Business waits on new rules for payroll tax

BUSINESSES will have to wait until the Government releases its budget on May 16 to find out how new payroll tax rules will operate.

In the last budget the Government said it would be widening the payroll tax net to catch employee-like contractors.

It undertook a consultation process with business representatives beginning last December and ending in February.

Both the proposal to widen the payroll tax net and the consultation process have proved controversial.

Many tax specialists argue the State Revenue Department already has the powers to catch employee-like contractors and that any widening of those will make it the most powerful revenue collector in the land.

They also railed against the Government’s demand that all consultations on the new rules were to be held ‘in-camera’.

The Government had suggested the new payroll tax rules would be available to business before the budget was released.

However, a spokesman for Treasurer Eric Ripper said the new rules would probably be included with budget releases.

“The Government is still weighing up the findings from industry consultation,” the spokesman said.

CPA Australia WA president Graham Harrison represented the Chamber of Commerce and Industry in the consultations.

Mr Harrison said he was unable to discuss what came out of the consultations due to confidentiality provisions put in place by the Government.

However, Mr Harrison said there were several things a company could do to prepare for the changes.

He said businesses should have written agreements with its subcontractors.

“When were the written agreements last reviewed? If it is more than 12 months since the last review, the agreements will need a fresh look,” Mr Harrison said.

“Could these agreements in any way be construed as contracts that are principally for labour? If so, the business may well be exposed to payroll tax.

“How well do the agreements measure up against the indicators used by the courts and revenue authorities in determining whether contractors are truly independent? Only a proper review will determine this.”

PricewaterhouseCoopers senior manager indirect tax Guy Noakes believes the new provisions will follow the relevant contractor provisions available in tax laws in New South Wales, Victoria and South Australia.

“These laws have a number of exclusions attached to them but I don’t think these exclusions will appear in this Government’s draft bill,” Mr Noakes said.

Contractors who supply their own equipment or are hired for less than 90 days are usually excluded from payroll tax provisions under these tests.

The Victorian Government has recently announced it will bring forward planned cuts to its payroll tax system and the New South Wales Government is considering payroll tax cuts.

“I believe the Government will also look at some of the tests that have come out under the Federal Government’s Personal Services Income tax rules,” Mr Noakes said.

He said businesses should consider the terms of the contracts they had with subcontractors.

“Is it results-based or open ended? If it is results-based there will probably not be a problem,” Mr Noakes said.

“Businesses should also identify the number of individuals carrying out the work. These new rules are aimed at catching one-man-band operators.”

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