Payroll tax and large business
Learn how Revenue NSW helps large businesses comply with their payroll tax obligations, including an overview of common errors and our approach to audits.
A ‘large business’ is any employer who pays more than $15 million in NSW payroll tax annually.
These employers may be a single entity or a group of related or commonly controlled entities. Their annual wages expenses exceed $275 million Australia-wide.
All large businesses should have robust, well-established processes in place to make sure their payroll system is set up to accurately meet their ongoing NSW payroll tax obligations.
Common errors
Some of the more complex payroll tax items to be aware of include:
- The valuation of shares and options under Employee Share Schemes (ESS or similar schemes) provided to employees and/or executives.
- The treatment of expatriate employees. Read Revenue Ruling PTA002: Expatriate employees for more details.
- Identifying and declaring all grouped businesses.
- Classifying payments to contractors as either liable or exempt from payroll tax, and recording which exemption applies.
- The correct identification of exempt wages and relevant supporting evidence/records required to be kept to verify the exemption.
- The use of “non-genuine” employment agencies or not identifying contractual arrangements that are in fact “employment agency arrangements”.
Compliance for large businesses
Revenue NSW reviews the payroll tax compliance of large business customers at least once every 5 years. The frequency can depend on new data or information that comes to hand.
Our compliance approach reviews:
- the accuracy of your payroll tax compliance in recent years
- your payroll tax framework, and
- your internal payroll controls.
This helps us establish confidence in your ability to correctly meet your NSW payroll tax obligations in the future.
Our aim is to reassure the NSW Government and the people of NSW that large businesses are paying the correct amount of payroll tax.
We can determine an appropriate compliance approach that will ensure the most effective use of your time by using:
- our risk differentiation framework, and
- internal and external data available to us, such as data from the Australian Taxation Office.
Risk differentiation framework
Large businesses are placed in one of three broad groups for payroll tax compliance: high, medium or low risk.
Our classification is based on a combination of quantitative and qualitative factors using data available to us.
Quantitative factors are taken from an analysis of various data sources we can access.
Qualitative factors refer to:
- the previous compliance history of a business,
- the results of previous audits we’ve conducted on that business,
- general industry insights, and
- other perceived risk factors.
Our approach to customer service
We offer professional services to strengthen the relationship with our large business customers.
Our goal is to improve your voluntary payroll tax compliance through education and clear communication around any issues we uncover.
We can tailor our approach based on your level of risk and adjust our interactions with you to meet mutually agreed timeframes.
Our skilled and responsive auditors will maintain a positive working relationship with your staff and listen to your needs. We aim to minimise our impact on your normal business activity.
Our level of interaction with you will vary based on whether we believe you require an ‘assurance’ or an ‘enforcement’ approach.
Assurance and enforcement audits
Businesses selected for an assurance audit are considered low to medium risk for payroll tax errors.
An assurance audit can be expanded and changed to an enforcement audit depending on what we may uncover during an audit.
Businesses selected for an enforcement audit are considered medium to high risk for payroll tax errors.
If your business is audited our auditors will meet with you and provide:
- clear guidance about the taxable wage components, including records, documents and the periods we would like to review
- access to compliance data tools, such as computer assisted verification (for enforcement audits involving large data sets)
- reasonable timeframes for you to provide requested information
- opportunities to respond to our findings before they are finalised, and
- education on any payroll tax issues you do not understand.
What you need to do
Whether you have been selected for an audit or not, we expect the following actions:
- Keep us informed of any changes impacting your payroll tax compliance, for example changes to group members.
- Provide information we ask for in a timely manner.
- Keep sufficient and relevant payroll and financial records for at least 5 years, including:
- accessible soft copy data, and
- payroll tax return working papers.
- Comply with all reasonable requests made by our officers on behalf of the Chief Commissioner of State Revenue.
- Conduct regular internal reviews of your payroll processes and contact us immediately if any errors are discovered.
- Maintain staff training and competence in relation to your internal payroll.
- Maintain effective procedures for payroll tax compliance.
Voluntary disclosure
Non-compliance identified through our audit and data matching activities will result in penalty and interest charges, in addition to any underpayments detected.
Such penalty tax may end up costing your business significant sums of money. Penalty tax can range from 20% up to 90% on top of the primary tax payable, depending on your level of culpability. Penalty tax for significant global entities is higher.
If you make a voluntary disclosure before we initiate an audit we can reduce, or even waive, any penalty tax that may otherwise apply to your tax defaults.
Contact us to make a voluntary disclosure if you have not declared all liable wages in your returns, including for previous financial years.
Contact the large business team
If your business is currently being audited please contact your auditor.
For general questions, email our dedicated large business team at [email protected]