Employment Taxes
2010 Executive Update
Speakers:
Greg Kent, Director, PricewaterhouseCoopers
Andrew Purdon, Director, PricewaterhouseCoopers
David Sofra, Senior Manager, PricewaterhouseCoopers
Claire Fisher, Senior Manager, PricewaterhouseCoopers
Steve Mulcahy, Australian Taxation Office
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February 2010
Agenda
Section
Summary – Key Issues during FY10
Slide
x
ATO Compliance Update & Focus Areas
x
23AG – Australians Working Overseas
x
Employee Share Schemes
x
Fringe Benefits Tax
x
Superannuation
x
Payroll Tax
x
PricewaterhouseCoopers
Slide 2
Summary:
Key Issues during FY10
PricewaterhouseCoopers
Slide 3
Henry Review Report
• Expected to be publicly available March 2010
• Recommendation - taxing benefits in the employee’s hands … could it work?
• What have we heard?
• Concessional treatment for charities / public hospitals – to be removed?
• Car fringe benefits – a third valuation option for emission ratings?
• Payroll tax – one uniform system?
PricewaterhouseCoopers
Slide 4
Fringe Benefits Tax – Overseas Employment
• Section 23AG changes
• > 90 days service no longer exempt from 1 July 09
• Consider:
• Non-resident classification
• Treaty relief
• Foreign Tax Credits
• Double tax – FBT
• Jurisdictional issues
• ATO administrative considerations
PricewaterhouseCoopers
Slide 5
Employee Share Schemes
• Timeline – where are we at with the law?
• Why the controversy?
• What are the main changes?
• What are the implications?
PricewaterhouseCoopers
Slide 6
Section 1:
ATO Compliance Update
PricewaterhouseCoopers
Slide 7
ATO Compliance Update & Focus Areas
Insert ATO Slides (if any)
PricewaterhouseCoopers
Slide 8
Section 2:
23AG & Australians Working
Overseas
PricewaterhouseCoopers
Slide 9
23AG & Australians Working Overseas
Summary
• 2009 Federal Budget included an announcement that Section 23AG
will be amended from 1 July 2009
• Why the change? – existing provisions were producing a nonneutral tax outcome between Australia resident working overseas
and Australian resident working in Australia
• 115 submissions were made to Parliament during a short
consultation phase
• Changes were included in TLAB (Budget Measures No 1) 2009,
which received Royal Assent on 29 June 2009
PricewaterhouseCoopers
Slide 10
23AG & Australians Working Overseas
Section 23AG pre-1 July 2009
• Section 23AG (ITAA 1936) allowed Australia resident employees
working overseas to exempt from tax overseas employment income
• Earnings were exempt for:
• an Australian resident
• engaged in foreign service
• service greater than 91 continuous days
• Earnings are not exempt from foreign tax because of the operation
of a double tax agreement
• Foreign country taxes employment income
PricewaterhouseCoopers
Slide 11
23AG & Australians Working Overseas
Section 23AG from 1 July 2009
• Section 23AG requirements same as previous law but amended to
limit the exemption to certain aid workers and Australian Defence
Force personnel
• Taxable income to be reported in Australia, by Australian resident
employees working overseas, may significantly increase
• Eligibility for certain tax rebates, family tax benefit payments, etc
may be impacted
• NOTE: Non-residents (typically outside Australia for at least 2 years)
not impacted.
• NOTE: DTA relief available?
PricewaterhouseCoopers
Slide 12
23AG & Australians Working Overseas
Impact of changes
• Employees working overseas will rely on claiming foreign income
tax offset for taxes paid in the foreign country on the same income
• Employees may have a greater overall tax liability
• Greater tax liability where the Australian tax rate exceeds the foreign
tax rate on overseas employment income, e.g. Asian region
countries
• In some cases, cash flow issues from up to 85% withholding at time
of payment.
