Stamp duty and payroll tax are imposed by the various State and Territory Governments.
Stamp duty is a State and Territory tax imposed at either a fixed or at an ad valorem rate on the value of the transaction involved.
Since 1997 New South Wales, Victoria, Tasmania, the ACT and Queensland have co-operated to rewrite their legislation in an attempt to achieve uniform legislation.
Stamp duty will, in most cases, apply to the GST inclusive amount of the consideration. Stamp duty imposes tax on certain transactions and documents. Duty is charged on a transfer of, and certain other dealings in, dutiable property. Dutiable property is broadly defined and includes land, goodwill, intellectual property, partnership interests, and certain dutiable shares, units in unit trusts and interests in dutiable property. Other transactions which may be dutiable include declarations of trust, agreements for sale or transfer, surrenders and foreclosures.
Stamp duty is levied at different rates depending on the nature of the property assessed to duty. Note that in the case of corporations and unit trusts that hold substantial land, the land conveyancing rates apply to transfers of shares or units in what is termed “land-rich” corporations and unit trusts. The clear intent is to ensure that the higher duty on the transfer of land is not avoided by transferring shares or units in land-holding entities rather than the land itself.
Stamp duty is also imposed on other commercial transactions such as mortgages, leases, rental or house agreements and insurance contracts. The rates and assessability will vary from state to state.
When making agreements for the transfer of property, it is important to take into account the stamp duty costs that may be involved. However, there are various capital gains tax concessions for the transfer of property between related entities. This does not mean that there will be no stamp duty payable on the transfer.
In their 2016-17 state budgets, Victoria, NSW, and Queensland introduced stamp duty surcharges of 3% to 4% on foreign residents purchasing residential property.
All state governments are committing more resources to combat tax avoidance of stamp duty and payroll tax.
Payroll tax is a State or Territory based tax imposed on employers who pay wages in excess of certain tax-free thresholds.
There are considerable differences between the different States and Territories in the application of payroll tax. The rates of tax vary from 4.75 per cent in Queensland to 6.85 per cent in the ACT. The tax-free threshold varies from $700,000 in Victoria to $2,000,000 in the ACT.
Employers should be aware of various anti-avoidance measures, including those dealing with contractors and group related employers.
The definition of ‘wages’ in Payroll Tax legislation is very broad and is not restricted to wages or salaries.
The term ‘wages’ includes:
- employer (pre-tax) superannuation contributions including superannuation guarantee payments, salary sacrifice contributions, from 1 July 2007 (1 July 2009 in W.A.), the value of non-monetary contributions and superannuation contributions to defined benefit funds
- appropriately grossed-up value of fringe benefits, within the meaning of the Fringe Benefits Tax Assessment Act 1986 (Cwlth) (FBT Act)
- the value of shares and options granted to employees, directors, former directors, and some contractors
- payments to some contractors
- payments by employment agencies arising from employment agency contracts
- remuneration paid by a company to or in relation to company directors, employment termination payments, and accrued leave.
Note carefully that fringe benefits, superannuation and payments to contractors have some employers exceeding the thresholds without being aware of it.
Current payroll tax rates thresholds 2021/22 are:
RATE ON EXCESS OVER
|QLD||4.75% / 4.95% *1||$1,300,000|
|TAS||4.00% / 6.10% *4||$1,250,000|
The above thresholds may be reduced where the company is part of a group and/or pays interstate wages.
- 4.75% on wages $6.5mil or less, 4.95% on wages more than $6.5mil
- For regional employers, 1.125% from 1 July 2021
- 0% – 4.95% on wages $1.5mil to $1.7mil. Over $1.7mil 4.95%
- 4% low rate applies to wages $1.25mil to $2mil
- Payrolls up to $7,500,000. For wages in excess, see www.osr.wa.gov.au
Employers who are not members of a group must register within seven days after the end of the month in which their average weekly payroll first exceeds 1/52 of the relevant annual exemption threshold.
All States provide for the grouping of related or associated businesses so that their wages are aggregated, and one threshold only applies to the group.
Normally, one group member claims the exemption threshold, and the remaining members must pay a flat rate of tax.
Grouping of employers
Under the grouping provisions, two or more employers may constitute a group if:
- They are related bodies corporate within the meaning of the Corporations Act 2001 (Cwth); or
- They use the same employees or have an agreement for shared use of employees, or an employee is hired by one employer to work in another business: or
- The same persons have controlling interests in a number of businesses (whether conducted by persons, partnerships, corporations, or trusts); or
- One has a controlling interest in the other (being a corporation) under the tracing provisions.
If an employer is a member of two or more groups, all the members of those groups will constitute one group.
As some borderline and definitional issues vary between the States, only use the above information as a guide.
Areas of concern include what constitutes an employee and an independent contractor. As many businesses have been caught unawares, real care needs to be taken.
Although we make every reasonable effort to get the thresholds and payroll tax rates correct, some State Budgets come out subsequent to publication.
A number of concessions have been announced in the wake of the Covid-19 economic crisis. Refer to the relevant websites below
For more details, refer to the websites listed below:
COMMENT ON RECENT DEVELOPMENTS
Enhanced data matching techniques used at the Federal and state levels are catching out more employers who fall foul of the grouping provision or engage in sham contracting.
This means paying contracting fees to people (or their entities) who are essentially employees in all but name.
Understandably, employers do not want to pay this tax which is effectively a disincentive to take on new staff and expand a business.
Having said this, some states have a Payroll Tax Rebate Scheme to offer rebates to eligible employers who take on new staff. For example, the S.A. Government has recently extended their scheme for a further four years. Check the relevant revenue website to see if you are eligible.
An alternative view is that payroll tax is an important part of State Revenue and should be factored in as a cost of doing business.
For those close to the thresholds, working directors may instead elect to take dividends rather than salaries from companies. Also, those employers (and their advisors) who think they are just beneath the threshold should carefully study the expanded definition of wages.
Employers close to the threshold on normal basic wages can expect to come under increased scrutiny.