2018 Payroll Tax Annual Reconciliation - Revenue NSW
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2018 Payroll Tax Annual Reconciliation
On the agenda • What is payroll tax • Thresholds and tax rates • Nexus provision • Liable wages • Contractor payments • Employment Agency contracts • Exemptions and rebates • Grouping provisions • Recent cases • What’s new 2017 – 18 • Small Business Grant • Annual reconciliation demonstration
What is Payroll Tax?
Annual
Harmonised
threshold,
legislation
lodged monthly
Liable wages for
employees or
Self-assessed Grouping
‘deemed
tax provisions
employees’
(contractors)
Tax-Free Threshold – 2017 -18
Liability in a state exists if:
• services are performed wholly in that state
• Australia-wide wages exceeds threshold
* Note: Once total gross wages reach a certain amount threshold disappears
NSW SA VIC QLD
• $750,000 • $600,000 • $625,000 • $1,100,000*
5.45% 4.95% 4.85% or 3.65% 4.75%
NT TAS WA ACT
• $1,500,000* • $1,250,000 • $850,000* • $2,000,000
5.5% 6.1% 5.5% 6.85%
Revenue Office Information
payrolltax.gov.au
NSW SA VIC QLD
revenue.nsw.gov.au revenuesa.sa.gov.au sro.vic.gov.au qld.gov.au/osr
1300 139 815 08 8204 9880 13 21 61 1300 300 734
NT TAS WA ACT
treasury.nt.gov.au sro.tas.gov.au osr.wa.gov.au revenue.act.gov.au
1300 305 353 03 6166 4400 08 9262 1300 02 6207 0079
Tax-Free Threshold
Total Australian Wages: $1,500,000 Adjusted
NSW tax-free threshold:
$600,000
X $750,000
$1,500,000
Adjusted NSW = $300,000
South Australian
$600,000
tax-free threshold:
$300,000 SA
X $600,000 $300,000 Adjusted Victorian
$1,500,000
tax-free threshold:
= $120,000 VIC
$600,000
$600,000 X $575,000
$1,500,000
= $230,000
PTA – 039
Where are wages taxable?
Local and Interstate employees
An area of confusion with payroll tax is how to treat wages paid to workers
who work in other states/territories or overseas
General Rule
WHOLLY IN RULE
The work is performed solely in Wages taxable in that state
one state in a month
PTA – 039
Working in multiple locations
Wages taxable where:
1. The employee’s principal place of
residence is located
PARTLY IN RULE
• If no principal place of residence
The work is performed in more then
than one state (or partly overseas)
in a month 2. The employer’s business is registered
• If employer’s business is not
registered in Australia or does not
have a principle place of residence
(PPR) then
PTA – 039
Working in multiple locations continued
Wages taxable where:
3. The bank account the employee’s
wages are paid into
PARTLY IN RULE
• If not paid into an Australian bank
The work is performed in more account then
than one state (or partly overseas)
in a month 4. Where the work is predominately
performed
PTA – 039
Working overseas
> 6 months - exempt
WHOLLY OUT RULE
Employees working overseas
< 6 months – where paid
Work performed only in one state
Taxable in that state
Employees from overseas
Work performed in more than one
state
Test 2. to 4. appliesTax-Free Threshold – 2017 -18
Salaries and
Allowances
• Wages above $750,000 Apprentice/
NSW tax-free threshold Shares and trainee
options payments
• Rate is 5.45%
• Threshold reduced by: Remuneration
‘Wages’
• Interstate wages Leave and
Directors
fees and
• Part-year employment Termination
contractor
payments
• Business groupings payments
Super,
Bonuses
Fringe
and
benefits
CommissionsPTA – 005v2
Allowances
PTA – 011
PTA – 024
Allowances Liable
PTA – 025
NOT Liable
Reimbursements*
(unless subject to FBT)
* Substantiated with receipts/claim etcExempt Allowances
Motor Vehicle
Must be employee’s own car
Exempt up
to 66c per
Must be for business travel km
! Substantiation RequiredExempt Allowances
Motor Vehicle
Exemption Kilometres Rate (66c)
Example
Fixed allowance amount: $200
Business kilometres travelled: 100km
Less exempt component (100km X 66 cents) - $66
Taxable portion of allowance $134Exempt Allowances
Accommodation
ATO reasonable amounts for
daily travel
$266.70 per night exempt
Room $138.00
where paid to the employee
Incidentals $19.35
Meals $109.90
$266.70
Reimbursement Charge-backsExempt Allowances Accommodation Example 1 Mr Beard travels from Sydney to Melbourne to attend a work meeting and is required to stay overnight. He is paid a daily allowance of $300 to cover room, meals and incidentals. Allowance $300.00 Less exempt amount $266.70 To declare for payroll tax purposes $33.30
Exempt Allowances Accommodation Example 2 Mr Beard travels from Sydney to Newcastle to attend a work meeting and is required to stay overnight. His employer organises and pays for his accommodation, however he is paid a daily allowance of $150 to cover meals and incidentals. Allowance $150.00 Less exempt amount for meals and incidentals $129.25 To declare for payroll tax purposes $20.75
PTA – 005v2
Exempt Allowances
Living Away from Home Allowance
!
