Payroll Tax Guide For Northern Territory Employers and Businesses

How the Process Works

1. 
   The onus is on a grouped business to provide the Commissioner with detailed arguments and evidence as to why it should be excluded from the group.
   

39.Pending a decision by the Commissioner, the business will be treated as if it were part of the group and must meet any payroll tax liability arising from the grouping. This will include any ongoing accrual of interest.

40.An application for exclusion is to be made on the interactive form F-PRT-015 Application for Exclusion from a Group.

41.Further background information on the subject can be found at Payroll Tax Ruling PTA031 Commissioner’s Discretion to Exclude from a Group.

Note: If the exclusion is approved by the Commissioner, it can be backdated which may result in a reassessment of payroll tax paid to date.

What the Commissioner Considers

To grant exclusion, the Commissioner must be satisfied that the business carried on by the business seeking exclusion is independent of and not connected with businesses carried on by other group members.

The Commissioner needs to be satisfied that the connections between the businesses are no more than casual, irregular or occasional occurrences.

The Commissioner will look at a broad range of matters, including:

business dealings between group members;

any sharing of staff, premises, equipment and facilities;

how business decisions are made and who makes them;

the extent of financial interdependence between group members, including intra-group loans and the rates of interest charged;

whether there are common customers of group members;

purchases made by one group member from another;

whether goods or services are purchased by one group member for sharing between group members;

economies of scale generated by the cooperative activities of group members;

the types of businesses conducted by each group member and the extent to which they are complementary; and

the connection(s) between the ultimate owners of each group member.

Administration of Payroll Tax

Payroll tax liabilities arise under the PRTA.

The TAA regulates the administration of NT revenue, including payroll tax and such matters as:

interest and penalty tax;

record keeping requirements;

refunds;

power of investigation;

power to require taxpayer to provide documents or attend an interview;

objections and appeals; and

general penalties for non-compliance (for example, failure to keep records, failure to provide required information, failure to provide information requested for an investigation).

Record Keeping

Background

TRO relies on access to a range of business and employer records in order to verify a taxpayer’s payroll tax liability, in the event of an investigation conducted.

What Records Need to be Kept?

These records are similar to those a taxpayer is required to keep for ATO/income tax purposes and include, where relevant to the business structure of the taxpayer:

business financial statements in normal accounting standards format;

PAYG payment summaries;

payroll journals, timesheets and similar records;

employee superannuation contribution records;

records of allowances, bonuses and expense reimbursements related to employees and directors;

payment journals recording payments to contractors, subcontractors, consultants and similar categories of service providers;

tax invoices received from persons paid via the payments journal;

contractor quotes, agreements, job sheets and similar records related to contractor payments;

business activity statements (BAS);

income tax returns;

FBT returns;

minutes of directors’ and shareholders’ meetings;

minutes of meetings of trustees;

trust deeds;

partnership agreements;

copy of company constitution;

copies of correspondence related to investigations conducted by other statutory authorities (including ATO and any other state revenue office); and

any other record to substantiate that the treatment of a payment to an employee or contractor was taxable, not taxable or otherwise exempt from tax (for example, a contract under which an employee or director purchased an asset from the employer, such as a company vehicle or a home unit constructed by the employer).

Retention Period

Each employer is required to keep these records for a period of not less than five years from the date of the transaction or the date the record was obtained or created.

The records must be either in English or in a form that can be readily converted to English.

Interest and Penalty Tax

The TAA provides for interest and penalty tax to apply to a ‘tax default’.

A tax default includes the non-payment, underpayment or late payment of payroll tax.

Penalty tax and interest are calculated on the amount of payroll tax underpaid.

Penalty tax is charged on a one-off basis, whereas interest is time-based – the longer an underpayment is overdue, the higher the value of interest.

The legislative philosophy behind interest and penalty tax is to ensure the majority of taxpayers who meet their obligations in full and on time are not penalised in comparison to those who do not and to compensate Government from revenue to which it was entitled after it became due.

Interest

The rate of interest is made up of two parts – the market rate (which varies from year to year in line with bond rates) and a ‘premium’ rate (currently fixed at 8 per cent p.a.)

The market and premium rate together are called the ‘statutory’ rate. The statutory rate applies to all defaults other than in special circumstances where the default was beyond the control of the taxpayer. In those special circumstances, only the market rate will apply.

The statutory rate will be reduced to zero where the employer can demonstrate that the payroll tax was paid in error to another state (within the time frame for payment) and, on discovering the error, immediate steps are taken to make payment to TRO.

The statutory rate is set at a level that ensures a taxpayer who underpays and or pays late will pay more than if the business had borrowed from a bank to fund the payroll tax.