|Ruling number||PTA 036v3|
|Date issued||1 July 2019|
Chief Commissioner of State Revenue
|Effective from||1 July 2019|
The Payroll Tax Act 2007 (the Act) is a taxation law for the purposes of the Taxation Administration Act 1996 (TAA). Any failure to pay the correct amount of payroll tax when it falls due is a tax default which is subject to interest and penalty tax under the TAA. Our Interest and Penalty Tax Factsheet outlines Revenue NSW's general policy on the application of interest and penalty tax.
The Act harmonises the payroll tax legislation in NSW and Victoria. As part of the payroll tax harmonisation initiative, interest and penalty tax policies in relation to payroll tax defaults have also been harmonised.
This Revenue Ruling explains in detail the application of interest and penalty tax to a range of payroll tax defaults and should be read in conjunction with the Interest and Penalty Tax Factsheet.
A. A payroll tax default occurs when a taxpayer fails to pay tax in accordance with the Act. The TAA provides for interest and penalty tax to be applied to a tax default.
The interest rate consists of a market rate component and a premium rate component. The market rate component is to reimburse the Government for the financing costs incurred due to the late payment of tax. The premium rate component of 8% per annum is imposed to deter late payments and ensure that a defaulting taxpayer is not advantaged when compared with a taxpayer who paid on time.Penalty tax is imposed,
in addition to interest, on the amount of tax unpaid when a tax default occurs.For the purposes of applying interest and penalty tax, the Chief Commissioner of State Revenue (Chief Commissioner) categorises tax defaults as follows:
a. A tax default is regarded as a late payment when the correct tax is paid in full after the due date but before any action has been taken by the Chief Commissioner.As a general rule, a late payment tax default will not be charged penalty tax but will attract interest at the sum of the market rate plus the premium interest rate. Interest will apply from the due date for payment until the actual date of payment.However, an exception to the rule is when a registered employer pays the monthly tax after the due date but before the Chief Commissioner issues an assessment on more than two occasions within a financial year (i.e. a repeat late payer). This late payment tax default will attract market rate of interest and penalty tax of 5%.Examples of late payment tax defaults include:
b. Any tax default other than a late payment is regarded as a tax shortfall. As a generalrule, a tax shortfall will attract:
A tax shortfall will not attract penalty tax in the following circumstances:
A registered employer fails to pay the correct monthly tax by the due date and the Chief Commissioner has taken action by issuing an assessment for the tax owing for the month. As a general rule, the rate of penalty tax in this circumstance will be 25%. The assessment will be based on estimated taxable wages where no monthly return was lodged and will be based on the wages or liability stated on the return where the employer lodged a return but failed to pay the tax.
Even though a registered employer has paid an amount of tax for a month or a financial year, the employer has paid less than the correct tax. The underpayment may be identified by a review conducted by, or on behalf of, the employer or by an investigation conducted by the OSR. The amount of penalty tax applied will reflect the taxpayer’s culpability.
An employer, whose taxable wages have exceeded the threshold, fails to register within the time permitted and pay the tax owing. The amount of penalty tax applied will reflect the taxpayer’s culpability.
The Chief Commissioner may remit interest in part or in full in such circumstances as the Chief Commissioner considers appropriate. Interest may be fully remitted for a late payment tax default if the Chief Commissioner is satisfied that the late payment occurred as a result of circumstances beyond the control of the taxpayer. Examples of circumstances when interest may be remitted in full include, but are not limited to:
A taxpayer is entitled to a 20% reduction in the penalty tax if the taxpayer voluntarily makes a written disclosure during an investigation into a known or suspected tax default which enables the Chief Commissioner to determine the nature and extent of the tax default.
The penalty tax will be increased by 20% if the taxpayer hinders or conceals information during an investigation into a known or suspected tax default.
At the end of each financial year, every registered employer is required to lodge an AR return for the purpose of reconciling the employer’s tax liability for the financial year with the tax previously paid for that year. When an employer finds that further tax is payable for the financial year, the AR return should be lodged by the due date together with the payment of the tax outstanding. For an employer who has overpaid payroll tax for the financial year, the lodgement of the AR return constitutes a request for Revenue NSW to refund the overpayment.
The due date for lodging the AR return is the 28th day of July, or the next business day if the 28th falls on the weekend or a public holiday, immediately following the financial year to which the AR return relates (the AR period).
There is no tax default if the employer lodges the AR return and pays any outstanding tax by the due date. A tax default occurs when the correct amount of tax owing for the financial year has not been paid, or where the AR return has not been lodged, by the due date.
If the employer makes a payment of tax without lodging an AR return, the Chief Commissioner is unable to determine whether the total tax paid is the correct tax payable for the year. Therefore, even though a payment of tax was made, given that no AR return is lodged, the Chief Commissioner will proceed to issue an assessment of any estimated tax owing as though a tax default has occurred.
If an employer lodges its AR return or pays the tax owing after the due date but before the Chief Commissioner issues an assessment for the tax owing for the AR period, any tax paid after the due date or remaining unpaid will attract interest at the market rate plus premium interest at the rate of 8% per annum.AR lodged or tax paid after assessment is issued
If an employer fails to lodge its AR return or pay the tax owing and the Chief Commissioner issues an assessment for the tax owing for the AR period, any tax paid after the due date or remaining unpaid will attract penalty tax of 25% and interest charged at the market rate. If the AR return is subsequently lodged, the penalty tax and interest will be adjusted accordingly based on the wages stated on the return. If the AR return subsequently lodged shows that no tax was outstanding at the due date, the interest and penalty tax will be fully remitted.
A tax shortfall may arise because tax has been paid in error to the ATO or another jurisdiction. If Revenue NSW is satisfied that the tax was paid to another party in error, no penalty tax will be imposed. Further, if the full amount of tax payable in NSW was received by the wrong party on or before the due date, interest will be remitted in full. If the tax liability payable in NSW is greater than the amount of tax paid to the wrong party, full remission of interest will still apply, provided the difference is paid to Revenue NSW by a date specified by the Chief Commissioner.
Interest (per annum)
|1. Monthly return lodged/tax paid after due date (7th day of the following month) but before issue of assessment||Market + 8% Premium||0|
|2. Assessment not paid by due date as shown on the notice of assessment Payroll tax – interest||Market + 8% Premium||0|
|3. The Chief Commissioner is satisfied late payment was beyond the control of the taxpayer||0||0|
|4. Monthly return lodged/tax paid late on more than 2 occasions during a financial year before the issue of assessment||Market||5%|
|1. Monthly return not lodged and assessment issued for tax owing for the month||Market||25%|
|2. Voluntary disclosure before investigation commenced||Market + 8% Premium||0|
|3. Disclosure made after investigation commenced||Market||20%|
|4. Assessment issued after investigation completed (and taxpayer did not take reasonable care)||Market||25%|
|5. Assessment issued after investigation completed (and evidence of intentional disregard of the law)||Market||75%|
|6. The Chief Commissioner is satisfied that the taxpayer took reasonable care||Market + 8% Premium||0|
|7. The Chief Commissioner is satisfied tax shortfall was beyond the control of the taxpayer||0||0|
|1. Annual return lodged before issue of assessment. Tax paid late or remains outstanding||Market + 8% premium||0|
|2. Annual return not lodged and assessment issued for tax owing||Market||25%|