Normally triggers an
FBT liability
Don’t double
declarePTA – 003
Fringe Benefits Tax
Golden Rule:
“If it is Fringe Benefits Taxable
it is Payroll Taxable”PTA – 003
Fringe Benefits Tax
Actual
OR
Estimated?Fringe Benefits - Wages Actual Method Calculate the grossed up fringe benefits each calendar month and declare that amount in each monthly return = (Type 1 + Type 2 benefits) x Type 2 rate The Type 2 rate is 1.8868
Fringe Benefits - Wages
Estimated / Alternative method
Monthly Declare 1/12th of the grossed up FBs
Returns (1 April 2016 – 31 March 2017)
Annual Declare full year’s grossed up FBs
Reconciliation (1 April 2017 – 31 March 2018)Fringe Benefits - Wages
Declare the relevant component of the total
Fringe Benefits provided in each state
Australian wages Total fringe benefits
$250,000 NSW Wages 25% % declared
in NSW
Vic wages
% declared
$750,000 75% in VicPTA – 030
Superannuation Contributions
All pre-tax superannuation
contributions are liable
Deemed Company
Employees
employees directors
SGC >SGC Salary Top-up
Amounts Amounts sacrifice contributionsPTA – 030
Shares and Options
Value of shares or options on ‘the relevant day’
less any consideration paid by employee
Grant date Vesting date
Market value or amount determined by
Income Tax Assessment Act 1997PTA – 004
Termination Payments
Employee
Liable Termination Pay in lieu
Payments
Director Contract
termination payouts
Income tax free components
Contractor Golden
of a genuine redundancy
termination handshakes
OR early retirement scheme
All leave paid
Severance
on
payments
terminationPTA – 016
Leave Payments
Leave payments
are liable
Sick leave Leave loading Maternity, paternity
and adoption leave
Long service are not taxable
Annual leave
leavePTA – 016
Director’s Fees
Directors fees are
liable
Non-working Working
Directors Directors
Profit
Regardless of Distribution
where paid toThird-party payments
Partner / Spouse
Private Company
$
Super fund
Outsourced
‘ Don’t pay me, please pay it to..’ payroll packaging
companyPTA – 038
Employee or Contractor?
Totality of the relationship
• Control
• Formation / Terms of Contract
• Integration
• Risk
• Leave entitlements
• Super
• Tools, materials, equipment
• DelegationContractor Exemptions
One Specific Six General
90 days 180 days
(PTA-035 v2) (PTA-020)
Owner drivers Engaging others Labour ancillary
(PTA-006) (PTA-023) (PTA-033)
Services not Services rendered
ordinarily required to the public
(PTA-022) (PTA-021)PTA – 018
Contractor Provisions
PTA – 019
Full amount paid Approved
to the contractor
GST Liable wages
less less DeductionPTA – 026
Employment agent contracts
Employment agents generally provide two kinds of service: PTA – 027
PTA – 028
Results in direct hire of the worker as an
Placement Employee or contractor of the client.
PTA – 029
Contracts Client is liable for tax on wages going
forward
Results in indirect hire. The worker is
Labour hire procured by the agency and on-hired to work
contracts in a client’s business but does not become
an employee of the client. Agency is liable
for tax on wages going forwardEmployment agency contracts
AGENT
$$$
Payment for
Service $$$
Liable Agency Fees
Wages
CLIENT
SERVICE
*Service Provider PROVIDER !
can be a company
*Employment agency contracts
• The agency is the only liable party to the contract
• Exemption – If the client of the employment agent is exempt from payroll
tax, the employment agent is also exempt
• Approved declaration required
Example: An employment agent provides nurses to public hospitals.
NOTE: State and Commonwealth agencies are not exempt from payroll taxExemptions – Employer based
• Religious bodies
• Non-profit organisations having solely or dominantly charitable,
benevolent, philanthropic or patriotic purposes
• Educational Institutions – up to Secondary level, non-govt, and non-profit
• Health care service providers - e.g. Ambulance Service, Home Care Service,
Public and non-profit private hospitals.
