Payroll tax and the point to point transport industry
Learn about common business arrangements in the point to point transport industry that may impact the calculation of payroll tax.
What is point to point transport?
Point to point transport describes moving people in a vehicle for a fare. It does not cover public transport.
Point to point transport customers often choose the route and time of travel. Examples include:
- taxis and rideshare services
- airport transfer services
- hire cars.
The NSW Point to Point Transport Commission categorises industry members into two broad groups.
Booking service providers (BSP) are businesses that take bookings from customers to provide a passenger service and then communicate bookings to drivers. This can include rideshare, limousines, and other hire vehicles.
Taxi service providers (TSP) are businesses that provide rank and hail taxi services. The vehicles must be licenced as taxis and comply with the relevant vehicle standards.
TSPs can also be registered as BSPs and take bookings for taxi transportation requests.
Common payroll tax errors
As an employer in the point to point transport industry you must meet your payroll tax obligations.
Common errors in this industry occur in connection with the engagement of drivers, including contractor exemptions and taxi driver bailment arrangements.
These errors often result in businesses underpaying their payroll tax by a significant amount.
If we conduct a payroll tax audit on your business we will verify your evidence with third-party information, including information obtained from other government agencies.
Engagement of drivers
A central payroll tax issue in the industry is the relationship between businesses and their drivers.
If drivers are engaged as employees under common law their wages are liable for payroll tax. Read more about the wages that need to be included in payroll tax calculations.
If drivers are not engaged as employees payments made to them may still be subject to payroll tax under ‘relevant contract’ laws. See Division 7 of Part 3 of the Payroll Tax Act 2007 (PTA).
For more details read:
Drivers of booked transport requests
Booked transport requests constitute a contract under which the BSP receives services from the drivers that are for, or in relation to, the performance of work. As a result, relevant contract laws apply.
Under these arrangements:
- Passengers enter contractual arrangements with the BSP to provide the requested transportation service.
- BSPs fulfil their obligations to passengers by engaging drivers to provide the requested service.
- Drivers are held to be providing services to the BSPs through the provision of transport services to passengers.
- Payment flows from the passenger to the BSPs, who then pays the driver less their agreed share.
The labour component of payments made by BSPs to drivers are wages of the BSP unless the contract is exempt.
See sections 32 to 35 of the PTA.
Typical example of booked transport requests
Diagram 1: In this typical model the passenger requests services from the Booking Service Provider (BSP) who then allocates the request to the driver (blue arrows). The BSP also enables the payment from the passenger, distributing it to the driver after taking a share (green arrows). The driver provides services (orange arrows) to both the passenger and BSP by fulfilling passenger service requests.
Contractor exemptions for BSPs
Businesses must include all payments to contractors as taxable wages in their payroll tax returns unless an exemption applies.
Only two contractor exemptions are available for booked transport request arrangements. This is due to the following factors:
- BSPs usually need the kind of services provided by drivers throughout the year.
- Drivers usually provide their services personally and do not engage others to assist them in driving a passenger to their destination.
- Drivers transport people rather than goods.
Also read Commissioner’s Practice Note 007: Payroll tax contractors.
Services provided for less than 90 days
The contract will be exempt where the driver provides services to the BSP for no more than 90 days in the financial year. See section 32(2)(b)(iii) of the PTA.
Any amount of time worked in a day constitutes a full day.
If you are claiming an exemption under this category, you should keep copies of the following:
- the contract
- invoices
- working papers
- general ledgers
- timesheets, and
- any other evidence which supports the exemption claim.
For more details about this exemption read:
Contractor who ordinarily provides services to the public
The contract will be exempt where the driver ordinarily provides the same kind of services to the public generally in that financial year. See section 32(2)(b)(iv) of the PTA.
Where a TSP is also registered as a BSP and takes bookings for taxi transport requests, this exemption will usually apply. This is because taxi drivers generally also accept transport requests from passengers hailing a ride on the street and at taxi ranks.
When claiming this exemption, you should keep supporting records such as copies of:
- the contract
- advertising material
- declarations, and
- other evidence which substantiates the exemption claim.
We consider a range of factors to determine whether you have satisfied the requirements of this exemption. Read Revenue Ruling PTA 021: Exemption for contractors ordinarily rendering services to the public for more details.
Taxi driver bailment arrangements
For payroll tax purposes there are no taxable wages for the TSP in relation to taxi drivers under bailment arrangements.
Under these arrangements the taxi driver hires the taxi vehicle for a period for an agreed fee.
The driver is then free to use the taxi vehicle to ply their trade at taxi ranks or with passengers hailing for a ride from the street.
Courts have held that under typical bailment arrangements:
- passengers enter contractual arrangements with the taxi drivers themselves rather than the owner or operator of the vehicle
- payment is held to flow from the passenger to the driver, who then pays the vehicle hire fees to the taxi vehicle owner / operator
- there is no payment from the taxi vehicle owner / operator to the driver for any services.
See Voros v Dick [2013] FWCFB 9339 (at 14-15) and De Luxe Red & Yellow Cabs Co-Operative (Trading) Society Ltd & Ors v Commissioner of Taxation 1997 FCA 0840 .
Anti-avoidance provisions
The payroll tax anti-avoidance provisions apply where an arrangement reduces or avoids liability for payroll tax.
There does not need to be proof the arrangement was intentional. What matters is the effect the arrangement has on the payroll tax liability.
We examine the facts and circumstances of your business to work out whether to apply the provisions.
The Chief Commissioner may disregard the agreement, transaction or arrangements and determine that any:
- party to the arrangement is taken to be an employer, and/or
- payment in respect of the arrangement will be deemed taxable wages.
You will be given a notice outlining the details.
Read section 42 and section 47 of the PTA for more details.
What you need to do
You should conduct an internal review of your business to determine the correct payroll tax treatment of payments made to all workers.
Registered businesses
If you have identified an underpayment, or not declared liable amounts in your monthly payroll tax return for the current financial year, include these additional amounts in your next return due for lodgement.
Unregistered businesses
If your taxable wages exceed the monthly payroll tax threshold in the current financial year, or the last four financial years, you must register for payroll tax.
Register for payroll tax now
Voluntary disclosure
Voluntary disclosures attract a reduced level of penalty tax compared to cases where we identify an underpayment. The full interest rate will still apply.
Non-compliance identified through our data matching activities will result in penalty tax and interest charges, in addition to any underpayments detected.
Contact us to make a voluntary disclosure if you have not declared all liable amounts in your returns, including previous financial years.
Contact the payroll tax team
If you have more questions about this topic call 1300 139 815 or +61 2 7808 6904 for international callers.
You can also email [email protected]