Payroll tax and the meat processing industry
An overview of common employment practices and business structures in the meat processing industry that may create payroll tax problems in NSW.
As an employer in the meat processing industry, you must meet your payroll tax obligations.
Common errors in this industry occur in connection with:
- the use of labour hire businesses
- grouping of businesses, and
- the use of apprentices and trainees.
Use of labour hire businesses
Labour hire businesses are often used to supply workers to carry out de-boning, filleting and other related services.
Under typical arrangements:
- on-hired workers:
- usually follow the food handling, production and safety procedures of the meat processing business
- provide services in an employee-like manner, sometimes working alongside employees of the meat processing business carrying out similar tasks
- the labour-hire business may be part of a group with the meat processing business or may be independently controlled
- there may be several tiers of labour-hire businesses involved in a chain of on-hire arrangement.
Under the employment agency provisions contained in Division 8 of Part 3 of the Payroll Tax Act 2007, the labour hire business directly engaged by the meat processing business is usually considered an employment agent.
Payroll tax consequences
The labour hire business is liable for payroll tax on amounts paid to all workers on-hired to the meat processor, whether they are employed directly by the labour hire business or sourced from further subcontractors.
The ‘contractor exemptions’ do not apply to any on-hired workers obtained from other subcontractors.
The labour hire business is required to register for payroll tax if wages exceed the monthly threshold.
Common errors of labour hire businesses
- Failing to register for payroll tax.
- Failing to include payments for on-hired workers sourced as subcontractors (either as individuals or through other businesses).
Read our employment agencies page for more information.
Read Commissioner’s Practice Note CPN 005: Employment Agency Contracts Guidelines for more information about whether particular arrangements are an employment agency contract.
Grouping issues
Meat production involves tasks such as:
- farming
- transporting
- processing
- packaging, and
- wholesale and retail distribution.
It is rare that a single business entity will carry out all these tasks. Many meat processors are part of a larger group of businesses involved in meat production.
Under the payroll tax grouping provisions businesses may be grouped through several methods including:
- common control of shareholders and directors, or
- where employees of one business perform duties for another business.
If a meat processing business is grouped with other businesses, they will share a single payroll tax threshold. The threshold will often be claimed by one business in the group (the designated group employer) and all other group members will not be able to claim the threshold.
Common grouping errors
- Failing to accurately declare payroll tax groupings.
- Incorrectly claiming a payroll tax threshold when it is already claimed by the designated group employer
- Failing to register for payroll tax when wages are below the payroll tax threshold, but the business is grouped and may not be entitled to a threshold.
Read our grouping page for more information.
Use of apprentices and trainees
The meat processing industry is a large employer of apprentices and trainees.
All wages paid to apprentices and new entrant trainees are liable for payroll tax, including:
- superannuation
- allowances, and
- fringe benefits.
However, you can claim a payroll tax rebate on wages paid to approved apprentices and new entrant trainees.
Not all trainees are eligible for the rebate. Read more about apprentice and trainee wages.
Common errors
- Claiming a rebate for an apprentice or trainee not registered with Training Services NSW.
- Continuing to claim the rebate when the worker is no longer an apprentice or new entrant trainee.
- Claiming the rebate on the apprentice or trainee’s ordinary wages only, instead of their total remuneration.
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.
We disregard any arrangements, including contracts, when the payroll tax anti-avoidance provisions apply. Your business is then considered an employer and all payments are taxable wages. You will be given a notice outlining the details.
Read section 42 and section 47 of the Payroll Tax Act 2007 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. Interest will still be imposed.
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 questions about this topic call 1300 139 815 or +61 2 7808 6904 for international callers.
You can also email [email protected]