• Delay in foreign tax credit claims
PricewaterhouseCoopers
Slide 13
23AG & Australians Working Overseas
Impact of changes
• Increased tax costs for:
• Fringe Benefits
• Termination Payments
• Foreign Superannuation Fund Payments
• Employee Share Scheme Income
PricewaterhouseCoopers
Slide 14
Section 3:
Employee Share Scheme
Changes
PricewaterhouseCoopers
Slide 15
Employee Share Scheme Changes
Timeline
2009
• 12 May
Budget announcement of changes
• 5 June to 14 Aug Treasury Consultation Paper/Government Policy Statement/
Senate inquiry commenced/Exposure Draft and EM
• 7 Sept
Board of Taxation (BoT) commences review on
valuation and concessions for start-ups
• 21 Oct
Legislation introduced into Parliament
• 14 Dec
Royal Assent - no changes made on passage through Parliament
2010
• Feb
ATO Roadshow
• Feb
BoT report due on valuation and concessions for start-ups.
• Feb/Mar
Regulations to use existing rules for valuing unlisted interests due
• Feb-Jun
ATO to release employer reporting forms and guidelines.
• July/Aug Reporting to ATO
PricewaterhouseCoopers
Slide 16
Employee Share Scheme Changes
Why the Controversy?
• New law represents a complete re-write of the tax law governing the taxation of equity
based remuneration
• Employee taxation of ESS interests much less concessional:
• No ability to elect to be taxed up-front on any discount
• Ability to defer taxation of a discount more stringent
• $1,000 exemption salary capped
• Wording of the new law gives rise to additional CGT exposures for employee share
trusts
• Employers now burdened with a reporting regime and potential obligation to TFN
withholding
• Employee interests in non-corporate entities that are treated as a company under tax
law potentially subject to the new rules
• Potential FBT exposures
• Change of treatment for international assignees
PricewaterhouseCoopers
Slide 17
Employee Share Scheme Changes
• What are the main changes?
Tax deferral possible?
Maximum deferral
Pre-1 July 2009 grants
Post-1 July 2009 grants
Yes – to “cessation time” – OK if just
time based restriction
Yes – if there is real risk of forfeiture /
genuine disposal restrictions
10 years
7 years
Elect to tax at grant?
Yes
No
Employer reporting?
Yes where ESS interest outstanding
at 01/07/2009
Yes
Employer withholding?
Yes where ESS interest outstanding
at 01/07/2009 and no TFN/ABN
Yes – but only where “No TFN/ABN”
Rights only
Rights and shares
(provided employee cannot choose to
forfeit)
No income restriction
$180,000
No
$5,000
Refund of tax paid
upfront on forfeited
awards?
Upfront $1,000
exemption
Limit on automatic
deferral for salary
sacrifice plans?
PricewaterhouseCoopers
Slide 18
Employee Share Scheme Changes
What are the implications?
• Employers will need to revisit existing plans for tax effectiveness and possibly redesign
• Effective communication of the new rules to employees will need to be implemented –
tougher conditions to satisfy deferral treatment
• Employers remunerating employees through employee share trusts can still get tax
deductions but need to be mindful of potential CGT exposures
• Employers will need to review data management systems to ensure ability to comply
with reporting obligations and possibly upgrade – may require back-filling.
• New takeover/restructure rules – to watch on M&A transactions
• Remuneration of private equity management teams – need to ensure not caught by
the new deferral rules.
