To group or not to group: the payroll tax discretion

By Ali Suleyman - November 11, 2016

The payroll tax common control provisions, as they apply to discretionary trusts, are extremely broad and can create problems and expense for employers.

Under the payroll tax grouping provisions, any beneficiary (including any general beneficiary) is deemed to control a discretionary trust. This is a very expansive provision which often creates a technical grouping of two or more family discretionary trusts and the other entities they control. The strict application of these provisions can result in unexpected and adverse payroll tax outcomes.

Whilst the Commissioner has the ability to exercise his discretion to exclude a member from a technical group, the discretion is not automatic and the employer needs to present their case for de-grouping in the most effective manner.

We note that there has been a lot of State Revenue Office activity centred around payroll tax grouping in recent months, but we have been able to work with employers to successfully exclude entities from payroll tax grouping, or minimise the adverse outcomes arising from grouping.

Grouping can also arise outside of the discretionary trust context discussed above.

Broadly, entities may be grouped for payroll tax purposes if they exhibit any of the following features:

  • they are related bodies corporate
  • they are commonly controlled
  • they use “common employees”
  • one entity has a “controlling interest” in another corporation determined by tracing interests

Grouped entities are treated as a single employer and the payroll tax-free threshold is applied to the designated group employer (DGE) entity rather than to each individual employing member. The annual threshold in Victoria from 1 July 2016 is $575,000.

The other significant effect of grouping is that each group member is jointly and severally liable for every other member in respect of their payroll tax liability.

Our team has extensive experience in preparing de-grouping applications and dealing with the revenue authorities in various jurisdictions. We would be delighted to assist employers in seeking the Commissioner’s discretion to de-group payroll tax groups.


Contact our experts


Other articles


 

Top of Page


 Back to News




IN THIS SECTION:


Rob Southwell

Sydney

Managing Partner and Partner – Private Clients Group


> View profile

John Brazzale

Melbourne

Chairman - Pitcher Partners Association Partner/Executive Director - Tax Consulting


> View profile

Michael Minter

Newcastle

Managing Partner


> View profile

Bryan Hughes

Perth

Chairman


> View profile

Tom Verco

Adelaide

Managing Principal


> View profile

Ross Walker

Brisbane

> View profile



Partnership fraud

SUCCESS

Paperwork and independent advice saves partnerships from fraud

Discover more

Kia Ora Horse Stud

CASE STUDY

Pitcher Partners fills a Financial Manager gap to keep the business on track

Discover more

Fuel Injection Company Administration

LEADERSHIP

A fuel injection company began life as an Australian public company before being acquired by a UK publicly listed company while in the research and development stage of a “green...

Discover more



@PitcherPartner RT : .Paul Ostrowski CEO kicks off Healthcare Briefing on Consumer Directed Care… https://t.co/33DwssT8TM