Revenue authorities are becoming increasingly active in pursuing payroll tax compliance. King & Wood Mallesons has been involved in various payroll tax matters for some time. We have recently observed a marked increase in the number of payroll tax audits being conducted by revenue authorities around Australia, especially in the resources sector.
Listed mining services companies in the spotlight
We have observed a pattern of revenue authorities systematically targeting one particular industry at a time. The focus in the recent past has been on the financial services and health care industries. We are now seeing revenue authorities aggressively targeting listed mining services companies.
A key area of focus of mining services industry audits has been the application of the grouping provisions and the use of common employees between otherwise independent businesses.
Payroll tax grouping risk
For listed mining services companies that operate several businesses in separate structures, it is common for employees to be shared amongst the various businesses. That sharing attracts potential grouping concerns.
Under the harmonised payroll tax provisions (all jurisdictions except WA), employers will be grouped where:
- they are “related corporations” under the Corporations Act;
- there is a use of common employees; or
- the same person(s) have a controlling interest in the businesses carried on by those persons.
Tracing provisions also apply to look through the interests held in corporations.
While not subscribing to the harmonised payroll tax provisions, Western Australia has similar grouping provisions.
Discretion is often the key
The use of common employees is a key area being investigated and targeted by revenue authorities due to the breadth of the provisions. Importantly, revenue authorities have a discretion to de-group businesses that are prima facie grouped due to the common use of employees. Our experience is that having a revenue authority exercise its discretion is often the key to a successful outcome.
Review your corporate structure
We recommend you review your payroll tax arrangements to confirm compliance with payroll tax grouping provisions. Substantially reduced penalties apply where a company voluntarily discloses a default in its tax liability prior to an investigation being commenced by a revenue authority.
King & Wood Mallesons has the experience and expertise to successfully resolve payroll tax disputes with revenue authorities across Australia. We perform second opinion “health checks” on business structures to ensure they are payroll tax compliant, provide strategic advice based on our advisory and disputes experience, provide second opinions where a higher level of assurance is needed and prepare evidence and provide litigation support where early resolution is unsuccessful.
Flexible fee arrangements are available to assist you in managing costs from start to finish.