• Potential FBT exposures to manage
• IAS assignees also impacted
• Valuation and
• Transfer pricing
PricewaterhouseCoopers
Slide 19
Section 4:
Fringe Benefits Tax
PricewaterhouseCoopers
Slide 20
Section 4a:
NTLG FBT – 26 February 2009
PricewaterhouseCoopers
Slide 21
Joint investment substantiation requirements
• Employer reimburses expenditure incurred jointly by employee and associate
• Declaration only requires employee to state % of business use, not their % of
expenditure
• New provisions do not contain additional record keeping requirements
• Keep sufficient records to explain transaction (s132)
PricewaterhouseCoopers
Slide 22
Travel diaries
• Needed for overseas travel over five nights
• Total nights includes transit time
PricewaterhouseCoopers
Slide 23
Minor benefits
• Confirms infrequent and irregular
• Applies to benefits provided to a particular employee
• Not to total similar benefits provided by employer
PricewaterhouseCoopers
Slide 24
Car parking
• Car exempt under s8(2) may still be subject to car parking fringe benefits
• Vehicles which are not cars do not fall under Div 10A - Car Parking Fringe
Benefits
• May be exempt under s58G(1):
• Residual benefits
• Certain expense payment benefits
PricewaterhouseCoopers
Slide 25
FBT audit/compliance
• Under data matching audits
- Seven out of 10 clients non-compliant
- Average tax $70,000
- Average GIC $20,000
- Average penalties $38,000
PricewaterhouseCoopers
Slide 26
Section 4b:
NTLG FBT – 14 May 2009
PricewaterhouseCoopers
Slide 27
Entertainment Facility Leasing Expenses
• Increase in salary packaging of EFLE, including
• Hotel accommodation
• Hire of a yacht or similar vessel
• Hire of a reception venue
• Excludes:
• Caravan park fees
• Golf green fees or memberships
• Purchase of holiday home
• Incidental hotel costs, e.g. phone calls, dry cleaning
• If election under 152B, must be incurred by ‘employer’
• ATO ID 2009/45 – Private Function Room and Hotel Room Expenses
PricewaterhouseCoopers
Slide 28
Excluded fringe benefits – pool cars
• View that once pool car is excluded benefit, it remains that way
• ATO advised that a year by year analysis required
PricewaterhouseCoopers
Slide 29
Living away from home allowance
• Employee living away from home part of each week
• Reasonable and statutory food amounts should be apportioned proportionately to
the number of days in the week the employee is living away from home
PricewaterhouseCoopers
Slide 30
Meals while travelling in day time
• For expense to be otherwise deductible, must involve sleep away from home
TR2004/6
• Food and drink, including some alcohol, whilst on overnight business travel is not
entertainment
• If excessive alcohol, meal and alcohol is meal entertainment
PricewaterhouseCoopers
Slide 31
Work related items
• Where employer provides several items of protective clothing as residual benefits,
s58X satisfied
• Where property benefits, consider:
- Recurring declaration (s152A)
- Minor benefits
• Second set of clothing may not be replacement
• Legislation contemplates an item of protective clothing not a set
PricewaterhouseCoopers
Slide 32
Car fringe benefits
• Car parked at airport available for private use, unless
• Employer removed control and custody (keys)
• Enforced prohibition on private use
• Referred to TD 94/16 safe storage
• CR2009/3 - Sydney Airport Commercial Car Parking Agreement
• During the bailment period, both the employee and the associate are not
entitled to use the car and do not have custody or control
PricewaterhouseCoopers
Slide 33
Meal entertainment and minor benefit exemption
• Not appropriate to stipulate number of times
• TR 2007/12 provides guidance
PricewaterhouseCoopers
Slide 34
Living away from home
• Application for permanent residency does not automatically mean employee not
entitled to LAFH
• Need to consider all facts
• If permanent residency granted, no entitlement to LAFH
• This is debatable
PricewaterhouseCoopers
Slide 35
Section 4c:
NTLG FBT – 13 August 2009
PricewaterhouseCoopers
Slide 36
Entertainment facility leasing expenses
• Savings under salary sacrifice for employees of public benevolent institutions,
hospitals and rebatable employers
• Following media attention in Western Australia (purported fraudulent activities)
• ATO to advise Treasury of its concerns
• Henry Review?
