With effect from 1 July 2012 Section 48 of the Payroll Tax Act
2007, which deals with the treatment of wages in non- profit
organisations, will be amended by the State Taxation Acts Further
Amendment Act 2011.
As background, for the period 1 July 2008 to 30 June 2012, the
previous provision covered by section 48 provided that wages were
exempt from payroll tax if they were paid by a religious
institution, a public benevolent institution or a non- profit
organisation with a dominant charitable, benevolent, philanthropic
or patriotic purpose. For the purpose of this article we will refer
to all of these institutions and organisations as charitable
Under the previous provision, for wages to be exempt it was
required that those wages paid by a charitable organisation to a
person engaged exclusively in a work performed in connection with
the charitable purposes of the organisation. The intent behind this
requirement being to limit the exemption to persons engaged
exclusively in the charitable purpose of the organisation. If the
institution or organisation conducted both charitable activities
and unrelated commercial activities, only wages paid to person
engaged in charitable activities would receive the exemption.
Following the High Court of Australia's decision in
Commissioner of Taxation v Word Investments Ltd, the common law
definition of charitable organisation has been expanded to include
non- profit organisations that conduct unrelated commercial
activities to fund their charitable purposes or donate their
profits to another charity. The previous provisions under section
48 captured this decision, rendering wages paid to a person engaged
exclusively in work ordinarily performed in connection with the
unrelated commercial activities as exempt.
From 1 July 2012, the amendment to Section 48, will restore the
pre-Word Investment position, where wages paid to a person engaged
in commercial activities that are unrelated directly to a
charitable organisations charitable purposes are not exempt.
The effect of the amendment is to ensure that only wages paid to
person engaged exclusively in work of a charitable nature for the
institution are exempt. In the instance where activities of a
commercial nature are conducted but are directly related to the
charitable purposes of the organisation, they are regarded as
'directly related commercial activities' and are considered
to be exempt wages under Section 48.
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