The Queensland Commissioner of State Revenue has offered a
penalty amnesty for employers who have incorrectly excluded certain
payments to contractors from their taxable wages for payroll tax
purposes prior to 1 July 2008.
Because of the difficulty the Office of State Revenue
experienced in determining whether payments under contractor
arrangements were wages subject to payroll tax, the law has been
changed from 1 July 2008 so that many payments to contractors will
now be subject to payroll tax.
According to the Commissioner, the penalty amnesty will allow
employers to bring their payroll tax affairs up to date and
transition to the new contractor rules. It is important to note
that the amnesty is not in respect of the underlying payroll tax,
it is for penalties only.
As a sweetener, the Office of State Revenue (OSR) offered to
reduce the unpaid tax interest charge by 50% and only to review the
previous 3 financial years. On 12 February 2009, the terms of the
amnesty were modified so that only the 2008 financial year will be
reviewed if a voluntary disclosure is made, and any payroll tax
debt arising from the amnesty can be paid off over 12 months. The
amnesty will apply to disclosures made to the Office of State
Revenue until 30 April 2009 (originally the amnesty was to end on
31 March 2009) using the amnesty declaration form.
Before employers rush off to fill in the OSR amnesty form, it is
important to keep in mind that the reason the law has been changed
from 1 July 2008 is that the Office of State Revenue (and
employers) found it very difficult to determine whether a
contractor was an employee or an independent contractor for payroll
tax purposes. In the words of the OSR "no one factor (is)
necessarily conclusive", and "all the facts in each case
must be examined" in determining whether payroll tax was
payable on pre 1 July 2008 contractual payments.
From 1 July 2008 any arrangement that includes a payment for
services or work may be caught, and it is then necessary to
determine whether exclusions from payroll tax apply.
Exclusions include where:
the labour is ancillary to the supply or use of goods by the
the services are not ordinarily required by the principal and
are rendered to the general public;
the principal ordinarily requires the services for less than
180 days in a financial year;
the services are provided for 90 days or less in the financial
the contractor provides the services to the public generally
within that financial year; and
the contractor engages other persons to perform the
The new contractor provisions cast a very wide net to bring a
wide variety of arrangements within the payroll tax scheme.
Employers will need to be very careful that they do not
inadvertently overlook the requirements of the new provisions as we
expect the Office of State Revenue will undertake extensive audit
activity in this area.
The existing law regarding employees and independent contractors
is complex. As the Commissioner has noted, the facts and
circumstances of each individual arrangement need to be taken into
account in deciding whether any pre 1 July 2008 liability exists.
Employers should carefully consider whether payroll tax was
properly payable in respect of pre 1 July 2008 contractor
arrangements, so that where appropriate advantage can be taken of
the amnesty being offered.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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