August 9, 2017

Professionals | QLD

This article looks at the criteria to be met where an exclusion order (degrouping applications) to exclude businesses from a payroll tax group may be granted, including the matters that the Commissioner must consider when determining such an application.
 

APPLICATIONS FOR EXCLUSION ORDERS

Where businesses are grouped for payroll tax purposes, the Commissioner has the discretion to exclude businesses from the group (an exclusion order). In order to make an exclusion order, the Commissioner must be satisfied that the business seeking exclusion is independent of the other businesses in the group and not significantly connected in any way. 

Before making an exclusion order, the Commissioner must take certain factors must be taken into account, including:
  1. the nature and degree of ownership and control of the businesses;
  2. the nature of the businesses; and
  3. any other matters the Commissioner considers relevant.

1. Ownership and Control of Business

This requires an analysis of the control of the business rather than control of the entity that operates the business. The Commissioner will look at both ‘executive’ control as well as day-to-day or administrative control of businesses to determine who actually has.
 

2. Nature of the Businesses

Where businesses are significantly different, the Commissioner will be more likely to make an exclusion order. By comparison, where the businesses are in similar industries and/or have contractual arrangements in place for the exchange of goods and services, the Commissioner is less likely to see that there is independence between the businesses.

3. Other Matters

In Queensland, as an example, Public Ruling PTA031.2 includes a non-exhaustive list of other matters that may be taken into account, including:
  • the nature and extent of any commercial transactions between the members;
  • the extent to which members share resources, facilities or services
  • the extent to which the employer controls or is involved in managerial decisions and day to day administration of the other members;
  • the extent to which there are financial interdependencies, including intra-group loans or guarantees;
  • the degree to which there is a connection between the employer and other members of the group in the purchase or sales of goods and services;
  • the extent to which there is a connection between the nature of the businesses of the employer and other members of the group; and
  • the extent to which there is a connection between the ultimate owners of the employer and other members of the group.
Any application for an exclusion order would need to address each of these matters.
 

IMPORTANT MATTERS WHICH AFFECT THE COMMISSIONER’S EXERCISE OF DISCRETION

The common factors which we see stop an exclusion order being made include:
  • sharing of employees by members of the group – often administrative staff or key employees (e.g. a chef, bookkeeper);
  • loans between members of the group;
  • sharing of business premises;
  • sharing of phone numbers and postal addresses.
Factors such as these mean that businesses may not be independent of each other, regardless of whether they are not of the same nature. 
 

WHY IS THIS IMPORTANT?

The factors set out above are matters to keep in mind when setting up new businesses or acquiring new businesses to try to mitigate the risk that the businesses will be grouped for payroll tax.
 
It is important to take early action where there is a new businesses which may be grouped with an existing business for payroll tax (whether the existing business is registered for payroll tax or whether the grouping with the new entity results in both entities being required to be registered for payroll tax). The relevant action is notifying the Commissioner of the new group. 
 
Do not wait for the Commissioner to uncover the group. Doing so can lead to interest on unpaid payroll tax or penalties for failing to make the notification.   
 
McInnes Wilson Lawyers’ are able to advise you on all aspects of payroll tax including advice on whether businesses are grouped and preparing applications for exclusion orders.