GST considerations for the calculation of payroll tax liability
Version Number: 1
Legislation: Payroll Tax Act 2009
Date Issued: 1 July 2009
Revenue Rulings do not have the force of law.
The Payroll Tax Act 2009 (the “Act”), which commenced on 1 July 2009, rewrote and repealed the Pay-roll Tax Act 1971 and provides fully harmonised legislation with New South Wales, Victoria, Tasmania and Northern Territory.
From 1 July 2000, the supply of most goods and services became subject to the Commonwealth’s Goods and Services Tax (GST). The GST has relevance to payroll tax because certain supplies which are subject to the GST are also subject to payroll tax. These include the supply of labour services by contractors and agency supplied staff.
Section 44 of the Act provides that GST will be excluded from wages (other than wages that comprise fringe benefits) in circumstances where a payment for a supply of services is taken to be wages under the Act and that payment includes an amount of GST.
This Revenue Ruling explains how the GST impacts on the calculation of an employer’s liability for payroll tax.
Payments to, or in relation to, employees
Employees’ wages and salaries are not subject to GST. Consequently, there is no impact for payroll tax purposes.
Payments to, or in relation to, contractors
An employer can exclude the GST component from those payments to contractors which are taken to be taxable wages under the Act.
Payments in relation to employment agency contracts
An employment agent can exclude the GST component from payments to service providers (on-hired workers) which are taken to be wages under the Act.
With effect from 1 July 2008, the value of a fringe benefit for payroll tax purposes is the value determined by grossing up the aggregate fringe benefits amount using the formula for Type 2 benefits specified under the Fringe Benefits Tax Assessment Act 1986 (Cwlth) (the “FBT Act”). The value of a fringe benefit may or may not include GST depending on the valuation rules applicable under the FBT Act. Where the value so determined includes GST, the GST amount is also included in the value for payroll tax purposes.
View this Revenue Ruling as a PDF (PDF 298KB)