Common errors

If you pay wages in NSW and they exceed the monthly threshold, you must register for payroll tax. If you’re a member of a group, the total Australian wages paid or payable by all members of the group will determine whether you should register for payroll tax.

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Only one member of the group can claim the threshold.

If any of these apply to your business, it will affect the threshold:

• wages are only paid for part of the year
• you pay wages in another state or territory that are subject to payroll tax
• you are part of a group.

For payroll tax purposes, you may be grouped with other businesses if there’s a link between the companies. Grouping can occur through:

• related companies
• common employees
• common control
• tracing of interest
• subsuming.

Only one member of the group can claim the threshold.

The threshold can be claimed either by the Designated Group Employer (DGE) or the Group Single Lodger (SL).

If you are the DGE, the other group members become non-threshold claimers (NTC) and pay the flat rate of payroll tax on their wages.

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

A motor vehicle allowance is paid to an employee to compensate them if they use their private vehicle for business purposes.

To calculate the exempt component, multiply the number of business kilometres travelled in the financial year by the exempt rate.

For people working in the real estate industry, refer to Revenue Ruling PTA 025.

A living away from home allowance (LAFHA) is a fringe benefit. Its value for payroll tax purposes is outlined in the Fringe Benefits Tax Assessment Act.

If the allowance does not qualify as a LAFHA allowance benefit under the Act, it will be treated in the same way as an overnight accommodation allowance.

If the worker is not an ‘apprentice’ or ‘new entrant trainee’ according to the NSW Department of Industry (NSW DOI), they are not eligible for the apprentice and trainee rebate.

Not all trainees are eligible for the apprentice and trainee rebate. Generally, you can claim the rebate on wages paid to trainees classified by Department of Industry as ‘new entrant trainees’ but you cannot claim for ‘existing worker trainees’.

Ask NSW DOI if you are unsure about the status of your trainees.

You can only claim a payroll tax rebate on wages paid to approved apprentices and new entrant trainees who are recognised by the NSW Department of Industry.

All wages paid to an eligible apprentice/trainee should be included in the rebate. This includes superannuation, allowances and bonuses.

Only one rebate can be claimed at a time. If you’re eligible for the Jobs Action Plan (JAP) rebate, you cannot claim the apprentice and trainee rebate at the same time.

Once the employee is no longer eligible for the JAP rebate, you can claim the rebate if the apprentice has been approved by NSW Department of Industry.

The value of fringe benefits used for payroll tax is the NSW portion of the total of type 1 and type 2 aggregate amounts (less any tax exempt entertainment fringe benefits) multiplied by the type 2 gross-up rate.

You can find out more about gross up rates on the rates and thresholds page.

If you pay fringe benefits in NSW and interstate but cannot accurately determine your NSW fringe benefits value, you can pro-rata your FBT value based on the ratio of NSW wages to total Australian wages.

If your business pays interstate wages, you cannot claim the full payroll tax threshold in NSW. The threshold is reduced based on your interstate wages.

Include all wages paid in Australia, even if it’s from businesses that do not pay wages in NSW.

If you’re grouped with a business that only pays wages interstate, it’s important to include their wages in the ‘interstate wages’ section of your returns.

Interstate wages will affect the threshold entitlement of your business.

If an employee works in more than one jurisdiction in a calendar month, the place where the wages for that month are taxable depends on:

• the employee’s principal place of residence
• the employer’s registered ABN address or principal place of business
• the place where the wages are paid to the employee
• the place where the services were mainly performed.

If you send a worker overseas to perform a job for your business, that person’s wages continue to be NSW wages and subject to payroll tax for the first six months.

For more information, refer to the nexus provisions decision guide.

This includes:

• incorrectly determined value of the option (as the value of the share to which the option relates less the option exercise price. This is only one of two potential values, the greater of which must be used)
• incorrectly determined nil value, where the exercise price is equal to the market value of the share at the grant date. The options retain a positive value under the Commonwealth Income Tax Provisions.

Although these shares are exempt for income tax purposes, they are not exempt for payroll tax purposes.

The pro-rata method is not accepted when calculating liable taxable shares and options for payroll tax. While employees may spend part of their employment in Australia, you must work out whether shares or options are liable for payroll tax.

Often when customers submit their annual reconciliation they do not clearly declare the ESS values as part of the return. These need to be reported in the shares and options category.

This includes:

• incorrectly declaring shares and options at vesting date when the employee was working overseas at the time of the grant
• incorrectly declaring shares and options at vesting date when the employee was working overseas at the time of vesting for six or more months
• incorrectly excluding shares and options at vesting date when the employee was working overseas at the time of vesting for less than six months.

You need to consider the full relationship when deciding if your contractor is really an employee. Even if the contract says they are an independent contractor, they may still be an employee.

For more information, read Revenue Ruling PTA 038.

The 180 day exemption focuses on the type of services the business uses. The 90 day exemption focuses on the contractor and the number of days they provide their services. The 180 day exemption does not extend the 90 day exemption.

Revenue Ruling PTA 020 explains the 180 day exemption in more detail and outlines how it is different from the 90 day exemption. Revenue Ruling PTA 035v2 explains the 90 day exemption.

A contract is exempt from payroll tax if:

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

For more information, read Revenue Ruling PTA 022.

Payments made to a contractor are exempt if they engage two or more workers to provide the contracted services. For the exemption to apply, the services performed must be for that contract only.

For more information on the conditions necessary for the exemption to apply, read Revenue Ruling PTA 023.