NSW Payroll Tax Grouping Provisions
Understanding the rules
In recent years NSW Office of State Revenue (OSR) has increased its audit activities in the payroll tax area, particularly with respect to grouping and contractors’ payments.
In relation to payroll tax audit grouping provisions many employers fail to recognise that grouping applies in their circumstances. Other employers may recognise grouping, but fail to understand how it impacts their payroll tax returns and liability.
For payroll tax purposes, businesses may be grouped with other businesses if there is a link between the entities. Where two or more businesses are grouped, only a single threshold deduction applies to the group. Also, each member of the group is liable for any outstanding payroll tax of the other group members.
WHEN WILL BUSINESSES BE GROUPED?
Under the Payroll Tax Act 2007 (NSW) a group can be formed in any of the following ways:
All corporations that meet the definition of related companies provided in the Corporations Act 2001 are grouped. The related corporations grouping only apply to companies. Companies are taken to be related if two or more companies are:
- a holding company and a subsidiary
• both subsidiaries of the same holding company
Use of common employees
Businesses are grouped when an agreement for services between two or more businesses results in the employees of one business performing duties as an employee for another business. This provision does not apply to all inter-business agreements for services.
Commonly controlled businesses
Two businesses controlled by the same person or persons are grouped. All persons common to two businesses will have their interests combined. A ‘person’ means a natural personal, trustee or corporate entity. A controlling interest can occur when a person(s) together have a controlling interest of more than 50% across different entities.
A larger group can be formed out of multiple smaller groups using the following two methods:
- a business is a member of two or more groups at the same time.
- the members of a group have together a controlling interest in another business.
Where two or more entities are grouped, a business may apply in writing to be excluded from the group. The Chief Commissioner may grant an exclusion if satisfied the business is conducted independently and not connected with any other group member. When making a determination the Chief Commissioner will consider any matters he considers relevant in addition to the nature of the business and nature and degree of ownership and control.
Employers should take appropriate steps to be prepared for an audit by undertaking a review of their current Payroll tax processes and procedures. If you require assistance with NSW payroll tax or your business has been selected for a Payroll Tax Audit and you have been requested to complete an Employers Questionnaire you should contact us on (02) 9223 9166 to get assistance with completing this form and discussing your options. Alternatively you can submit an online enquiry form.