Payroll Tax Harmonisation

In 2007 Commissioners committed to harmonisation of Payroll Tax administration. Since then, all jurisdictions have fully harmonised in 8 key areas and 5 jurisdictions have implemented fully harmonised legislation. In addition, all jurisdictions have made significant progress in relation to greater administrative consistency including in the area of rulings. By signing a recent protocol Commissioners have ratified and confirmed their continued commitment to the harmonisation process.

As part of Payroll Tax Harmonisation, RevenueSA has also introduced a number of new guides and revenue rulings relating to specific payroll tax matters aimed at ensuring that the administration of the harmonised provisions are consistent between all jurisdictions.  A summary of the harmonisation reforms are available from the following links:

Harmonisation Reforms Effective 1 July 2009

South Australia initially adopted a number of reforms contained in the Payroll Tax (Harmonisation Project) Amendment Act 2008, which came into operation on 1 July 2008.

Consistent with all state and territory Treasurers' agreement to further payroll tax harmonisation, the South Australian Payroll Tax Act 2009 (the "PRT Act")commenced on 1 July 2009.

The commencement of the South Australian PRT Act means that South Australia's payroll tax legislation is now fully harmonised with that of New South Wales, Victoria, Tasmania and the Northern Territory.

Some of the further changes to payroll tax in South Australia that apply from 1 July 2009 are summarised below.

The most significant changes:

  • The due date for lodgement of annual returns will be amended. The current administrative due date of the annual adjustment return will be reduced by 1 week (including the monthly return for June) from 28 July to 21 July of each year. 

See the Payroll Tax Guide to Legislation for further information.

  • Specific provision for the collection and recovery of tax from certain third parties, including agents, trustees, executors and liquidators and provision of indemnities and rights of recovery as between third parties who are required to pay tax and the person on whose behalf the tax is paid.

See the Payroll Tax Guide to Legislation for further information.

  • The current exemption for charitable bodies will be amended to apply to wages paid by a non-profit organisation that has, as its sole or dominant purpose, a charitable purpose rather than a non-profit organisation that has a wholly charitable purpose.

  • Grouping provisions have been aligned. The most substantial change being the requirement that trustee companies be grouped together as related bodies corporate for payroll tax purposes is removed. The amendment to remove trustee companies from the scope of grouped corporations law companies provides a benefit to employers. Although it will still be possible for a trustee company to be grouped with another company in which it holds an interest under other provisions of the PRT Act (such as those relating to commonly controlled businesses), it will no longer be required to treat the companies as related bodies corporate. As a result, the Commissioner will have discretion to exclude persons from the group in appropriate cases.

See the Payroll Tax Guide to Legislation for further information.

  • Contractor and employment agent provisions have been aligned. No substantial changes have been made to the way that the contractor and employment agent provisions are applied to South Australia.

See the Contractors' Information Circular and Employment Agency Information Circular for further information.

Jurisdiction Specific Matters:

In moving to the harmonised legislative model, jurisdictions will have legislative provisions that relate to jurisdiction-specific circumstances.

The most significant of these jurisdiction-specific matters for South Australia is the retention of the current superannuation provisions that ensure that the payroll tax base includes contributions paid by an employer in respect of an unfunded or partly funded arrangement, and contribution holidays.

Payroll tax will continue to be payable in respect of portable long service leave and redundancy payments made by employers to a central fund for workers entitlements.

No changes have been made to existing South Australian specific exemptions that are not provided in New South Wales and Victoria.

 Harmonisation Reforms Effective 1 July 2008

From 1 July 2008, a number of changes were made to the South Australian Pay-roll Tax Act 1971 (the "old PRT Act") to harmonise key aspects of its payroll tax system with those of other jurisdictions.

The changes are summarised below.

Liable Wages - Work Performed 'In Another Country'

Wages paid or payable in respect of services, which are performed wholly outside Australia for a continuous period of more than six months, are exempt from the time that the initial six-month period overseas has been served. From 1 July 2008, such wages will be exempt from payroll tax from the commencement of the period of overseas service.

See Revenue Ruling PTA039 for further information.