• Non-profit Group Apprenticeship and Traineeship Schemes
• Local and county councils
• except prescribed trading activities
NOTE: only applies to wages paid:
• For core activities
• To persons exclusively engaged in such activitiesPTA – 012
Exempt Employers
PTA – 037
Substantiation
! Required
Leave as a result of membership
Defence of the Defence Force or Armed
Forces is exempt
Force
Reserves
Duty Maternity /
14 weeks full-time or part time
equivalent is exempt
Paternity &
Adoption
Leave
Fire and Paid Parental
Emergency Leave
Services (C’wealth)
not liable
Exempt where employee does Duty
not take ‘official leave’PTA – 015
Payments not liable
Worker’s Compensation
Valid work cover claim
lodged?
Compensation
amounts not liable Top-up pay liablePayments not liable • Workers compensation up to limit (PTA015) • Dividends, partnership drawings (PTA016) • Trust distributions (PTA016) • GST payments (PTA008) • Direct reimbursements (PTA011) • Commonwealth paid parental leave (PTA037) • Jury Duty (payments from the courts)
Rebates and incentives
Apprentice and Trainee Rebate
• Rebate is for all wages paid to workers approved by
NSW Department of Industry (DOI) under the
Apprenticeship and Traineeship Act 2001 who are:
• Apprentices
• New Entrant Trainees that have not been
employed for more than 3 months full-time or 12
months part-time/casual
• Rebate is claimed on all their wages as an offset
against your payroll tax liability
• Can be claimed monthly or annuallyJAP - 002
Rebates and incentives
Jobs Action Plan Rebate
• All new jobs from 1 July 2011 to 30 June 2019
Incentive to create
new jobs in NSW • Up to $6000 payroll tax rebate
• Paid in two parts after 1st and 2nd anniversary
• Complete online application within 90 days of hiring
How to apply a new employee
and claim • Provide details of new job and FTE
• Lodge claim within 30 days of anniversary
• New employee
Eligibility • Employment maintained for two years
• Employee wholly/mainly works in NSWRebates and incentives
Who is not eligible?
Person whom
Continuation you are
of previous already Greater than
employment – entitled to
Person is 50 FTE
merger , other State
takeovers * subject to
assistance
Person is not another Contractors
a new payroll tax and agency
employee rebate e.g. workers
apprentice/
trainee
* Note:
• Amendments were made to allow the transfer of employees between group members or when there is a
merger or takeover.
• Provided the original employer would have been eligible for the rebate had they not transferred the
employees then the new employer will also be eligible.Rebates and incentives
Payment of the rebate for Jobs Action Plan
For employment commencing on or after 31 July 2016,
businesses who have a full time equivalent (FTE) of greater
than 50 will be seen as excluded employment under section 12
of the Payroll Tax Rebate Scheme (Jobs Action Plan) Act 2011
New jobs from 31 July 2016:
*$2,000 for 1st year
*$4,000 for 2nd year
NOTE: The rebate is pro-rated for part-time and casual jobsNSW FTE employees on a particular date
FTE F A/B
• F = number of full time employees, on the start date
• A = number of hours worked by your part time NSW employees in the
preceding pay period
• B = average number of hours worked by your full time NSW employees in
the preceding pay period
Example: J Citizen starts work on 1 September 2017.
