The State Revenue Office announced in Payroll Tax Bulletin Oct 11 PTX 1/11 an ‘opportunity’ for employers (including employment agencies) to make a voluntarily disclosure of payroll tax liabilities where they have used a discretionary trust to restructure the payment of wages to employees or contractors as trust distributions to beneficiaries. The opportunity to make a voluntary disclosure ends on 4 November 2011.
The Bulletin states that investigations by the State Revenue Office, Victoria (SRO) have found that some employment agencies were utilising a discretionary trust structure for the purpose of classifying payments made to their employees as distributions to beneficiaries and thereby avoiding payroll tax on those payments.
In cases investigated, the payments made by the agencies were:
- commensurate with the services performed by the ‘beneficiary’;
- paid on a regular basis; and
- were not discretionary.
In these cases, the SRO takes the view that such payments are wages for payroll tax purposes. The SRO will also take the same view where a similar arrangement is utilised by other employers.
Employers may make a voluntary disclosure before close of business 4 November 2011. The disclosure period should cover each financial year commencing from 1 July 2007 to the current month. A penalty tax of 5% plus the applicable market rate of interest will be applied to any payroll tax liability.
It is noted however that an employer is not precluded from making a voluntary disclosure at any time after expiry of the SRO’s time limit. A voluntary disclosure of a payroll tax liability made by an employer before or during an investigation would have penalties imposed in accordance with Revenue Ruling TAA.007. The implication is that where an employer has used this kind of scheme, the SRO will not be inclined to reduce the statutory penalties.