Why does The Office of State Revenue (OSR) Group?
When commonly owned or commonly controlled business groups employ people; the total amount of wages and salary type amounts are aggregated across the group in order to determine the total amount subject to payroll tax. This grouping ensures that the same ‘economic group’ only applies the payroll tax free threshold of $1.1M once, rather than for each employer.
This same grouping also determines who the Commissioner can demand to pay the tax bill in the event it remains unpaid by the employer.
How does the OSR 'group' business entities?
There are three ways in which your businesses and the companies or trusts that operate them will be grouped for payroll tax purposes
- Groups by company ownership – companies that own other companies will be grouped.
- Groups by employees working in more than one business or a business different to the employer’s.
- Groups by controlling interests – when the same person or persons who are associated in some way (say by being related) own or control entities – the businesses they own or control will be grouped. These are very broad provisions and must be looked at carefully particularly since the definition of ‘business’ includes ALL activities for Payroll Tax purposes.Additionally the rules around control of family trusts can present surprising outcomes.
The first type of grouping is inflexible – that is if one company owns more than 50% in another company – these two or more companies are grouped for Payroll Tax purposes.
The second and third types of groups may have the option to apply to the OSR and have the entities de-grouped.
How to apply to have an entity(s) excluded from the group?
Should the law group your entities, it may be possible to have this grouping undone by making a special application. There are 7 issues considered by the OSR when considering whether to de-group or not. These are all equal and none hold any greater importance than the other.
- nature and extent of commercial transactions between group members;
- extent that resources are shared;
- whether business decisions are made collectively or independently by each entity;
- extent of loans, guarantees and common banking facilities across the group;
- extent to which group members are connected with regards to sales and purchases of goods and services;
- extent to which the nature of the businesses are connected across the group;
- extent to which there is a connection between the ultimate owners of the members of the group.
Adapted from PTA031.2 Public Ruling – Commissioner’s discretion to exclude from a group
Please note the preceding information is general in nature and in very broad strokes. What should be clear is that Payroll Tax can be very complex and if you are unsure of your obligations or how it may apply to your business group you should contact your Ulton adviser to discuss.
Click here to read about Payroll Tax for Contractors
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