To assist you in ensuring your business understands and meets it’s payroll tax obligations, this blog highlights some of the common errors and misunderstandings that are to be avoided.
Contractors
Contractors vs employees
You must consider the full relationship when deciding if your contractor is really an employee. This includes the following factors:
- The degree of control that the business operator can exercise over the worker.
- The nature of the relationship between the parties.
- The purpose of a contract is to achieve a ‘given result’.
- The worker is conducting their own business as distinct from participating in the business of the business operator.
- The right to delegate is initiated and carried out by the worker and not controlled by the business operator.
- The worker bears the commercial risk and responsibility for rectification and injury.
- The provision of tools, equipment and assets without reimbursement or an allowance being paid.
- Other factors detailed in Revenue Ruling PTA 038.
Even if the contract says they are an independent contractor, they may still be an employee and the contractor exemptions will not apply. Having an ABN specifically does not automatically mean that a worker is a contractor.
There is also the possibility that superannuation is required to be paid for some of these contractor payments.
Contractor exemption – 180 days vs 90 days rule
The 180 day exemption focuses on the type of services the business uses. The 90 day exemption focuses on the contractor and the number of days they provide their services. The 180-day exemption does not extend the 90-day exemption.
Contractor exemption – services approved by the Commissioner as exempt – ordinarily rendering services to the public:
A contract is exempt from payroll tax if the contractor provided services of that type to:
- two or more businesses (not members of a group) during the financial year, and
- the business claiming the exemption for an average of 10 days or less per month (excluding the months in which no services were provided).
Contractor exemption – contractors engaging labour
Payments made to a contractor are exempt if they engage two or more workers to provide the contracted services. For the exemption to apply, the services performed must be for that contract only.
For more information, read the contractors page.
Grouping
Failing to recognise grouping of employers
For payroll tax purposes, businesses can be grouped with other businesses if there is a link between the companies. Grouping can occur regardless of where the businesses operate. Grouping has important implications for calculating threshold entitlements.
Where a group exists:
- the threshold entitlement is based on the proportion of NSW wages against total Australian wages
- a single threshold deduction applies to the group
- every member of the group is liable for any outstanding payroll tax of other group members.
What should I do if I find an error?
If you fail to include all liable amounts in your monthly payroll tax returns for the current financial year, you should ensure these amounts are included in your Annual Reconciliation Return. If you identify you haven’t included all amounts in your payroll tax returns for previous financial years, please contact your Account Manager on 1300 533 787 so we can help you arrange a voluntary disclosure.
Keeping Company is a team of experts; Cloud Accountants, Business Advisors, Finance Specialists working together to provide a complete solution for the Australian Small to Medium Business owner.
The information provided here is general for Australians and should not be your only source of information. We recommend consulting an experienced Chartered Accountant or Registered Tax Agent as each business’s circumstance will vary.
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For all media enquires please contact Tracy Miller, CMO, Keeping Company 0414 898 452.