Taxes, duties, levies and royalties
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Grouping

For payroll tax purposes, businesses can be grouped with other businesses if there is a link between the companies. Grouping can occur regardless of where the businesses operate. Grouping has important implications for calculating threshold entitlements.

Where a group exists:

  • the threshold entitlement is based on the proportion of NSW wages against total Australian wages
  • a single threshold deduction applies to the group
  • every member of the group is liable for any outstanding payroll tax of other group members.

Related companies

All corporations that meet the definition of related companies in the Corporations Act 2001 are grouped.

Companies are related if two or more are:

  • a holding company and subsidiary
  • subsidiaries of the same holding company.

Any related companies paying Australian wages are grouped, even if they have an overseas holding company.

The related corporations grouping only applies to companies. Trustee or nominee companies cannot be grouped under this provision.

Companies grouped under this provision cannot apply for an exclusion from the group.

Electronic Devices Pty Ltd owns Mobile Tech Pty Ltd, Video Tech Pty Ltd and Televisions Pty Ltd.

Mobile Tech Pty Ltd owns Phones Pty Ltd.

Video Tech Pty Ltd owns Camcorders Pty Ltd.

Electronic Devices Pty Ltd is the ultimate holding company.

All of these companies are grouped because Electronic Devices Pty Ltd is their ultimate holding company.

Common employees

Businesses can be grouped if one or more employees of a business performs duties under an agreement between the employers.

A business has an agreement to supply receptionist, secretarial and other administrative duties to another company. As the employees perform these duties for the other company a grouping exists for payroll tax purposes.

Common control

If a person or set of persons together have a controlling interest in two or more businesses, those businesses are grouped. A ‘person’ includes a natural person, set of persons, trustee or corporate entity.

There are different definitions of ‘controlling interest’ depending on the business type:

  • Sole owner: a person who is the sole business owner (whether or not as a trustee).
  • Joint owners: a set of persons, together as trustees, are the sole business owners.
  • Company: a person who is entitled to exercise more than 50 per cent of the voting power at director meetings; or, a person(s) who together have more than 50 per cent of the voting rights attached to voting shares that the company has issued.
  • Body corporate or unincorporated: a person who controls more than 50 per cent of the management board.
  • Partnership: a person who owns more than 50 per cent of the capital. Or, a person who is entitled to more than 50 per cent of the profits.
  • Trust: a person who is a beneficiary of more than 50 per cent of the value of the interest in the trust that carries on the business. Note: under a discretionary trust, all beneficiaries are deemed to have a controlling interest.

Two individuals have a combined 80 per cent interest in one company and a combined 100 per cent interest another. The two companies are grouped for payroll tax purposes because they have a controlling interest in both businesses.

Tracing of interest

If an entity has a direct, indirect or aggregate interest of more than 50 per cent in any corporation, that corporation is grouped with that entity.

Beau directly owns 80 per cent of Hot Drinks, and 50 per cent of Cool Coffee.

Hot Drinks owns 40 per cent of Bubbling Tea, and Bubbling Tea owns 50 per cent of Cool Coffee.

Beau has an indirect interest in Cool Coffee of 16 per cent. This is calculated by multiplying:

  • Beau’s ownership of Hot Drinks (80 per cent)
  • Hot Drink’s ownership of Bubbling Tea (40 per cent)
  • Bubbling Tea’s ownership of Cool Coffee (50 per cent)
  • 80 per cent × 40 per cent × 50 per cent = 16 per cent

By adding Beau’s direct and indirect ownership of Cool Coffee, Beau has an aggregate interest in Cool Coffee of 66 per cent (50 per cent directly, and 16 per cent indirectly).

Hot Drinks and Cool Coffee are grouped because Beau has an interest of greater than 50 per cent in both companies.

Bubbling Tea is not part of the group as the level of interest is not more than 50 per cent (80 per cent × 40 per cent = 32 per cent).

Subsuming

A larger group can be formed out of multiple smaller groups when a business is a member of two or more groups at the same time, or the members of a group share a controlling interest in another business.

Subsuming through common group members

Stationery Pty Ltd is grouped with Pencils Pty Ltd and Erasers Pty Ltd.

Art Supplies Pty Ltd is grouped with Acrylic Paints Pty Ltd and Pencils Pty Ltd.

Pencils Pty Ltd is common to both groups. Subsuming applies and so a group consisting of Stationery, Pencils, Erasers, Art Supplies and Acrylic Paints is formed.

Subsuming through combined interest

Two businesses have common shareholders and are grouped. Each business also holds 30 per cent of the units in the same unit trust. As they are grouped their interest in the trust is combined.

Subsuming will apply and form a group of all three entities.

Read the case studies page for more grouping examples.

Claiming the threshold

Only one member of the group can claim the threshold. The threshold can be claimed either as the designated group employer or the single lodger.

Read the lodge your return for more information.

Designated group employer

In a designated group employer (DGE) group, one member of the group becomes the DGE and that member must have wages that exceed the threshold amount. The other group members become non-threshold claimers (NTC).

The DGE is the only member which can claim the threshold. The NTCs pay the flat rate of payroll tax on their wages.

You’ll need to complete a Nomination of designated group employer to claim threshold entitlement form for a group member to be the DGE.

Single lodger

In a single lodger group, one member of the group becomes the single lodger and no other group member lodges a return.

The single lodger is responsible for lodging and paying payroll tax on behalf of all members in the group. They must include the total Australian group wages in the return.

A single lodger group is mandatory if none of the group members have sufficient wages to claim the threshold.

You’ll need to complete a Group single lodger application form for a group member to be the single lodger.

Calculating the group liability

Lodging as a DGE or single lodger does not affect the total group liability.

In the following calculation:

 NSW wagesInterstate wage
Company 1$500,000$800,000
Company 2$100,000$600,000
 Designated group employerSingle lodger
Calculate threshold:
(Group NSW wages / Group Australian wages) x NSW threshold		[($500,000 + $100,000) / $2,000,000] x $900,000 = $270,000[($500,000 + $100,000) / $2,000,000] x $950,000 = $270,000
Tax payable for company 1($500,000 - $270,000) x 5.45% = $12,535($600,000 - $255,000) x 5.45% = $17,985
Tax payable for company 2$100,000 x 5.45% = $5,450nil
Total group liability$17,985$17,985

Read the lodge your return page for more examples on calculating the group liability.

Exclusion

You can apply to be excluded from a group by submitting an application for exclusion from grouping – payroll tax form.

We may grant an exclusion if we are satisfied that the businesses are conducted independently and are not connected with any other group members. When making our decision, we'll consider:

  • commonly controlled businesses
  • use of employees
  • nature and degree of ownership
  • nature and degree of control
  • nature of businesses
  • conducting business together
  • sharing of resources
  • financial relationships/dependencies.

For more information regarding exclusions, refer to Revenue Ruling PTA 031.

If businesses are grouped through related companies in the Corporations Act 2001, you cannot apply for an exclusion from the group.