PricewaterhouseCoopers
Slide 37
Employee contribution
• Does not have to be made in FBT year benefit provided
• ATO view is that there needs to be an agreement contribution will be made
PricewaterhouseCoopers
Slide 38
TLA (2009 Measures No 4) Bill
Gifts
• Received Royal Assent
• Ensures gifts to DGR
• Do not result in FBT liability
• Applies 1 April 2008
PricewaterhouseCoopers
Slide 39
Section 4d:
NTLG FBT – 12 November 2009
PricewaterhouseCoopers
Slide 40
Pooled cars
• Appropriate records need to be kept
• Names of two or more employees using the excluded car need to be recorded
• Employer must direct shared use, e.g. by policy
• Acceptable for employee to confirm shared use on year-end declaration
PricewaterhouseCoopers
Slide 41
Long service awards
• Where exemption does not apply because amount exceeds threshold
• Subsequent awards consider awards previously provided
• Example:
- 15 year award $1,200 – not exempt
- 20 year award $600 – not exempt
• Awards under 15 years not long service award
PricewaterhouseCoopers
Slide 42
Compliance update
• Car fringe benefits and data matching - $10,000 or greater
• Follows on from ‘success’ from luxury car project
• Previous lodgers no longer lodging
• Employee contributions included in employer’s assessable income
PricewaterhouseCoopers
Slide 43
Section 23AG
• ATO developing Frequently Asked Questions document
• A number of areas in the ATO are progressing various matters on s23AG
PricewaterhouseCoopers
Slide 44
Section 4e:
NTLG FBT – 18 February 2010
PricewaterhouseCoopers
Slide 45
Summary of items
• 23AG issues
• Sustenance vs entertainment – adjacent premises
• Other
PricewaterhouseCoopers
Slide 46
Section 4f:
STIP – 8 September 2009
PricewaterhouseCoopers
Slide 47
Living away from home
• ATO to commence research project
• Gain understanding of practices and arrangements
PricewaterhouseCoopers
Slide 48
Commercial car park
• Definition requires permanent commercial parking facility
• Provision of short term shopping parking unlikely to be considered commercial car
park
• Example:
- Up to 3 hours
$1
- 3 to 4 hours
$2.50
- 4 to five hours
$7.70
- 5 to 6 hours
$18.70
PricewaterhouseCoopers
Slide 49
Commercial car park
• Where no penalty rates likely to be commercial
• Example:
- Up to 3 hours
Free
- 3 to 4 hours
$2.00
- 4 to five hours
$4.00
- 5 to 6 hours
$8.00
PricewaterhouseCoopers
Slide 50
Light meals off business premises
• Property benefit
• Minor benefits exemption may apply
• Coffees, sandwiches?
PricewaterhouseCoopers
Slide 51
Part IVA and salary deferral arrangement
TD 2009/D6
• Employee and employer agree to defer salary
• Employer provides loan equal to income deferred
• Loan used to acquire income producing asset
• Right to deferred income crystallises in future
• Applied to outstanding loan
• Some have limited recourse features
• Employee may be considered to have derived salary at time of agreement
PricewaterhouseCoopers
Slide 52
Part IVA and salary deferral arrangement
TD 2009/D6
• CR 2007/48 withdrawn
• Ruling applies to class who entered arrangement up to date of withdrawal
PricewaterhouseCoopers
Slide 53
Employee savings plan – TD 2009/D5
• Part IVA may apply to arrangements
• Case by case basis
• Depends on facts of each case
PricewaterhouseCoopers
Slide 54
Miscellaneous – Jetto Industrial Pty Ltd
• Employee’s business run from home
• Car garaged at home available for private use
• Log book kept in subsequent year might be regarded as circumstantial evidence
of pattern of private use
PricewaterhouseCoopers
Slide 55
Section 5:
Superannuation
PricewaterhouseCoopers
Slide 56
Superannuation Guarantee Ruling 2009/2
• New Ordinary Time Earnings Ruling – from 1 July 2009
• Removal of in respect of employment concept
• Replaced with specific non-ordinary hours test
• E.g. Christmas bonuses now OTE
• E.g. General allowances now OTE
• Payments in lieu of notice – in respect of termination or ordinary hours?
PricewaterhouseCoopers
Slide 57
Superannuation Guarantee Ruling 2009/2
• Meaning of ordinary time earnings
• Fringe benefits excluded under 11(3) SGAA
• ATO view other benefits given by employer not S&W or fringe benefits
• Examples:
- Employer contributions to superannuation fund
- Acquisition of a share or right
PricewaterhouseCoopers
Slide 58
Reportable Employer Superannuation Contributions
• New requirement to report contributions on employee PAYG Payment Summaries
• Applies from 1 July 2009
• Applies to contributions where an employee has a “capacity to influence” the
contribution
• E.g. Salary sacrifice
• Total Employment Cost Arrangements
• One rule applies to all approach
• Consider the Awards, agreements, policies and systems.
