|Ruling number||PTA 023|
|Date issued||30 June 2008|
|Issued by||Tony Newbury|
Chief Commissioner of State Revenue
|Effective from||1 July 2007|
Parties to a ‘relevant contract’ are taken to be employers and employees (sections 33 and 34 of the Act) and payments made under a contract are taken to be wages (section 35 of the Act). Payments taken to be wages are subject to payroll tax under section 36 of the Act.
While most contracts for the provision of services come within the meaning of ‘relevant contracts’ under section 32 of the Act, certain types of contracts are specifically excluded from the definition of ‘relevant contract’. One exclusion is a contract in which the contractor hires employees or engages other contractors to perform some or all of the work required under the contract (section 32(2)(c) of the Act).
The purpose of this Revenue Ruling is to explain how section 32(2)(c) of the Act would apply to exclude a contract from the definition of ‘relevant contract’.
Section 32(2)(c) of the Act may apply to exclude a contract from the definition of ‘relevant contract’ in any of the following situations:
|Type of contracting entity||Persons performing the work under the contract|
Two or more
Partnership of natural persons
This exemption will not apply if the work under the contract is performed only by partners.
In addition, all the following conditions must be met for the exemption in section 32(2)(c) of the Act to apply in each of the above circumstances:
Where a principal has numerous contracts with a contractor during a financial year and there is clear evidence that each contract is discrete, the exemption will apply on a contract-by-contract basis.
It is common for contractors to operate in a team or buddy gang system where two or more contractors work together on a job or number of jobs. Often, it is difficult to establish the formal relationship between members of the gang, or whether the gang constitutes a legal entity. Where there is a lack of documentation supporting the status of the gang, a contract is deemed to exist between the principal and each contractor if the principal pays each of the contractors separately. In these circumstances, the exemption does not apply to a buddy gang of contractors.
There are circumstances where a contractor may share the services of a person or persons with another contractor to perform work pursuant to the respective contracts between the same principal and the contractors. For the exemption to apply, the sharing of such services must be a commercial arrangement, that is:
Where the criteria stated above are not met, but you believe that the exemption should apply, please apply to the Office of State Revenue for a determination.
A contract will not be exempt under section 32(2) of the Act if the Chief Commissioner considers the contract or arrangement was entered into with the intention of avoiding payroll tax. If any person engaged by the contractor to perform the work is a former employee of the principal, the Chief Commissioner may also consider the arrangement in light of the anti-avoidance provisions under section 32(2)(c) of the Act.
The same approach may be taken where a person engaged by the contractor is a spouse or child of the contractor, or a beneficiary of a trust set up by the contractor and is not paid at a commercial rate.
This Revenue Ruling is effective from 1 July 2007.
Please note that rulings do not have the force of law. Each decision made by the Office of State Revenue is made on the merits of each individual case having regard to any relevant ruling.