Payroll tax

Grouping

What is Payroll Tax 'Grouping'?

The ‘grouping’ provisions (Part 5 of the Payroll Tax Act 2011) have the effect of deeming businesses to be related and including these businesses in a ‘group’. The grouping provisions examine the control, ownership and relationship of businesses. Although each member of the group must register for payroll tax and lodge a separate return, the businesses which constitute the group are treated as one entity and the calculation of their payroll tax liability is based on the group's total wages.

Only one member of the group is entitled to claim the threshold. In some instances, where approved by the Commissioner, one member of the group can lodge one return on behalf of all group members.

The grouping provisions are harmonised across all jurisdictions and apply to businesses throughout Australia. An Australian business may also be grouped with an overseas business.

What is defined as a business for payroll tax grouping?

Business means an activity that is:

  1. a profession or trade
  2. carried on fee, gain or reward
  3. employing one person, or more, who performs duties for another business
  4. operating a trust, including a dormant trust
  5. holding money or property used for another business.

How does a group exist?

A group exists if:

  1. corporations are related bodies corporate – refer to section 50 of Corporations Act 2001 (Cth)
  2. employees are used in more than 1 business
  3. the same person, or set of persons, has a controlling interest in 2 or more businesses
  4. an entity has a controlling interest in a corporation (tracing interest)
  5. a person is part of 2 or more groups.


Common Control

EXAMPLE 1 (Related Bodies Corporate)
  • A Pty Ltd constitutes a group with both B and C. A is the holding company of both B and C because it holds more than 50% of the issued shares of each company.
  • B, D and E constitute a group because B is the holding company of both D and E.
  • All of the companies shown on the diagram constitute a group because A is the common ultimate holding company.

EXAMPLE 2 (Shareholding and Directors)
  • Joe Bloggs  beneficially owns 55% of the share capital of A Pty Ltd
  • Joe Bloggs beneficially owns 100% of the share capital of B Pty Ltd
  • Joe Bloggs is the sole director of C Pty Ltd
  • Joe Bloggs has a controlling interest in A Pty Ltd, B Pty Ltd and C Pty Ltd
  • Joe Bloggs controls greater than 50% of the share capital of A Pty Ltd and C Pty Ltd, and controls greater than 50% of the votes at meetings of directors of C Pty Ltd
  • A Pty Ltd, B Pty Ltd and C Pty Ltd form a group due to the common control of Joe Bloggs (common controlling interest of Joe Bloggs)

Shared Liability

All members of the group (irrespective of whether or not they are employers) become jointly and severally liable for the debts of the group which are incurred while they are members of that group. This means that if one member defaults in the payment of tax, that amount may be recovered from any of the other group members.