The nexus provisions determine in which Australian jurisdiction a payroll tax liability arises.
The nexus provisions only affect circumstances where employees provide services in more than one Australian jurisdiction or partly in more than one Australian jurisdiction and partly overseas in a calendar month. Where an employee provides services wholly in one Australian jurisdiction, payroll tax will continue to be paid in the jurisdiction where those services are performed.
The nexus provisions provide a 4 tiered test to determine a payroll tax liability where the employee provides services in more than one Australian jurisdiction and/or partly overseas. This test is as follows:
- Payroll tax is payable in the jurisdiction where the employee’s principal place of residence is located.
- If an employee does not have a principal place of residence in any Australian jurisdiction during the relevant month, payroll tax is payable in the jurisdiction where the employer has registered their Australian Business Number (ABN) address.
If the employer does not have a registered Australian Business Number (ABN) address, or has 2 or more Australian Business Numbers (ABNs) addresses in different jurisdictions, payroll tax is payable in the jurisdiction where the employer has their principal place of business.
- If the employee does not have a principal place of residence in any jurisdiction and the employer does not have an Australian Business Number (ABN) address or principal place of business in any Australian jurisdiction, payroll tax is payable in the jurisdiction where the wages are paid or payable in that calendar month.
If wages are paid by the employer into an employee’s bank account, the wages are deemed to be paid in the jurisdiction in which the employee holds their bank account. If wages are paid or payable in a number of jurisdictions, payroll tax is paid in the jurisdiction where the largest proportion of the employee’s wages is payable.
- If both the employee and employer are not based in any Australian jurisdiction and wages are not paid in Australia, a payroll tax liability arises in South Australia if the services are mainly performed in South Australia (including South Australian coastal waters) in that calendar month (that is, the work performed in South Australia during that month is greater than 50%).
For further information see Revenue Ruling PTA039: Payroll Tax Nexus Provisions.
Employees working in another country for 6 months or less
Where an employee is working in another country or countries for a period of 6 months or less, a payroll tax liability arises in South Australia if the wages are paid or payable in South Australia.
Employees working in another country for more than 6 months
If an employee is working in another country or countries for a continuous period of more than 6 months, then the wages paid or payable to that employee for the whole period will be exempt from payroll tax. In these circumstances, the 6 month period need not be within the same financial year, but must be a continuous period.
Should an employee that is working in another country return to Australia, it will not be considered to be a break in continuity of their overseas employment if the employee returns to Australia under the following circumstances:
- for a holiday; or
- to perform work exclusively related to the overseas assignment for a period of less than one month.
In either case, the employee must immediately return to that country or another country to continue their overseas employment.
Services performed offshore
Where an employee is working outside all Australian jurisdictions, but not in another country, the wages are taxable in the Australian jurisdiction in which the wages are paid or payable. The exemption available for employees working in another country or countries would not apply in this circumstance.
Wages paid for services performed offshore, but within the territorial (coastal) limits of South Australia are liable for payroll tax and must be included in your payroll taxable wages.
For payroll tax purposes, South Australia’s coastal boarder is take to be the ‘mean low watermark baseline’ which is the territorial seas that follows the low watermark of South Australia’s mainland and islands and deviates offshore across river mouths and bays if less than 24 nautical miles in width.
Shares and options
Where wages comprise the grant of a share or option, the payroll tax liability (for the grant of a share or option) is also governed by the new nexus rules.
For further information on shares and options, refer to definition of wages.
However, certain circumstances relating to shares and options attract different nexus rules. These are outlined as follows:
- The employee performs services in more than one Australian jurisdiction and/or partly overseas, and the employee does not have a principal place of residence in an Australian jurisdiction, and the employer does not have a registered business address or a principal place of business in an Australian jurisdiction and the shares/options relate to an Australian company.
- The employee performs services wholly outside all Australian jurisdictions for less than 6 months but is paid in an Australian jurisdiction.
In these situations, where the grant of a share or option constitutes wages, the shares or options are taken to be paid or payable in the jurisdiction where the Australian company is registered.
For further guidance on the application of the nexus provisions, please refer to Revenue Ruling PTA039: Payroll Tax Nexus Provisions.
When contacting us please provide your South Australian Taxpayer Number (if known), ABN, and organisation name.
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