Understanding payroll tax

Grouping rules

All jurisdictions require ‘grouping’ of associated/related businesses so that, where two or more businesses are grouped, their wages are aggregated in order to determine whether a liability exists. However, each employer in the group remains primarily responsible for the payment of PRT on its own wages.

The main circumstances in which businesses are grouped in the various jurisdictions are:

* where companies are related under the Commonwealth’s Corporations Act (i.e., holding/subsidiary relationship)

* where employees of one business perform duties solely or mainly for the benefit of another business

* where there is an agreement between two businesses relating to the performance of duties by employees of one, for the benefit of the other

* where the same person(s) has a controlling interest in two or more businesses, and

* where a business exercises managerial control over a branch or agency (Qld and WA).

Determining whether a group exists largely hinges on the opinion of the relevant commissioner in each state, having regard to the circumstances of each particular case. Generally, other than in respect to companies related under the corporations law, the commissioner has a discretion to exclude an employer from the operation of the grouping provisions. The discretion may be exercised where it can be demonstrated that the grouped businesses are substantially independent and unconnected, and that the relationship is not designed to reduce or avoid PRT.

Generally, where employers are grouped, one group member claims the exemption threshold and the remaining members must pay a flat rate of PRT.

Inter-jurisdictional issues

Each state/territory prescribes the circumstances in which wages are liable to PRT in that jurisdiction with the broad criteria for establishing liability being:

* the wages are paid or payable in a particular state, unless the wages relate to services rendered wholly in another state

* the wages are paid outside a state (but within Australia) but all the services to which the wages relate were rendered in that particular state, and

* the wages are paid outside Australia in respect to services rendered mainly in a particular state.