Gig workers can be considered independent contractors or employees, or sometimes the platform operator is classed as an employment agent. It depends on the business structure and the workers’ employment relationship. Click the arrow to read the new ‘Gig economy businesses’ page.
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.
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.
Apprentices and trainees
Not all apprentices and trainees are eligible for a rebate.
You can claim the rebate on wages paid to trainees classified by Training Services NSW as ‘new entrant trainees’, but you can't claim on wages paid to ‘existing worker trainees’.
You can only claim the rebate on wages paid during the time the employee is an eligible apprentice or trainee – from the date of commencement until the date of completion or cessation.
A common mistake is continuing to claim the rebate after the employee has completed or ceased their apprenticeship/traineeship.
Apprentice and trainee wages aren't exempt from payroll tax. They need to be separately declared in the appropriate field in your payroll tax return. From this, the rebate will be calculated.
If you're part of a group, the total group wages should include wages paid to all apprentices and trainees, as apprentice and trainees wages still form part of taxable wages.
All wages paid to an eligible apprentice and trainee should be included in the rebate, including all forms of remuneration that are captured for payroll tax, such as superannuation, allowances and bonuses.
This situation may occur when a group member employs the apprentice or trainee, however the apprenticeship or traineeship is registered with Training Services NSW under another group member.
If the external training provider or employment agency is the employer of the apprentice or trainee (they're responsible for paying any wages and providing other employment benefits) then only they can claim the apprentice or trainee rebate.
As a ‘host’ employer, you don't include the wages paid to these apprentices or trainees in your annual returns. Furthermore, you're not entitled to claim the rebate on these wages
If an employer is eligible for the apprentice or trainee rebate, they're not eligible to apply for a JAP rebate in relation to the apprentice or trainee. If that employer has already been paid the JAP rebate, they must repay that rebate and apply for the apprentice or trainee rebate.
Directors’ fees
Include wages paid to a director, including non-working directors, for services performed in your returns.
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.
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.
Interstate wages
Your interstate wages affect the threshold you claim.
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.
Nexus provisions
Where your employees work affects the threshold you claim.
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.
Salary sacrifice
Often businesses fail to include all salary sacrifice amounts that are liable for payroll tax. Payroll tax is applicable to salary sacrifice arrangements.
Note the following:
the reduced wage that the employee pays income tax on is treated as taxable wages
the pre-tax superannuation contribution is classified as the employer contribution and is taxable
Shares or options granted to employees through an Employee Share Scheme (ESS) defined in section 83.10A of the Income Tax Assessment Act 1997 are considered wages for payroll tax. You must delcare the value of the shares or options provided as wages.
Payroll tax audits show that customers are making the following errors:
Not being aware:
of any ESS offered in your company or your parent company
that the value of shares and options arising from ESS are taxable wages, and/or
that dividend equivalents are liable wages for payroll tax purposes.
Incorrectly calculating the taxable value arising from the grant of shares or options.
Using incorrect share price, vesting date or exchange rate when calculating the market value of the shares or options.
Using a pro-rata method to calculate taxable values for employees providing services both in Australia and overseas during the vesting period. The pro-rata method is not acceptable when calculating taxable values for payroll tax.
Not recognising that shares or options are deemed to have vested or become taxable seven years after the grant date (whether or not they have actually vested).
Not including the taxable value of shares under the Commonwealth ‘taxed-upfront $1,000 reduction’ scheme. Although these shares are exempt for income tax purposes, they are not exempt for payroll tax purposes.
Not claiming a refund when taxable values arising from shares or options have been declared for payroll tax at grant date which subsequently got cancelled or rescinded.
Employment termination payments (ETPs) are liable for payroll tax. The amount of ETP that is liable is the amount paid by you, minus the income tax exempt component.
Third party payments
If an employee or director provides services to a business, all payments for that service are liable for payroll tax, no matter who makes or receives the payments.
Wages you pay an employee or a director for services they provide to your business as known as third party payments and must be included in your returns even if they are paid:
to a person other than the employee or director
by a person other than the employer
by a person other than the employer to a person other than the employee or director.
These payments for services can include consultancy fees paid to or received by a third party.
Contractors
Payments made to contractors are included for payroll tax unless an exemption applies.
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.
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.
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.
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.