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A payroll tax grouping exists when a person, or set of persons together, have a controlling interest in two or more businesses. View examples of common control.
On this page
For payroll tax purposes, businesses can be grouped with other businesses if there is a link between the businesses. This can include non-employing businesses.
Grouping can occur regardless of where a business operates in New South Wales (NSW) or interstate.
When businesses are grouped only one member of the group can claim the tax-free annual threshold. Read the thresholds and rates page for more details.
What is common control?
Common control is when a person or set of persons together have a controlling interest in two or more businesses. When this occurs those businesses are grouped for payroll tax purposes. See section 72 of the Payroll Tax Act 2007 (PTA) for more details.
A “person” includes, but is not limited to, a:
natural person
trustee
corporation
body corporate, or
body politic.
Types of controlling interest
There are different types of controlling interest depending on the business type.
Open the headings below for more details and definitions.
A controlling interest is held by any person who, or set of persons who together, controls more than 50% per cent of:
the board of management or controlling body of a body corporate (e.g. the board of directors of a company), or
an unincorporated body.
This provision also applies to a person or persons who can control the composition of the board or controlling body. See section 72 of the PTA.
Note
Grouping that involves body corporates, unincorporates or a board of directors often results in a grouping under the related corporation provisions in section 70 of the PTA.
Section 70 takes precedence over a grouping under section 72.
Where a section 70 grouping also exists, members of that section 70 group are not able to apply for an exclusion.
entitled to more than 50% of the value of the interests in the trust that carries on the business.
Any two or more beneficiaries who are entitled to more than 50% of the value of the interests in the trust, together have a controlling interest in the trust business.
The “value of interests” in a trust includes the proportion of profits and capital distributions to which a beneficiary is entitled.
If a beneficiary or beneficiaries are entitled to more than 50% of the value of interests in a trust, and the trustee of that trust has a controlling interest in another trust, corporation, or partnership, the beneficiaries in the first mentioned trust have a controlling interest in the second mentioned trust, corporation, or partnership.
Note
If the trust is a discretionary trust, then every beneficiary is deemed to have a controlling interest in the trust.
This type of trust is treated as a discretionary trust if the trustee or any other person has a discretionary power to determine who receives any part of an income or capital distribution, even if the trust deed specifies fixed distributions of part of the capital or income, or both.
Examples
Example 1
Simon holds 40% of the shares in Horse Pty Ltd and is 1 of 2 directors of Goat Pty Ltd.
Anjali holds 40% of the shares in Horse Pty Ltd and is the other director of Goat Pty Ltd.
Together as a set of persons Simon and Anjali have a controlling interest in both:
Horse Pty Ltd, controlling 80% of the voting power attached to the share capital, and
Goat Pty Ltd, controlling 100% of the voting power at directors’ meetings.
The businesses are grouped for payroll tax purposes using common control provisions in the PTA.
Diagram 1
This diagram is a visual depiction of the relationships in the example.
Example 2
Matthew and Nancy are the Directors of both Hibiscus Pty Ltd and Geranium Pty Ltd.
Together as a set of persons, Matthew and Nancy have a controlling interest in both Hibiscus Pty Ltd and Geranium Pty Ltd, controlling 100% of the voting power at directors’ meetings.
The businesses are grouped for payroll tax purposes using common control provisions in the PTA.
Diagram 2
This diagram is a visual depiction of the relationships in the example.
Example 3
Maria and Frank Grasso are the shareholders of Aluminium Pty Ltd.
They are also both beneficiaries of the Grasso Family Trust, along with their 2 children, Albert and Carla.
Frank and Maria together as a set of persons have a controlling interest in both the trust and Aluminium Pty Ltd.
Therefore these 2 businesses form a group for payroll tax purposes.
Note
The carrying on of a trust is deemed to be a “business” under the PTA. Since the Grasso Family Trust is a discretionary trust then all beneficiaries are deemed to have a controlling interest in the trust business.
Diagram 3
This diagram is a visual depiction of the relationships in the example.
Case studies
These case studies demonstrate how common control may apply in a real-world scenario.
The case studies also extend to payroll tax lodging and reporting requirements for that scenario.
Common control through sole director/shareholder
A real estate business carried on by a company with a sole director and shareholder, is looking to expand the business by purchasing an existing rent roll.