PricewaterhouseCoopers
Slide 59
Superannuation – New Contribution Thresholds
• Concessional Contributions Cap
• $25,000 from 1 July 2009
• $50,000 from 1 July 2009 (if age > 50 by 30 June 2010)
• Consider company superannuation rules and policies – potential tax implications
for employees
• Consider maximum contribution base.
PricewaterhouseCoopers
Slide 60
Section 6:
Payroll Tax
PricewaterhouseCoopers
Slide 61
Update on payroll tax harmonisation
• Administrative harmonisation between the jurisdictions: 35 harmonised revenue
rulings.
• Next step: other areas of harmonisation and consistency
- Customer education
- Private rulings
- General administration
- Exemptions
- Compliance
- Application of penalties and interest
PricewaterhouseCoopers
Slide 62
Update on payroll tax harmonisation
Update on WA harmonisation
• WA draft harmonisation legislation yet to progress through parliament
- Harmonised legislation was intended to apply retrospectively from 1 July 2009
- Subject to re-introduction and passage of legislation
- Agreed areas of harmonisation include timing & lodgement, allowances, fringe
benefits, employee share schemes and superannuation.
- Does not harmonise provisions relating to contractors, employment agents,
grouping and charities
• WA Grouping provisions will be harmonised from 1 July 2012
PricewaterhouseCoopers
Slide 63
Update on payroll tax harmonisation
A summary of the main changes
• Expatriate employees: Exemption on wages paid in respect of services
performed in another country for greater than 6 months
• Allowances: The motor vehicle and accommodation allowances are linked to the
ATO rates which are used for income tax deduction purposes
• Fringe Benefits: A single gross-up factor (type 2 rate: 1.8692) applied
• Shares/Options: The inclusion of shares and options as taxable wages
• Parental Leave: Maternity/ adoption leave exemption (up to 14 weeks)
• Contractors: Introduction of relevant contractor provisions in most states
PricewaterhouseCoopers
Slide 64
Update on payroll tax harmonisation
A summary of the main changes (continued)
• Grouping: Controlling interest changed to “more than 50%”, inclusion of tracing
provisions.
• Leave payments: exclusion of portable long service leave
• Voluntary work/emergency relief: exemption added
• Allowances: exempt rates aligned with ATO’s rates
• Charities: consistent provisions, exempt where wholly charitable purpose
• Timing and lodgement: due date for annual returns: 21 July, all other returns: 7
days after month end
PricewaterhouseCoopers
Slide 65
Update on payroll Tax harmonisation
State/ Territory
Commencement Date
New South Wales
1 July 2007
Victoria
1 July 2007
Australian Capital Territory
1 July 2008
Queensland
1 July 2008
South Australia
1 July 2008
Tasmania
1 July 2008
Western Australia
?