FTE excluding new employee: 12 + 17.5/35 = 12.5
• As at 1 September 2018, the FTE has to be higher than 12.5 to lodge a claimGrouping Provisions Background
Deduction based on
One deduction for Joint and several
groups total
the group liability
Australian wagesForming a group
Related
bodies
corporate
Use of
common
employees
FORMING
A GROUP
Tracing of
interest
Common
controlForming a group
Related
bodies
corporate
Use of
common
employees
FORMING
A GROUP
Tracing of
interest
Common
controlRelated bodies corporate
Holding/subsidiary relationship under
Section 50 of the Corporations Act 2001
• Controls composition of board of Directors
One Pty Ltd
• Controls >50% of votes at a general meeting
Two Pty Ltd
• Holds >50% of issued share capital
• Body corporate is a subsidiary of a holding
Three Pty Ltd company of another body corporateRelated bodies corporate
80% Red Pty Ltd 100%
Gold Pty Ltd 70% Grey Pty Ltd
Rust Pty Ltd
50% 60%
Orange Pty Ltd Black Pty LtdForming a group
Related
Use of
common
bodies
employees
corporate
Use of
common
employees
FORMING
A GROUP
Tracing of
interest
Common
controlCommon Employees
Works for
another
Performs
business due
duties solely or
mainly for that
OR to an
agreement
other business
between
businessesUse of common Employees continued An employee of one employer performs duties for a business carried on by another person Mr Rust Ms Red Mr Grey The sole traders Mr Rust, Ms Red and Mr Grey are grouped for payroll tax purposes
Forming a group
Related
Use of
common
bodies
employees
corporate
Use of
Common
common
control
employees
FORMING
A GROUP
Tracing of
interest
Common
controlCommon control
A person, or set of persons together have a
controlling interest in two or more businesses
• Companies
• Trusts
• Sole Trader
• Partnerships
• Incorporated or Unincorporated bodyCommon control
Incorporation Trust
50% of the board or can control More than 50% of units held
composition of the board
Any possible beneficiary of a
Discretionary Trust
Common
Control
Partnership
Company
Entitlement to >50% of profits 1 or 2 or more shareholders with >50%
or capital of the partnership of shares with voting rights
Majority of Directors common to each
businessCommon control
Rust Pty Ltd
40% 40% 20%
80%
Mr Rust Ms Red Mr Grey
50%
100% 50%
Red Pty Ltd
Mr Rust and Ms Red
have common controlBusiness is Part of Two or More Groups
If a business is a member of two or more groups, the members
of the group together are considered as one large group.
Group One Red Pty Ltd Rust Pty Ltd Red Pty Ltd
Rust Pty Ltd
Group Two Red Pty Ltd Grey Pty Ltd
Grey Pty Ltd
Group Three Red Pty Ltd Black Pty Ltd Black Pty LtdPTA - 031
Exclusions
Grouping provisions are broad and may result in unintended groupings.
• Common management? • Nature of businesses? • Share premises?
• Shared resources? • Goods / Services? • Joint loans?
• Trade between business? • Bulk buying?
Chief Commissioner must be satisfied that:
‘a business carried on by the person, is carried on independently of,
and is not connected with the carrying on of, a business carried on
by any other member of that group’
Application for Exclusion from Grouping - Payroll Tax (OPT 018)
http://revenue.nsw.gov.au/sites/default/files/file_manager/opt018.pdfRevenue NSW Cases
Grouping and Trust Disclaimers
Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017]
Issue
Did the execution of trust deed disclaimers retrospectively apply?
Decision
The NSW Supreme Court of Appeal held that:
• Smeaton Grange Holdings Pty Ltd became liable to payroll tax by force of the legislation
for the financial years in question
• Liability under the legislation was to be determined by reference to the actual legal
relationships in existence under the trust
• A subsequent alteration of those relationships by the unilateral act of a discretionary object
could not change the operation of the legislation. The court said that the respondents’
statutory liability was complete before Michael Gerace executed the disclaimers.
https://www.caselaw.nsw.gov.au/decision/5976d031e4b074a7c6e176a6Revenue NSW Cases
Employment agency provisions
Knight Watch Security Services Pty Ltd v Chief Commissioner of State Revenue [2017]
Issue
Was Knight Watch an employment agency and the relevance of Revenue Ruling No. PTA 027
Decision
The Tribunal determined that:
• The security guards worked in the ordinary conduct of its clients' businesses, on the basis of
the limited evidence presented, which showed that the security guards were stationed at
clients' sites, wore uniforms supplied by the clients, and performed their duties in accordance
with instructions given by the managers of the sites
• Knight Watch hadn’t satisfied its onus of proving on the balance of probability by admissible
and probable evidence that any amounts in the assessments were incorrect.
https://www.caselaw.nsw.gov.au/decision/59655852e4b058596cba870dRevenue NSW Cases
Employment agency provisions or contracting provisions
JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017]
Issue
Whether the hiring of cleaning contractors were employment agency contracts or contracts
for services.
Decision
The Court held that:
• Cleaning services were not provided by the cleaners in and for the conduct of the business
of Franklins because they were provided outside of business hours and therefore weren’t
employment agency contracts
• Employment agency provisions applied to a variety of work arrangements and were not
restricted to traditional employment agency contracts.
https://www.caselaw.nsw.gov.au/decision/59ddbda9e4b074a7c6e19632Revenue NSW Cases
Employment agency provisions
Gabi Duta Pty Ltd v Chief Commissioner of State Revenue [2018]
Issue
Whether the hiring of fruit pickers were employment agency contracts or contracts for services.
