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Pay-roll Tax Harmonisation


From 1 July 2008, a number of changes will be made to the South Australian Pay-roll Tax Act 1971 (the “PRT Act”) to harmonise key aspects of its pay-roll tax system with those of other jurisdictions.

The changes are summarised below.

For additional information on the harmonisation changes please refer to Circulars 295, 296, 297, 298, 299, 300, 301, 302 and 303.

Liable Wages - Work Performed “In Another Country”

Wages paid or payable in respect of services, which are performed wholly outside Australia for a continuous period of more than six months, were exempt from the time that the initial six-month period overseas has been served. From 1 July 2008, such wages are exempt from pay-roll tax from the commencement of the period of overseas service.

See Circular 297.

Taxable Value of Fringe Benefits

From 1 July 2008, the taxable amount of fringe benefits for pay-roll tax purposes is determined by grossing up the fringe benefit using only the lower (Type 2) gross-up rate available in the FBT Act.

See Circular 299.

Shares and Options

From 1 July 2008, new provisions in the PRT Act legislation confirms shares or options issued under employee share acquisition schemes as liable wages. Under these provisions, the grant of a share or option to an employee, a director (including for the appointment of a director), or deemed employee, now constitute wages.

The granting of a share or option, which is classified as a fringe benefit under the FBT Act is not treated as a fringe benefit, but rather as wages for pay-roll tax purposes.

See Circular 303.

Travelling Allowances

An allowance paid or payable to an employee, to compensate them for any business use of their own private vehicle is taxable only to the extent that it exceeds a prescribed rate per kilometre, or an amount calculated at the prescribed rate.

From 1 July 2008, the prescribed rate for pay-roll tax purposes is aligned to the rate prescribed by the regulations under section 28-25 of the Income Tax Assessment Act 1936 (Cwth) for calculating a deduction for car expenses for a large car using the cents per kilometre method.

For 2008-09 this rate is 70 cents per kilometre, an increase from the previous rate of 56 cents per kilometre.

See Circular 298.

Accommodation Allowance

An overnight accommodation allowance paid or payable to an employee is taxable only to the extent that the allowance exceeds the prescribed daily rate. If the allowance paid exceeds the exempt rate, the amount above the exempt rate is taxable.

The accommodation allowance can include accommodation, meals and incidental expenses. The exemption applies only where the accommodation allowance is designed to compensate an employee for accommodation, related meal and incidental expenses directly related to performing duties away from the employee's usual place of residence.

From 1 July 2008 the prescribed daily rate is aligned with the rate determined by the Federal Commissioner of Taxation, and it is the total reasonable amount for daily travel allowances using the lowest capital city for the lowest salary band for the financial year.

For 2008-09 this amount is $218.30 per day, previously it was $127.60 per day.

The ATO makes these determinations in June each year and sets the amount they consider reasonable for the following income year in relation to claims made for travel allowances. The rate is published in the Taxation Determination - Income Tax - What are the reasonable travel and overtime meal allowance expense amounts for 2008-2009?, which can be located at www.ato.gov.au.

See Circular 298.

Superannuation Benefits

Until 30 June 2008, South Australia did not impose pay-roll tax on superannuation payments to non-working directors. From 1 July 2008, consistent with the arrangements in other jurisdictions, all superannuation contributions to non-employee directors will be considered wages for pay-roll tax purposes.

See Circular 303.

New Exemptions

A number of new exemptions are introduced from 1 July 2008. Wages will be exempt from pay-roll tax in the following circumstances:

  • paid to a female employee in respect of maternity leave or to an employee (male or female) in respect of adoption leave will be exempt from pay-roll tax. This exemption does not include some wages paid for other forms of leave and is limited to wages for a maximum of 14 weeks full time leave (see Circular 300);
  • paid to bush fire and emergency service workers during periods of absence to perform volunteer activities relating to fire or emergencies (see Circular 303);
  • paid under the Commonwealth Development Employment Scheme (see Circular 303); and
  • paid by charities in respect of employees undertaking direct charitable activities of the organisation (see Circular 301).
Grouping of Employers

The harmonisation measures have introduced changes to the grouping provisions including:

  • the defininition of business has been aligned;
  • the criteria for groups arising from the use of common employees has been aligned;
  • for commonly controlled businesses, the common control test threshold will now be more than 50%, replacing the 50% or more test; and
  • in determining controlling interests, a new category of grouping will be adopted that provides for the tracing interests in corporations (see below).

See Circular 303.

Tracing Provisions

Under the grouping provisions, a relevant entity (a person or two or more associated persons) will be deemed to control a corporation if it controls more than 50% of the voting shares held either directly, indirectly or through aggregation of interests.

The new tracing provisions introduce the concept of linking the interest of associated persons. Associated persons are established by examining the relationships between individuals, partners, private companies, bodies corporate, trustees and beneficiaries of trusts.

See Circular 303.

 

This page was last reviewed 7 October, 2008