Building and construction
As an employer in the building and construction industry, you must meet your payroll tax obligations.
Some businesses in this industry do not declare their contractor payments as liable wages. Businesses who engage contractors are required to report TPAR payments to the ATO and information is exchanged with the ATO to identify any potential discrepancies.
The industry is also one of the largest employers of Apprentices and Trainees. Not all Apprentice and Trainee wages are eligible for a rebate and some businesses claim a rebate they are not entitled to.
These common errors result in significant payroll tax liabilities.
Common issues
- Some businesses do not correctly apply the contractor exemptions. For more information, read our common errors page.
- If you engage contractors in place of employees to provide labour to your business, it is likely these payments are liable wages. For more information, see the practice note on payroll tax contractors.
- Some contractors may be deemed as casual employees. Consideration for the totality of the relationship is important when deciding if the contractor is a common-law employee or an independent contractor. Contractors may still be an employee even if a written contract indicates the contractor is independent. It is important to identify the relationship between the business and the contractor.
- Some employers incorrectly believe that if a contractor has an Australian Business Number (ABN) or is incorporated, then the contractor is not liable for payroll tax. Payroll tax can capture payments to contractors who have ABNs and operate through various entities, for example, sole traders, companies, trusts and partnerships.
- Some employers who engage contractors do not maintain evidence to support an exemption claim. It is important that you keep supporting evidence to substantiate your claim. In the event of an audit, you will need proof showing an exemption applies. Some particular areas are:
- Engaging labour/sub-contractors (2 or more) – the services must be performed for the actual contract only
- Claiming to provide services to the general public
- Claiming the work was provided for less than 90 days
- Incorrectly claiming a deduction for non-labour allowances/material. These deductions are for materials and equipment only. Revenue Ruling PTA 018 provides a list of percentages allowed per contractor type.
For more information on available exemptions, read the contractors and case studies page.
Apprentices and Trainees
- Some employers claim a rebate even though these employees are not registered with Training Services NSW. Only wages and superannuation paid to an Apprentices or Trainees registered with Training Services NSW are entitled to claim a rebate for payroll tax. For more information read our Apprentice and Trainee Wages page.
- Sometimes an employer continues to claim the rebate when the worker is no longer an apprentice or new entrant trainee. Documentation such as start and completion dates and the confirmation letter from Training Services NSW should be kept as a record to substantiate, if requested.
- Some businesses are not entitled to claim a payroll tax rebate because they are only the “host” employer of the apprentice or trainee placed through a Group Training Organisation (GTO). The GTO is the employer of these workers, pays all their wage entitlements and has registered the apprenticeship/traineeship with their organisation . Wages are exempt if paid by a non profit GTO that is approved by the Department of Industry. For more information on payroll tax exemptions please visit our Rebates and Exemptions page - Rebates and exemptions | Revenue NSW.
- Find out more about apprentices and trainees on our common errors and case studies page.
What you need to do
You should regularly review your building and construction business to determine the right payroll tax treatment on contractor payments.
Unregistered businesses
If your taxable wages exceed the monthly payroll tax threshold in the current financial year, or previous financial years, you must register. When calculating your taxable wages, include payments made to liable contractors.
Register for payroll tax now
Registered businesses
If you have not declared all liable amounts in your monthly payroll tax return for the current financial year, include these additional amounts in your annual reconciliation return.
If you did not declare all liable amounts in previous financial years, contact us to make a voluntary disclosure. Voluntary disclosures attract a reduced level of penalty tax compared to cases where we identify the understatement.
Contact us
If you have a question about the building and construction industry and cannot find the answer on this website, contact us .