Taxes, duties, levies and royalties
Listen

Common employees and payroll tax grouping

A payroll tax grouping exists where an employee of an employer performs duties for another business. View an example of the use of common employees.

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 use of common employees?

Businesses are grouped if one or more employees of a business:

  1. performs duties in connection with another business carried on by the employer and another person (including joint ventures), or
  1. is employed solely or mainly to perform duties in connection with one or more businesses carried on by another person, or
  1. performs duties in fulfillment of an employer’s obligation to provide services to another person under an arrangement or agreement between them.

An employee performs duties for another business if a person in that business can direct or control the manner in which the work is performed by the other person.

Consequently, businesses are not grouped if the employee undertaking work for or in connection with another business is not performing duties.

Example

Green Thumb Pty Ltd is a manufacturer of gardening and greenlife products.

Big Box Pty Ltd was set up to provide warehouse and logistic services for Green Thumb Pty Ltd.

In providing those services, employees of Big Box are under the direction of, and must adhere to, instructions from Green Thumb Pty Ltd management and staff.

The 2 businesses form a group for payroll tax purposes.

Diagram

This diagram is a visual depiction of the relationships in the example.

Flowchart of Payroll tax common employees example

Case study

North Pole Pty Ltd (North Pole), a heavy haulage transportation business, uses its own staff, trucks, trailers, equipment, as well as engaging contractors to do work.

The contractors include other transportation businesses that supply their own drivers, trucks, trailers and equipment, such as Top Truckers Pty Ltd (Top Truckers).

North Pole engaged the services of Top Truckers at a cost of $8 million. Top Truckers earned all of its operating revenues from North Pole in that financial year.

The director of Top Truckers manages its employees when they are in the office, but they are often on the road for extended periods of time.

When they are on the road, the operations staff from North Pole schedule, allocate, and provide job specific instructions to the contractors’ drivers. No written agreement exists between the parties for the provision of transportation services and they operate from the same business premises.

An informal agreement exists between North Pole and Top Truckers for the provision of transportation services where the employees of Top Truckers perform duties for North Pole when transporting cargo.

As a result, these 2 businesses are grouped from the use of common employees.

Need more detailed information?

Commissioner's Practice Note 009 – Payroll tax grouping contains additional examples of payroll tax grouping through common employees.

Related information

You might also be interested in other payroll tax grouping topics, such as:

Contact the payroll tax team

If you have questions about this topic call 1300 139 815 or +61 2 7808 6904 for international callers.

You can also email [email protected]