Contractors

This exemption applies if the main purpose of a contract is to supply goods or equipment, and the services provided by the contractor are only ancillary to this. When the amounts relating to goods or equipment are more than 50 per cent of the total contract amount, the provision of labour under the same contract is considered ancillary.

For more information, read Revenue Ruling PTA 033, our case studies and the practice note (CPN 007) on payroll tax contractors.

When the exemption applies

A drill is supplied under a contract for $200,000. A condition of the contract is that a drill operator must also be engaged at a cost of $50,000. The total contract value is $250,000. Amounts paid to the contractor are exempt because the supply of the drill is the principal purpose and the operator's services are incidental.

A contract is exempt from payroll tax when:

• your business does not normally need those services, and
• the contractor provides the same type of services to the public and derives less than 40 per cent of their gross trading income from your business in that financial year.

Where this exemption applies

A bank hires painters for their new branch. As a bank does not usually require painting services and the painters generally work for the public during the year, this contract is exempt.

Where this exemption doesn't apply

A bank hires painters for their new branches. The painters don't provide services to anyone else during the year. This contract isn't exempt.

For more information, read Revenue Ruling PTA 022.and the practice note (CPN 007) on payroll tax contractors.

This exemption applies if you require a specific type of service for 180 days or less. It’s the type of service required that is relevant, so it does not matter:

• whether a contractor or employee provides these services
• how many people provide these services at a time
• whether your business requires these services on consecutive days.

This is different to the 90 day exemption, which focuses on the contractor and the number of days they provide their services. The 180 day exemption does not extend the 90 day exemption.

For more information, read Revenue Ruling PTA 020, PTA 014, our case studies and the practice note (CPN 007) on payroll tax contractors.

When the 180 day exemption applies

A company contracts a landscape gardener for 100 days in a financial year. A second contract landscape gardener is engaged at the same time to perform the same services for 95 days. No other landscaping work is required for the rest of the financial year.

As the the landscaping services are required for only 100 days in the financial year, both contracts are exempt and payments are not subject to payroll tax.

When the 180 day exemption does not apply

A software development company engages additional software consultants during their busiest time. Together they provide these services for 120 days in a financial year. The company also has full time employees performing the same kind of work. The 180 day exemption will not apply for the consultants as the company requires these services throughout the financial year.

This exemption applies if the contractor provides the same or similar services for 90 days or less in a financial year. If the services are provided for more than 90 days, the wages paid for the entire period become liable for payroll tax.

Any amount of time worked on a day is counted as a full day and the days worked by the contractor do not have to be consecutive.

For more information, read Revenue Ruling PTA 035v2, PTA 014, our case studies and the practice note (CPN 007) on payroll tax contractors.

When the 90 day exemption applies

A plumber installs the piping in the building within 80 days in a financial year and does not provide any other service. As services were provided for less than 90 days in a financial year, this exemption will apply.

When the 90 day exemption does not apply

A company provides website design services for 80 days and website re-design services for another 50 days in a financial year. As similar services were provided for more than 90 days in a financial year, this exemption will not apply.

If a contractor provides similar services to the public, you can request this exemption even if the following exemptions do not apply:

• services not ordinarily requiring exemption
• 180 day exemption
• 90 day exemption.

We’ll consider a range of factors including:

• the clients serviced by the contractor
• how long the contractor spent with clients
• the extent and nature of the contractor's advertising
• the nature of the contractor's business
• the type of services provided.

The contractor must actually provide services to the public, simply being available to provide them is not sufficient.

You can claim this exemption without applying to us if the contractor provided services of that type to:

1. two or more businesses (not being members of a group) during the financial year, and
2. the business claiming the exemption for an average of 10 days or less per month (excluding the months in which no services were provided).

For more information, read Revenue Ruling PTA 021, our case studies and the practice note (CPN 007) on payroll tax contractors.

This exemption applies if a contractor engages two or more workers to provide the contracted services.

If the contractor is a partnership or sole trader, this exemption will only apply if one or more workers provide the services in addition to the partner or sole trader. This exemption may apply where:

The services performed must be directly for the purpose of the contract before the exemption can apply. There are also additional conditions you must meet before claiming this exemption.

For more information, read Revenue Ruling PTA 023, our case studies and the practice note (CPN 007) on payroll tax contractors.

Where a company is the contractor and the exemption does not apply

A company contracts another business. The work is completed by one person with a second person doing the invoicing. The exemption cannot be claimed as there’s only one person doing the actual work of the contract. The invoicing is not for the purpose of the contract.

Where a partnership is the contractor and the exemption does not apply

A partnership of natural persons provides human resources consultancy under a contract. Both partners provide the services and do not engage anyone else. This exemption cannot apply as the work is only performed by the partners.

This exemption applies if the services provided by the contractor are incidental to the transportation and delivery of goods in a vehicle provided by the contractor. The vehicle provided by the contractor must not be owned or leased by the employer and the employer must not contribute to the capital or running expenses of the vehicle.

Courier cyclists are not regarded as owner-drivers.

Where an owner driver exemption applies

A whitegood company uses a courier to deliver fridges. The courier owns and operates the truck without any contributions from the employer. The courier does not provide any other services. This exemption will apply.

For more information, read Revenue Ruling PTA 006, our case studies and the practice note (CPN 007) on payroll tax contractors.