Payroll processors and payroll tax
If your business has outsourced payroll processing to another business it is your responsibility to ensure your payroll tax is paid to Revenue NSW on time.
What is a payroll processor?
Many employers have their payroll functions managed by a third-party payroll processing service provider (payroll processor).
Payroll processors manage a range of transactions, such as paying the wages, superannuation and PAYG income tax of their clients’ employees.
Their services include the payment of state payroll taxes on behalf of their employer clients.
Payroll tax obligations
Payroll processors must pass on payroll tax from their clients to state revenue offices.
The payment of payroll tax remains the responsibility of the employer (client), even if these payments are not passed on by a payroll processor.
It is the responsibility of an employer to:
- pay their tax liabilities on time with Revenue NSW, and
- attempt recovery of amounts already paid to the payroll processor which have not been passed on.
Failure to pay the correct amount of payroll tax on time is considered a tax default and is subject to interest and penalty tax.
You may qualify for a reduced rate of penalty tax if you make a voluntary disclosure of any errors which have resulted in you underpaying your payroll tax.
Labour hire arrangements
Some payroll processors may offer to take on the status of employer for all employees of a client through “labour hire” arrangements.
The labour hire business is then liable for payroll tax on amounts paid to all workers on-hired, whether they are employed directly by the labour hire business or sourced from other businesses.
The labour hire business is required to register for payroll tax if their wages exceed the monthly threshold.
How to safeguard your business
We recommend that you conduct appropriate due diligence before engaging a payroll processor to perform these services.
If you are approached by a payroll processor offering labour hire arrangements that you suspect may not be genuine, please contact us.
If you already use a payroll processor we recommend that you:
- ask for proof that they have passed on payroll taxes to relevant state revenue offices, and
- contact the payroll tax team if you wish to confirm that your payroll processor has passed on your payroll tax.
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]