Taxable wages and payments
Taxable wages are any payment provided to an employee in return for services provided to an employer. The meaning of wages for ACT payroll tax purposes includes the following:
- remuneration, wage, salary, commission, bonus, allowance or other benefit;
- a superannuation benefit;
- a payment made under an employment or a service contract;
- director's fees;
- payments to employees (before or after retirement or termination) which relate to the term of their employment. These include payments for accrued annual and long service leave, sick leave (where cash is paid in lieu of unclaimed sick leave) and any other bonus or loading;
- eligible termination payment that would be included in assessable income;
- the value of any payments made in kind;
- payments not made directly by an employer to an employee for work performed by the employee (ie. payments made to a third party);
- benefits paid or granted by employers to employees (benefits include a fringe benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986);
- any employer contributions to employee share schemes (including the grant of shares or options) and any similar contributions to a director or member of the governing body of a company, including eligible termination payments. See circular PTA073 - publication pending.
Payments made to contractors that provide labour or services primarily to one person (and not to the public generally) are to be treated as taxable wages.
Contracts that are subject to payroll tax (service contracts) are those contracts where a person or company:
- supplies services to someone else in relation to the performance of work; or
- is supplied with the services of someone else in relation to the performance of work; or
- gives out goods to individuals for work to be performed by them in relation to the goods and for resupply of the goods to the designated person, or, if the designated person is a member of a group, to another member of the group.
Payments made under a service contract will be subject to payroll tax whether or not the person supplying the services or labour does so as an individual or through a company, trust or partnership.
The service contract provisions are complex and employers who are unsure of their liability should refer to the following revenue circulars:
- circular PTA006 [RTF, 163Kb], [PDF, 136Kb]
- circular PTA018 [RTF, 192Kb], [PDF, 135Kb]
- circular PTA019 [RTF, 156Kb], [PDF, 134Kb]
- circular PTA021 [RTF, 202Kb], [PDF, 148Kb]
- circular PTA022 [RTF, 159Kb], [PDF, 133Kb]
Any GST included in service contract payments is not subject to payroll tax.
Employment agents are liable to payroll tax on the wages paid to persons hired out by them irrespective of who pays the wages.
ACT Payroll Tax legislation allows employment agents to exclude from payroll tax any payments made to persons supplying the services where it can be established that the contractor is truly independent. Employment agents who require further information on this matter should contact us or refer to circular PTA074 [RTF, 187Kb], [PDF, 143Kb].
Any GST included in the employment contract is not subject to payroll tax.
Benefits that are provided by employers to employees are to be included as wages for payroll tax purposes. Primarily, the types of benefits are those which are presently subject to Fringe Benefits Tax (FBT) under the Commonwealth's Fringe Benefits Assessment Act 1986 (the FBT Act).
Where a benefit is provided by an employer, the value of the benefit for the purpose of assessing payroll tax liability is the amount that would be defined as the 'fringe benefits taxable amount' for the purposes of the FBT Act. The 'fringe benefits taxable amount' is the actual value of the fringe benefit to the employee and is known as the grossed up, or tax inclusive amount.
From 1 July 2008, for benefits that attract a fringe benefits tax liability, a single gross-up factor (Type 2) is used for calculating the value of such benefits as wages for payroll tax purposes.
For administrative ease, ACT Payroll Tax legislation allows employers that have been liable to pay FBT for a period of not less than 15 months prior to the commencement of the relevant tax year, to elect an alternative method, whereby the amounts declared in each monthly payroll tax return for fringe benefits are based on actual FBT returns. Where such an election is made, employers must include in each monthly payroll tax return from July to May, one-twelfth of the total taxable value of fringe benefits in the FBT return for the year ending 31 March immediately preceding the start of the current financial year, grossed-up by the Type 2 factor. The Annual Reconciliation return for each financial year should include the total taxable value of fringe benefits declared in the FBT return ending 31 March immediately before the Annual Reconciliation return, grossed-up by the Type 2 factor.
Newly registered employers will be allowed to make monthly payments based on an estimate of benefits paid or payable, if they had not been required to lodge an FBT return in the previous year. Any adjustments to instalments accepted for FBT purposes would be automatically accepted for payroll tax purposes. (refer to circular PTA003 [RTF, 192Kb], [PDF, 157Kb].
Payments of compensation under the Workers' Compensation Act 1951 are not subject to payroll tax, however, wages paid to sick or injured employees are taxable wages. (refer to circular PTA015 [RTF, 160Kb], [PDF, 130Kb].
Payroll tax is payable on wages paid in the ACT for services provided outside Australia for a period of less than six months.
Where services are performed by an employee on a continuous assignment in another country or countries for greater than six months, any wages paid or received in the ACT (including the first six months) are not subject to payroll tax. The six-month period does not have to be within one financial year but must be continuous.
Where an employee, working on assignment in another country, returns to Australia, it will not be considered to be a break in continuity in circumstances where:
- the employee returns for a holiday; or
- the employee returns to perform work exclusively related to the overseas assignment for a period of less than one month; and,
- in either case, the employee immediately returns to that overseas country to perform further work on the assignment. (refer to circular PTA039 [RTF, 907Kb], [PDF, 260Kb].
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