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, and is generally applied to the annual payroll of employers/grouping of linked employers. 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 $658,000 for the 2010 – 11 Payroll Tax year and $678,000 for the 2011–12 Payroll Tax year. If their wage payment is lower than this threshold, they do not have to pay the tax. As soonas their total wages go above this amount, the full tax is applicable to the amount that exceeds the limit.
Businesses that are grouped for payroll tax can only claim one tax free threshold and are jointly and severally liable for any outstanding payroll tax.
Annual threshold 2011-12
1 July 2011 to 30 June 2012
Monthly threshold 2011-12
From 1 July 2011
Payroll tax rates
From 1 July 2011
|29 days = $53,721
|30 days = $55,574
|31 days = $57,426
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 (particularly those operated through discretionary trusts) are often not aware of this until they receive an audit questionnaire or audit notice. Should you be audited and it is found that you have not correctly paid Payroll Tax can potentially result in a five-year OSR assessment with penalties, interest and costing you and your business greatly.
Recently, the NSW OSR has significantly increased its auditing of payroll activity, diligently applying the strict application and enforcement of the law, especially through the use of desk audits and questionnaires. Since 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. The questionnaire is essentially the beginning of an OSR audit, for this reason it is important that all questions be answered accurately. This is the point when many companies find out they are liable to pay Payroll Tax and may find themselves with penalties and interest building up.
Here at The Quinn Group we can help you with your business’ Payroll Tax issues as well as any questions you have about group provisions. Contact us if you are involved in grouping tax debt or for more information on grouping by submitting an online enquiry or call us on 13000 QUINNS (1300 784 667) or on +61 2 9223 9166 to book an appointment.