After an extensive search, an agreement is reached with another local real estate business to purchase their existing rent roll portfolio.
The deal will involve the director/shareholder of the purchaser becoming the sole director and shareholder of a company which owns the rent roll.
As both companies have the same director and shareholder they form a commonly controlled group of businesses for payroll tax purposes.
The monthly and annual payroll tax returns for both companies need to be lodged on a group basis as a consolidated Single Lodger, or as a Designated Group Employer and individual group members. Only one tax-free threshold can be claimed for the group. Read what is payroll tax grouping for more details.
Common control through a discretionary trust
The Kumar family own and operate a logistics business in NSW. The business is carried out under the Kumar Family Trust, a discretionary trust.
Nick and Rachael Kumar are specified beneficiaries of the trust, and their children and immediate families are included as general beneficiaries. The trustee of the trust has only ever made distributions to Nick and Rachael.
Nick and Rachael have 2 children who are heavily involved in the main logistics business and have also decided to start a small courier business of their own. The children set up a company where both are directors and equal shareholders and started trading as a courier business specialising in urgent parcel deliveries.
To help their children, Nick and Rachael provide the new courier business with a loan from the Kumar Family Trust. The loan is interest free with no repayment schedule as the loan amount exceeds the courier business’ net assets.
The logistics business also allows the new business access to its office, warehousing and loading space for no charge. Apart from this, the new business is managed separately from the main logistics business and also directly employs 4 staff.
Any beneficiary of a discretionary trust is deemed as having a controlling interest (greater than 50% of the value) in that trust, whether specified or not. See section 72 of the PTA.
In this case both children have a controlling interest in the Kumar Family Trust. Together, they also have a controlling interest (as directors and shareholders) in the new business.
As they have controlling interests in the Kumar Family Trust and the new business, these businesses form a commonly controlled group for payroll tax purposes.
Although the businesses are managed separately and employ their own staff, the connections and dependencies (interest-free loan and access to premises at no charge) would likely result in an application for a grouping exclusion being disallowed.
The new courier business will need to register for payroll tax as a grouped employer with the Kumar Family Trust.
The monthly and annual payroll tax returns for both would need to be lodged on a group basis as a consolidated Single Lodger, or as a Designated Group Employer and individual group members. Only 1 tax-free threshold can be claimed for the group. Read what is payroll tax grouping for more details.
Common control through shareholders and directors
Jen, Alice, Ken and Mary run a number of businesses.
Wages are paid by all businesses. Saxophone Pty Ltd and Trumpet Pty Ltd pay wages above the current payroll tax threshold.
Saxophone Pty Ltd
Shareholders
Jen (50%), Alice (50%)
Directors
Jen, Alice
Wages paid
NSW only
Trumpet Pty Ltd
Directors
Jen, Alice
Wages paid
NSW and Queensland (QLD)
Drum Pty Ltd ATF for Jazz Unit Trust
Beneficiaries
Jen (1 unit), Alice (1 unit), Mary (1 unit)
Wages paid
Victoria only
JAK Partnership
Partners
Jen (40%), Alice (30%), Ken (30%)
Wages paid
QLD only
Saxophone Pty Ltd and Trumpet Pty Ltd are grouped because Jen and Alice have controlling interest through their shareholding of Saxophone Pty Ltd (100%) and directorship of Trumpet Pty Ltd (100%).
Saxophone Pty Ltd and Drum Pty Ltd ATF Jazz Unit Trust are grouped because Jen and Alice have controlling interest through directorship of Saxophone Pty Ltd (100%) and as beneficiaries of Drum Pty Ltd ATF Jazz Trust (67%).
Saxophone Pty Ltd and JAK Partnership are grouped because Jen and Alice have a controlling interest through shareholding of Saxophone (100%) and they are entitled to greater than 50% of the profits in the JAK Partnership (70%).
The 3 groups above will be subsumed because Saxophone Ltd is a member of all 3 groups.
Saxophone Pty Ltd and Trumpet Pty Ltd will need to decide who will be the Designated Group Employer (DGE) for the group, as they both exceed the current payroll tax threshold.
Although Drum Pty Ltd ATF for Jazz Unit Trust and the JAK Partnership do not need to register or pay in NSW, they still need to declare their interstate wages under the DGE’s returns.