Northern Territory
1 July 2008
PricewaterhouseCoopers
Slide 66
Henry Review Commentary
• Likely to consider whether payroll tax can be administered centrally
• “Co-operative federalism” with the states, Canberra to take over the collection of
taxes over time
• Merely recommending a simpler administrative process across states to cut
compliance costs
• Endorsed by Dr Ken Henry & Treasury – Payroll tax would be extended rather
than scaled back because it is one of the most efficient taxes
PricewaterhouseCoopers
Slide 67
Henry Review Commentary
• Payroll tax is not considered to be one of the several “nuisance” and inefficient
taxes
• Uniform rate? States have used payroll tax concessions to help promote business
e.g. Virgin Blue to set up in QLD (lowest rate of payroll tax)
PricewaterhouseCoopers
Slide 68
Impact of GFC on payroll tax
• Significant reduction in state revenues as a result of reduced business activities
• Revenue targets not met
• Greater compliance efforts and investigations
• Higher avoidance activities & increased payment defaults
PricewaterhouseCoopers
Slide 69
Payroll tax rates & thresholds 30 June 2010
5.90%
4.75%
$1,000,000
$1,250,000
5.50%
$750,000
4.95%
5.75% / 5.65%
$638,000
$600,000
6.85%
$1,500,000
4.95%
$550,000
6.10%
$1,010,000
PricewaterhouseCoopers
Slide 70
Payroll tax rates & thresholds 30 June 2011
State
New South Wales
Payroll Tax Rate
Threshold deduction
5.65% / 5.50%
$ 654,000* approx
Victoria
4.95%
$ 550,000
Tasmania
6.10%
$1,010,000
Northern Territory
5.90%
$1,250,000
Western Australia
5.50%
$ 750,000
Australian Capital Territory
6.85%
$1,500,000
South Australia
4.95%
$ 600,000
Queensland
4.75%
$1,000,000
*(indexed based on 2.5% estimated Sydney CPI)
PricewaterhouseCoopers
Slide 71
Payroll tax rates & thresholds 30 June 2012
State
Payroll Tax Rate
Threshold deduction
New South Wales
5.50%
$ 670,000* approx
Victoria
4.95%
$ 550,000
Tasmania
6.10%
$1,010,000
Northern Territory
5.90%
$1,250,000
Western Australia
5.50%
$ 750,000
Australian Capital Territory
6.85%
$1,500,000
South Australia
4.95%
$ 600,000
Queensland
4.75%
$1,000,000
*(indexed based on 2.5% estimated Sydney CPI)
PricewaterhouseCoopers
Slide 72
Recent developments
Payroll Tax Nexus Arrangements: employees who work in more than one state
• Determining the State in which a payroll tax liability arises
- Payroll tax liability will arise in the state the worker resides
- If the worker does not reside in Australia, taxed in state where employers ABN
is located
- If ABN registered in more than once state, state of principle place of business
- If neither of the above apply, the wages are taxable if paid in that state
- Applies from 1 July 2009 in all states/ territories
- Only affects workers providing services across states/ territories
- The rules are essentially the same in each jurisdiction
• Previous treatment – payroll tax liability arose in the state the worker was paid
PricewaterhouseCoopers
Slide 73
Recent developments (continued)
Example: Payroll tax nexus provisions
- Flight stewards/ pilots spend an equal amount of time performing services in a
number of states/ territories in any given month
- The flight stewards/ pilots reside in VIC
- The workers wages are paid into an account with a BSB in QLD
- How do the new nexus arrangements apply?
• Payroll tax liability arises in VIC even though the flight stewards/ pilots perform
services in a number of states/ territories and are paid outside of VIC
PricewaterhouseCoopers
Slide 74
Recent developments (continued)
• NSW payroll tax relief for drought affected businesses
- Applies to businesses with up to 200 employees & farm related sales
- Must show a decrease in sales of 50% in 2008/09 compared to 2001/02
- The business must have retained at least 85% of staff in 2008/09
- The business must be located in regional NSW & a drought declared area
- Other conditions apply
• WA exemption for wages paid to apprentices/ trainees amended
- Employee must be apprentice, must have a training contract in place that is
registered under the Vocation Education and Training Act
- Probationer’s are no longer exempt from payroll tax
PricewaterhouseCoopers
Slide 75
Recent developments (continued)
• WA once-off payroll tax rebate in 2010-11
- Applies to employers with taxable wages of up to $1.6M
- Partial rebate with taxable wages between $1.6M and $3.2M
- Rebate phased out at $3.2M
- Paid after the 2009/10 annual return is processed (September 2010)
• TAS payroll tax rebate for new positions created from 11 June 2009 to 30 June
2010
PricewaterhouseCoopers
Slide 76
Recent developments (continued)