Decision
The Tribunal found that Gabi Duta Pty Ltd:
• Failed to provide certain information and records requested by the Chief Commissioner to
support its claims
• Had not discharged their onus of proof, and found that they were an employment agent on
the basis that they provided workers to work in their clients’ businesses
• Were just on-hiring agricultural workers to pick grapes and fruit like employees.
https://www.caselaw.nsw.gov.au/decision/5a7cdebee4b058596cbae170Revenue NSW Cases
Contractor and third party payment provisions
Novus Capital Ltd v Chief Commissioner of State Revenue [2018]
Issue
Do Authorised Representatives (ARs) fall under the contractor provisions? If so are they exempt?
Decision
The Tribunal found that:
• ARs were contractors, however, no contractors could be exempted under 90 day test
• Exemption for two or more persons applied where Novus demonstrated that ARs engaged
others (such as other ARs) for the performance of services. Where Novus directly engaged
the services of a third party and performed services for or with an AR, no exemption applied
• The payments from Novus to Cennlen were assessable as Director’s third party payments,
but the calculation of wages was not correct.
https://www.caselaw.nsw.gov.au/decision/5a7cdebee4b058596cbae170Revenue NSW Cases
Employment agency provisions and deemed wages
H R C Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018]
Issue
Did the hotel cleaning services fall under contractor or employment agency provisions?
Decision
The Supreme Court affirmed the decision of the Chief Commissioner that:
• HRC should be assessed as an employment agent as the workers HRC engaged for the
hotels were working in and for the end-users’ businesses as would an employee and not
just for the end-users’ benefit
• That payments made by HRC to the sub-contractor companies (including any profit
component) were “amounts paid in relation to the service provider in respect of the
provision of services in connection with the employment agency contract” and therefore
deemed wages.
https://www.caselaw.nsw.gov.au/decision/5a7cdebee4b058596cbae170Revenue NSW Cases
Liable wages
B & B Stevenson Pty Ltd v Chief Commissioner of State Revenue [2018]
Issue
Were “sub-licence fees” paid from a company to a partnership deemed liable directors fees
Decision
The Tribunal determined that:
• The Stevensons had failed to discharge their onus of proof that the payments made by the
company to the partnership were in the nature of “sub-licence fees”
• Amounts annually paid to the partnership throughout the relevant period had been originally
described as “Management Expenses” in the businesses’ financial accounts, and no other
directors’ fees or salaries had been recorded in respect of the Stevensons’ services
• Payments made to the partnership were directors fees.
https://www.caselaw.nsw.gov.au/decision/5afcdd03e4b087b8baa89114NSW Payroll Tax 2018-19
• Threshold will increase from $750,000 to $850,000
• Future scheduled increases as follows:
Year Threshold amount
2018-19 $850 000
2019-20 $900 000
2020-21 $950 000
2021 onwards $1 000 000
• Rate to remain at 5.45%
• Allowances: exempt components
• Motor vehicle - 66c/km
• Accommodation – $TBA
• Jobs Action Plan rebate scheme
• Starting FTE not greater than 50 (effective from 31 July 2016)
• Transfer SBG applicants to JAP allowed (and vice versa)
• Scheme scheduled to end 30 June 2019
• Applications close 30 September 2019Employment incentives
Small Business Grant – (Non-payroll tax liable clients)
Small Business Grant to
Jobs Action Plan Rebate NEW jobs that increase the
Grant up to $2,000 is paid
FTE created from
after the first anniversary
1 July 2015 to
Business who have already date
30 June 2019
registered for the Small
Business Grant and then Incentive to
become liable for Payroll create jobs in
tax, may be able to transfer NSW
their registration for those
new employees to the Grant available for full-time,
Jobs Action Plan Rebate. Grant is paid to you via EFT
part-time and casual jobsCommon Payroll Tax Mistakes Administrative – Not lodging returns in time = Interest and penalty charges Allowances - not substantiating exempt components Exempt components – Maternity, PPL, Redundancy (Lump Sum D) Fringe benefits – reportable, salary sacrifice, grossing-up, proportioning Superannuation – all amounts including salary sacrifice Third-party payments for Directors Contractors – all liable until exempted Threshold entitlement – proportioned to total Australian wages Apprentices and trainees legitimacy and knowing to claim Grouping – multiple threshold claimants
Payroll Tax
Free Online Services
Monthly calculator Nil returns Factsheets and
• Save each month’s • Must lodge a monthly seminar notes
calculations and return even if it is nil • Download as PDF
upload to the AR on a variety of topics
• Lodge from the monthly
• View return and calculator
payment history
Online payment Email updates Online training
• Calculate and pay in • Sends email alert to • Learn at a pace/time
one easy transaction notify you of changes to convenient to you
legislation, rulings etcPayroll Tax
More information
For further information, please visit www.revenue.nsw.gov.au
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Call Email Web
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