Payroll tax changes in 2018-19 South Australian State Budget 

The 2018-19 South Australian Budget was delivered on 4 September 2018 and included, among other things, proposed changes to the application of South Australian payroll tax rules. Specifically, it was announced that from 1 January 2019, payroll tax for businesses with annual taxable payrolls below AUD 1.5 million will be abolished. Furthermore, payroll tax rates for businesses with annual taxable payrolls between AUD 1.5 million and AUD 1.7 million will be set from 0 per cent at AUD1.5 million to increase proportionately to 4.95 per cent at AUD 1.7 million in taxable annual wages.  

Single Touch Payroll exemption for foreign employees 

The Australian Taxation Office (ATO) has released guidance for taxpayers which outline a number of circumstances in which Single Touch Payroll (STP) reporting exemptions can be accessed by employers in respect of a particular financial year, certain payments, or for certain employees.  

Where an employer is eligible for an STP reporting exemption, they must continue to comply with their existing PAYG withholding obligations, including reporting and paying PAYG withholding liabilities, issuing payment summaries to employees, and lodging a payment summary annual report with the ATO at the end of the financial year. 

This guidance indicates that an employer will be exempt from reporting payments to a foreign employee via STP if all of the following requirements have been satisfied: 

  1. The employee is employed by an offshore entity.
  2. The employee is present in Australia on a secondment.
  3. All or part of the employee’s base salary and other remuneration is paid by an offshore entity.
  4. The employer maintains a shadow payroll arrangement for the employee and internal tax equalisation and protection policies.

Employers do not need to apply for this exemption or advise the ATO, however, if this exemption is used, the employer should keep records that support this decision.

The ATO has advised that further reporting relief is still being considered. 

Payroll tax appeal decision handed down concerning amounts distributed via express trust (VIC) 

In Commissioner of State Revenue v The Optical Superstore Pty Ltd [2018] VSC 524, the Supreme Court of Victoria upheld the earlier decision of the Victorian Civil and Administrative Tribunal, finding that payroll tax was not payable on certain net consultation fees made to optometrists by the owner of the clinic and premises at which the optometrists used to treat their customers.  

In particular, the Supreme Court considered on appeal whether the amounts distributed to the optometrists were amounts “paid or payable” for the purposes of the Pay-Roll Tax Act 1971 (VIC) and Payroll Tax Act 2007 (VIC) and whether the distributions were made “for or in relation to the performance of work” in accordance with the relevant contract provisions. The Court ultimately found that in circumstances where a distribution is made to a beneficiary under an express trust, the money distributed already belongs to the beneficiary and therefore cannot satisfy the requirements to be considered “paid or payable” under the Payroll Tax Acts. This was contrasted by the Court to a discretionary trust, where the declaration of the Trustee to make a distribution may be taken to constitute an amount that is “paid or payable” for payroll tax purposes.  

Despite finding in favour of the taxpayer in this respect, the Court accepted the Commissioner’s submission that if the distribution under the express trusts had instead been found to constitute “payments” within the meaning of the Payroll Tax Acts, they would also be “payment for or in relation to the performance of work” under the relevant contract provisions. 

Expansion of TPRS  The legislation (Treasury Laws Amendment (Black Economy Taskforce Measures No 1) Bill 2018) to extend the existing Taxable Payments Reporting System (TPRS) so that it will apply to entities that provide courier or cleaning services has completed its passage through Parliament. Taxpayers affected by this new rule will need to review their payments made to contractors from 1 July 2018 and completeand subsequently  lodge with the ATO a Taxable Payments Annual Report disclosing details of transactions that involve engaging other entities to undertake courier or cleaning services. In addition, legislation to give effect to this year’s Federal Budget proposal to extend the TPRS to cover the road freight, information technology (IT), and security, investigation or surveillance services sector was introduced into Parliament and is proposed to apply from 1 July 2019.  

Fringe Benefits Tax Working Group – Key messages 

The ATO has released during the month details of the Fringe Benefits Tax (FBT) Working initial meeting held on 11 July 2018. The group’s purpose is to explore areas of FBT compliance difficulties for employers and develop practical guidance on areas of FBT law where there is often uncertainty. 

The group spoke about the need for improvements to ATO minor benefits exemption guidance and examples for taxpayers, the possibility of aligning the fourth quarterly FBT instalment with the FBT return lodgment due date. Further updates are expected at the next meeting of the working group. 

ACT Tribunal considers ‘Beneficial Organisation Determination’ for payroll tax purposes 

The ACT Civil and Administrative Tribunal in Australian Pork Limited v Commissioner for ACT Revenue has confirmed the decision of the Commissioner which declined to make a ‘Beneficial Organisation Determination’ for payroll tax purposes. Although the organisation was one promoting trade, industry or commerce, it did not satisfy the requirements in s18F of the Taxation Administration Act 1999 (ACT) to be granted an exemption from payroll tax.