Payroll tax audits

How we select customers for audit

Businesses registered for payroll tax

Revenue NSW uses specialised data matching programs to identify risks or errors in payroll tax returns.

We also select audits based on:

• research and risk profiling
• information sharing with other government agencies, and
• tip-offs and referrals.

The most common reasons why we select customers for audit include:

• an undeclared or incorrect grouping
• incorrect claims of contractor exemptions
• understated:
  • fringe benefits
  • superannuation payments
  • shares and options
• failure to register for payroll tax
• businesses in industries known for errors, and
• risk classification of customers with large businesses.

Businesses not registered for payroll tax

We identify businesses that have potentially exceeded the payroll tax threshold.

We then contact these businesses to discuss their circumstances. If your business is identified, we will send a letter to:

• help you determine if you should register, and
• ask you to complete a questionnaire.

The staff member listed as the contact in the letter will be able to assist you with this process.

If you do not respond to our requests for information we may:

• issue an estimated assessment based on data we have on hand, or
• commence an audit by issuing a formal Notice of Investigation.

What happens when you are audited?

One of our auditors will contact you via telephone to discuss the audit and explain the:

• reason you were selected
• scope and tax years we will be reviewing
• information you need to send us
• timeframe for the audit and further information requests
• payroll tax compliance portal and your account registration process
• resources and support available to assist you with the audit.

After the call, we will send you a secure link to register your compliance portal account. Once registered, you can access audit commencement documents, including:

• Notice of Investigation letter confirming the audit has commenced and outlining what information you need to provide
• Payroll Tax Questionnaire to complete.

Your auditor may set up a meeting with you to clarify information and discuss any issues. You’re welcome to have your accountant or tax agent join this meeting.

Security of your information

The portal is built to strict government security standards. It ensures your personal and financial information is protected at all times.

What you need to do

Complete the audit questionnaire carefully and ensure you provide all the information requested by the due date by submitting them through your portal account.

If you need to clarify anything, contact your auditor. Your auditor’s contact details are on the Notice of Investigation letter.

We recommend you review your payroll tax returns to confirm the correct amounts have been reported.

You should pay careful attention to the common errors we find during audits. Read the taxable wages pages for more details.

You may qualify for a reduced rate of penalty tax if you make a voluntary disclosure of any errors which have resulted in you underpaying your payroll tax.

Information you may need to supply

You may be asked to provide the following information by submitting them through your compliance portal account:

• Balance sheets (with notes).
• Trading and detailed profit and loss statements.
• Superannuation reports for employees and directors.
• End-of-year employee and management payroll summary reports, including year-to-date for the current financial year.
• Fringe benefit tax returns.
• General ledger accounts detailing payments made to contractors or subcontractors engaged by the business, including copies of invoices.
• Letter from Training Services NSW approving any apprentices or trainees for whom you wish to claim a payroll tax rebate.
• Details and supporting documentation for any:
  • share and option schemes for directors and/or employees, including any schemes operated by parent and/or overseas companies, and/or
  • payments treated exempt from payroll tax, such as maternity leave.
  • Details of shareholders, directors and beneficiaries of the business, and their interest in other businesses or entities, if applicable, and/or contractor arrangements.

What happens next?

• We will review the information and contact you if we require anything else.
• We may meet with you to discuss your payroll tax returns and clarify any issues. We do this via phone, through the compliance portal communication, video call or by a face-to-face meeting.
• We will validate the information you provide against information collected from other sources, such as other State and Commonwealth government agencies.
• We will give you initial findings and an opportunity to provide more information before the end of the audit.
• You will then be sent a finalisation letter outlining the audit outcome. The finalisation letter formally ends the audit.
• You will also have an opportunity to have an exit meeting with the auditor. This meeting is to educate you on how to comply with your payroll tax obligations.

What are the possible outcomes of an audit?

An audit may result in:

• No Further Action – where no errors are found.
• Issuing Payroll tax assessments – where errors have been identified resulting in additional payroll tax payable.
• A refund – where an overpayment has occurred.

Additional tax payable

Payment is due 21 days after the issue date of an assessment notice. Read more about the payment options for payroll tax.

Your auditor will negotiate an appropriate payment arrangement if you are unable to pay the amount in full by the due date.

If you need an extension to your payment arrangements you may be asked to provide:

• a written application, and
• supporting financial information, including detailed cash flow projections.

Interest and penalties

Failure to pay the correct amount of payroll tax on time is considered a tax default and is subject to interest and penalty tax.

You may be charged interest and penalties depending on the outcome of the audit and the circumstances of any tax shortfall.

For more details read:

• What happens if you do not pay your payroll tax?
• Interest and penalty tax
• Revenue Ruling PTA 036 v3: Payroll tax: interest and penalty tax explains the application of interest and penalty tax to a range of payroll tax defaults.
• Commissioner’s Practice Note 024: Interest and penalty tax guidelines explains the application of interest and penalty tax to all taxation laws administered by Revenue NSW.

How to lodge an objection

If you disagree with any of our findings you can lodge an objection.

You must lodge the objection in writing within 60 days of an assessment or decision being made.

Post audit survey

You will receive a post audit survey via an automated Portal Email Notification once the audit has been completed.

Please provide your candid feedback so we can continually improve our audit process and address any issues you experienced during the audit.

Compliance tips for payroll tax

If your payroll tax returns are lodged correctly, it makes it less likely you will be selected for an audit.

Here are some useful tips to help you meet your payroll tax obligations:

• Check for common errors in calculating and declaring taxable wages.
• Conduct regular reviews to ensure your returns are correct and make a voluntary disclosure when you find an error.
• Engage with us by supplying information if we contact you prior to an audit as part of an upfront compliance program.
• Subscribe to our newsletter to stay up to date.
• Contact us if you need help.

What happens if you do not comply?

If you do not comply with a reasonable request made by your auditor we may exercise one or more of our powers under the Taxation Administration Act 1996:

• Attending your business premises to obtain information. We have the power to enter and remain on your premises, in some cases without giving prior notice.
• Serving a notice requiring you to provide the information. Failure to comply with this notice may constitute an offence and render you or your corporation liable to a penalty.
• Assessing your tax liability based on any information we have. This includes making an estimate from data we access from other government agencies.

Our approach to customer service

We will be fair, objective, and professional in all dealings with you. Read more about our commitment to you.

During an audit, you can expect that we:

• clearly explain what information we require and why we need it
• provide you with a reasonable time in which to respond to our requests
• review the information you provide to us in a timely manner
• keep you informed of the progress at regular intervals
• provide you with preliminary findings before any assessments are issued
• give you an opportunity to provide additional information for our findings or clarify our understanding of an issue under consideration, and
• provide education to help you lodge future payroll tax returns.

Contact the payroll tax team

If your business is currently being reviewed, please contact your auditor. Your auditor’s contact details are on the Notice of Investigation letter.

For general questions about payroll tax call 1300 139 815 or +61 2 7808 6904 for international callers.

You can also email payrolltax@revenue.nsw.gov.au