The Basics of Payroll Tax and Grouping Provisions
Many businesses are required to pay Payroll Tax to the Office of State Revenue (OSR). Payroll Tax is a state-based tax imposed on wages that are paid or payable in the relevant state. Wages includes most payments for services made by an employer to employees, directors and contract workers who are deemed to be employees.
An individual employer or a group of employers may be liable for Payroll Tax if their total taxable wages throughout Australia, including NSW, exceeds the $658,000 threshold. This is for the 2010–11 Payroll Tax year where the tax rate is at 5.5 per cent. If the employer is a member of a group, the threshold can only be claimed by one member (the designated group employer). If none of the group members have total Australian wages exceeding the threshold the group must nominate a “Single Lodger” to be responsible for lodging and paying Payroll Tax on behalf of all members of the group.
For Payroll Tax purposes, a group is constituted under the following circumstances:
• use of common employees
• commonly controlled businesses
• inter-company agreements and common financial arrangements
• groups arising from tracing of interests in corporations
• smaller groups subsumed by larger groups.
• trade between the businesses
• shared expenses and resources, including premises
• common customers between the businesses
When one of the members of a group is also a member of another group, the groups will be combined as one group for Payroll Tax purposes. Many businesses are often not aware of this until they receive an audit questionnaire or notice. Recently, the NSW OSR has significantly increased its auditing of payroll activity. As the OSR now has increased access to the ATO, ASIC and WorkCover databases, it is able to easily discover unregistered businesses which have wages in excess of the exemption threshold and those that are grouped with other businesses.
Here at The Quinn Group we can help you with your business’ Payroll Tax issues as well as any questions you have about grouping provisions. For more information submit an online enquiry. If you have received an OSR audit or questionnaire it is vital that you seek professional advice because it is important that all questions be answered accurately. Call us on 1300 QUINNS (784 667) to book an appointment.