Contractors for payroll tax purpose

|by Jun Yang|Taxation and Compliance

If your business is paying for contractors, you need to look closer on each contractor to see if the contractor is considered as a relevant contract for payroll tax purpose.

First of all, contractors can be a sole trader, trust, company, consultant and even partnership. The contractors share the common characters of: being paid for a result; providing own material and equipment to perform the job; free to accept or refuse the job; free to delegate the work to anyone or any other entities and in a position of making profit or loss.

There are 9 exemptions rules and you only need to satisfy one of them for the payment to be excluded from the payroll tax.

  • Services provide for no more than 90 days in a financial year. On the 91st day, the entire period will be subject to the payroll tax. And any length of working hours in a day is counted as a whole day.
  • Services required by the business for less than 180 days in a financial year. It is the type of service required by the business which is relevant. And it is not the extension of the 90-day exemption.
  • Services performed by 2 or more people.
  • Services ancillary to the supply of the goods
  • Services not ordinarily required by your business. A contractor must provides the same service to the general public and derives less than 40% of the gross income from your business in that financial year.
  • Services approved by the Commissioner as exempt
  • Services provided by an owner-driver. The contractor main purpose is to deliver the goods. The contractor has to provide the vehicle and can not be your employee. Courier cyclists are not regarded as owner drivers.
  • Services relating to door to door sales. The Sales person can not be the employee; he/she must sell directly to the general public and must sell goods at the buyer’s home or work.
  • Services relating to selling insurance. The contractor must hold an Australian Financial Services licence.

If you seek further advice, please don’t hesitate to contact our office.

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