Contractors - 180 day exemption
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The Payroll Tax Act 2009 (the “Act”), which commenced on 1 July 2009, rewrote and repealed the Pay-roll Tax Act 1971 and provides fully harmonised legislation with New South Wales, Victoria, Tasmania and Northern Territory.
Parties to a ‘relevant contract’ are deemed to be employers and employees (Sections 33 and 34 of the Act) and payments made under a contract are deemed to be wages (Section 35 of the Act). Deemed wages are subject to payroll tax under Section 36 of the Act.
While most contracts for the provision of services come within the meaning of ‘relevant contract’ under Section 32 of the Act, certain types of contracts are specifically excluded from the definition of ‘relevant contract’. One exclusion is a contract for services of a kind ordinarily required by the principal for less than 180 days in a financial year (Section 32(2)(b)(ii) of the Act). Another exclusion is a contract for the provision of services by a person providing the same or similar services to a principal under the contract for no more than 90 days in a financial year (Section 32(2)(b)(iii) of the Act).
The purpose of this Revenue Ruling is to explain the 180-day exemption under Section 32(2)(b)(ii) of the Act and provide examples to clarify the application of this exemption.
The difference between the 180-day exemption and the 90-day exemption is that while the 90-day exemption requires the determination of the number of days an individual contractor provides services to a principal, the 180-day exemption requires a determination of the total number of days a particular type of service is required by the principal (regardless of whether the service has been provided by contractors and/or employees).
From time to time, businesses may require certain ad-hoc services to operate effectively but do not require these services for the whole year. Further, seasonal businesses may require certain essential services to operate effectively but do not require these services for the whole year.
The 180-day exemption focuses on the number of days on which a particular type of service is ordinarily required by the principal in a financial year. Where a particular service is provided by both employees and contractors, the number of days on which such a service is provided to the principal by both the contractors and employees must be taken into account. Services required for part of a day will count as a full day.
The days for which the type of service is required do not have to be consecutive. It is the total number of days for which a particular type of service is ordinarily required during the financial year that is relevant.
In essence, where a type of service is required by an employer for less than 180 days in a financial year, payments to all contractors providing that service are exempt even though an individual contractor may have worked for more than 90 days in the same financial year.
In the following examples, it is assumed that the principals do not engage employees to perform the type of services discussed in the financial year concerned.
View this Revenue Ruling as a PDF (PDF 208KB)