professional advice.