• QLD payroll tax rebate for wages paid to apprentices and trainees
- Applies from 1 July 2009 to 30 June 2010
- In addition to these wages being exempt from payroll tax
- Rebate of 25% automatically calculated by QLD OSR upon lodgement of
annual return
PricewaterhouseCoopers
Slide 77
Recent developments (continued)
• Reciprocal enforcement of taxation laws
- Framework for cooperation in investigations and exchange of information
between revenue authorities and the ATO
PricewaterhouseCoopers
Slide 78
Recent developments (continued)
• SA payroll tax rebate for renewable energy
- Investments in new large scale renewable energy projects will receive a rebate
- Applies to construction of new large scale renewable energy projects
- Projects must utilise wind, solar, wave or geothermal technologies
- Project needs to have a name plate rating and must start after 1 July 2010
- Project must have a fixed life of four years from 1 July 2010 to 30 June 2014
- Rebate capped at $5M per project for solar, $1M for wind projects
• SA government is consulting on the detailed parameters of the rebate and those
interested on being informed about the consultation can register at:
PricewaterhouseCoopers
Slide 79
Recent Case Law
Tasty Chicks v Chief Commissioner of State Revenue [2009 NSWSC 1007]
- Held that an administration services company and a transport company should
not be grouped with a chicken processing partnership
- The operations of the three entities were very closely intertwined
- The Group objected to the Commissioners initial findings to group the entities
- The Court held that the three entities not be grouped, each were different
unrelated businesses
PricewaterhouseCoopers
Slide 80
Recent Case Law (continued)
Commissioner of State Revenue v Mortgage Force Australia Pty Ltd [2009 WASCA]
- Consultants engaged by a finance broking business were deemed independent
contractors, rather than employees
- Commissions paid were not taxable wages
- Commissioner’s appeal was dismissed
PricewaterhouseCoopers
Slide 81
Client opportunities/ Issues
Defined Benefit Fund Contributions
• Refund opportunity: Payroll tax on defined benefit fund superannuation
contributions
- Payroll tax has applied to superannuation contributions in NSW from 1 July
1996 and Victoria from 1 July 1997
- opportunity relates to the exclusion of defined benefit fund ‘top up’ contributions
- Given the current economic environment, defined benefit fund ‘top up’
contributions have been significant recently
PricewaterhouseCoopers
Slide 82
Client opportunities/ Issues (continued)
Payments to expatriate employees
• Utilising the payroll tax exemption on wages paid to expatriate employees working
overseas for a continuous period of 6 months or more (except WA)
FBT
• Incorrectly disclosing the value of fringe benefits based on both gross-up rates
• Incorrect apportionment methodology applied between states
Employment Termination Payments
• Does not include the income tax free components of a genuine redundancy
payment and early retirement scheme
PricewaterhouseCoopers
Slide 83
Client opportunities/ Issues (continued)
Engagement of contractors
• Manage risks and identify opportunities (e.g. non labour components not taxable)
• Carry out at least an annual review
• Gather information on the less than four month consultants/ consultants to
determine taxable/exempt contractor payments
• Develop a management system to simplify the above tasks
• Ensure to consult accounts payable as well as payroll
PricewaterhouseCoopers
Slide 84
Client opportunities/ Issues (continued)
Employee Share Schemes
• Previously no specific provision in most states/ territories
• Election of taxing point – deemed election to tax at vesting if not taxed at grant
• Incorrect application of market values
PricewaterhouseCoopers
Slide 85
Payroll Tax Audit Activity
• Audit plans and outcomes shared annually between jurisdictions
• Harmonisation increased the refund/ re-assessment period in most states/
territories from 3 to 5 years
• Victoria and NSW undertaking joint audits
• WA hiring auditors to undertake a review of contractors in the resource sector
• Employee share schemes – data matching
PricewaterhouseCoopers
Slide 86
Payroll Tax Audit Activity
NSW investigations
• Questionnaires sent to Australia’s top 200
• Data matching conducted with other government agencies
• Commenced with a 12 page questionnaire
Victoria investigations
• Focus on independent contractors
• Employee share and option schemes
• Joint audits with NSW and sharing outcomes with other states
PricewaterhouseCoopers
Slide 87
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