Payroll Tax Guide For Northern Territory Employers and Businesses

Reimbursements Made to Employees

Reimbursements are not taxable wages unless they are deemed to be fringe benefits under the FBTAA (in which case, the grossed-up value is declared as taxable wages within the ‘Fringe Benefits’ section of the return).

To qualify as a reimbursement:

the expense must be work-related; incurred up front by the employee and then reimbursed precisely by the employer; or

if a cash advance was provided, receipts are provided and any excess is refunded to the employer.

Allowances Are Generally Taxable in Full

Generally, all allowances are treated as taxable wages, even if paid to compensate an employee for a work expense (for example, a uniform allowance provided under an award).

The exceptions to the general rule follow below.

Motor Vehicle Allowance

Motor vehicle allowances are only subject to payroll tax if they exceed the exempt rate set each year by the ATO.

From 1 July 2015, the ATO has set one rate for all vehicles (rather than the prior system of a scale of rates according to engine capacity).

The taxable amount is the amount by which the allowance exceeds the ATO rate.

For further information refer to Appendix 2.

Accommodation Allowance

Accommodation allowances are only subject to payroll tax if they exceed the exempt rate set each year by the ATO. The rate used by TRO is the ATO rate prescribed for the combination of ‘Lowest Price Capital City/Lowest Salary Band’

The taxable amount is the amount by which the allowance exceeds the ATO rate.

For further information refer to Appendix 2.

Living Away From Home ‘Allowance’ is a Fringe Benefit, not an Allowance

LAFHA is paid to compensate an employee for additional expenses incurred as a result of being required to temporarily live away from home for work purposes.

LAFHA can be a fringe benefit and is subject to both FBT and payroll tax.

If the LAFHA is subject to FBT, payroll tax is calculated on the LAFHA amount grossed up by the Type 2 rate.

The payroll tax rules for fringe benefits are fully explained in the Fringe Benefits section of this guide.

Travel Allowance

A travel allowance (TA) is distinguished from LAFHA. TA compensates an employee for accommodation, meals and incidental expenses while on a short-term assignment not involving a temporary relocation of the place of employment or residence.

TA is to be treated, for payroll tax purposes, as if it were an accommodation allowance (see above).

For further information on allowances, reimbursements and payroll tax, refer to the following publications: PTA005 Exempt allowances – motor vehicles and accommodation PTA011 Allowances and reimbursements PTA024 Overnight accommodation allowances paid to truck drivers PTA025 Motor vehicle allowances paid to real estate salespersons

Termination Payments

Subject to one exception (see below, genuine redundancy payments), all payments made to or on behalf of employees at termination are subject to payroll tax.

This includes payment for time worked, payment in lieu of notice, payment for any type of leave, and redundancy payments.

In relation to genuine redundancy payments, only the amount in excess of the rate published yearly by the ATO (the income tax-free level) is subject to payroll tax.

Refer to section 82-130 of the Income Tax Assessment Act (ITAA), and Payroll Tax Ruling PTA004 Termination Payments for further information.

Management Fees

If an individual working as a sole trader (or through a company, partnership or trust that they own or control) receives a payment for services from the same business, or a related or grouped business, and that service relates to the provision of advice, information or labour by the individual, that payment, excluding any GST component, may be taxable wages for payroll tax purposes.

In any case, generally such an arrangement would be a taxable-relevant contract.

If in doubt, contact your professional advisor to discuss.

The following examples show circumstances where a management fee is taxable, and where it is not taxable.

Example: Taxable Management Fee John is the sole director, sole shareholder and managing director of JM Pty Ltd, which has 25 other employees receiving taxable wages of $1.75 million per year. John spends about 30 hours per week working for JM Pty Ltd. He is also the sole director and sole shareholder of MJ Pty Ltd, which has no other employees and owns the property from which JM Pty Ltd operates. John does not take a salary or director’s fees from JM Pty Ltd. However, JM Pty Ltd pays MJ Pty Ltd $100 000 per annum as a management fee. This $100 000 would be treated as taxable wages paid by JM Pty Ltd, and included in JM Pty Ltd’s payroll tax returns.

Example: Non-Taxable Management Fee AAA Pty Ltd and BBB Pty Ltd are grouped businesses with common directors and shareholders. They share office premises and employees. Office accommodation costs and staff wages and on-costs are all paid by AAA Pty Ltd. Total annual wages paid by AAA Pty Ltd are $3 million. AAA Pty Ltd lodges payroll tax returns on behalf of the group. BBB Pty Ltd pays AAA Pty Ltd an annual management fee of $500 000 as a contribution towards staff and office costs. This is not a taxable management fee, as AAA Pty Ltd has already paid payroll tax on the wages, which are partly reimbursed by BBB Pty Ltd.

Fringe Benefits