Taxable Value of Fringe Benefits

From 1 July 2008, the taxable amount of fringe benefits for payroll tax purposes will be determined by grossing up the fringe benefit using only the lower (Type 2) gross-up rate available in the Fringe Benefit Act (the "FBT Act").

See Revenue Ruling PTA003: Fringe Benefits for further information.

Shares and Options

From 1 July 2008, new provisions in the old PRT Act legislation will confirm shares or options issued under employee share acquisition schemes as liable wages. Under these provisions, the grant of a share or option to an employee, a director (including for the appointment of a director), or deemed employee, will constitute wages.

The granting of a share or option, which is classified as a fringe benefit under the FBT Act is not treated as a fringe benefit, but rather as wages for payroll tax purposes.

See the Payroll Tax Guide to Legislation for further information.

Travelling Allowances

An allowance paid or payable to an employee for business travel purposes, using their own motor vehicle, is taxable only to the extent that it exceeds a prescribed rate per kilometre, or an amount calculated at the prescribed rate.

From 1 July 2008, the prescribed rate for payroll tax purposes is aligned to the rate prescribed by the regulations under Section 28-25 of the Income Tax Assessment Act 1936 (Cwlth) for calculating a deduction for car expenses for a large car using the cents per kilometre method.

See Revenue Ruling PTA011: Allowances & Reimbursements for further information.

Accommodation Allowance

An accommodation allowance paid or payable to an employee is taxable only to the extent that the allowance exceeds the prescribed daily rate. If the allowance paid exceeds the exempt rate, the amount above the exempt rate is taxable.

From 1 July 2008 the prescribed daily rate is aligned with the rate determined by the Federal Commissioner of Taxation, and it is the total reasonable amount for daily travel allowances using the lowest capital city for the lowest salary band for the financial year.The Australian Taxation Office (ATO) makes these determinations in June each year and sets the amount they consider reasonable for the following income year in relation to claims made for travel allowances. The rate is published in the Taxation Determination - Income Tax - What are the reasonable travel and meal allowance expense amounts, which can be located atwww.ato.gov.au

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See Revenue Ruling PTA011: Allowances & Reimbursements for further information.

Superannuation Benefits

Up until 30 June 2008, South Australia did not impose payroll tax on superannuation payments to non-working directors. From 1 July 2008, consistent with the arrangements in other jurisdictions, all superannuation contributions to non-employee directors will be considered wages for payroll tax purposes.

New Exemptions

A number of new exemptions will be introduced from 1 July 2008. Wages will be exempt from payroll tax in the following circumstances:

  • paid to a female employee in respect of maternity leave or to an employee (male or female) in respect of adoption leave will be exempt from payroll tax. This exemption does not include some wages paid for other forms of leave and is limited to wages for a maximum of 14 weeks full time leave;

See Revenue Ruling PTA012: Exemption for Maternity & Adoption Leave Pay for further information.

  • paid to bush fire and emergency service workers during periods of absence to perform volunteer activities relating to fire or emergencies;

See the Payroll Tax Guide to Legislation for further information.

  • paid under the Commonwealth Development Employment Scheme;

See the Payroll Tax Guide to Legislation for further information.

  • paid by charities in respect of employees undertaking direct charitable activities of the organisation.

Grouping of Employers

The harmonisation measures have introduced changes to the grouping provisions including:

  • for commonly controlled businesses, the common control test threshold will now be more than 50%, replacing the 50% or more test; and

  • in determining controlling interests, a new category of grouping will be adopted that provides for the tracing interests in corporations (see below).

See the Payroll Tax Guide to Legislation for further information.

Tracing Provisions

Under the grouping provisions, a relevant entity (a person or two or more associated persons) will be deemed to control a corporation if it controls more than 50% of the voting shares held either directly, indirectly or through aggregation of interests.

The new tracing provisions introduce the concept of linking the interest of associated persons. Associated persons are established by examining the relationships between individuals, partners, private companies, bodies corporate, trustees and beneficiaries of trusts.

See the Payroll Tax Guide to Legislation for further information.