The grouping provisions are set out in Part 5 of the Payroll Tax Act 2008 and provide for employers to be grouped where:
companies are 'related'; or
employees of one business are used in another business; or
the business conducted by persons, corporations, partnerships or trusts are commonly controlled.
A business is defined to include:
a trade or profession;
any other activity carried on for fee, gain or reward;
the activity of employing one or more persons who perform duties in connection with another business;
the carrying on of a trust (including a dormant trust); and
the activity of holding any money or property used for, or in connection with another business,
whether carried on by
Corporations are grouped for payroll tax purposes if they are deemed to be related to each other under Section 50 of the
Commonwealth Corporations Act 2001.
Section 50 of the Corporations Act defines 'related corporations' and the definition includes the following:
- a holding company and its subsidiary;
- two or more subsidiaries of a common holding company; and
- a subsidiary and its subsidiary.
A holding company is a company having one or more subsidiaries.
A subsidiary is a company of which another company:
- controls the composition of its board; or
- is in a position to cause, or control the casting of more than one half of the maximum number of votes that might be cast at a general meeting of the company; or
- holds more than one half of the issued share capital.
This means that a group includes not only those corporations that are in a direct holding/subsidiary relationship but also corporations with:
- common holding corporations; or
- with a common ultimate holding corporation.
An employer and the persons controlling another business form a group where:
- an employee of the employer performs duties solely or mainly for that other business; or
- the employer has an agreement, arrangement or undertaking with the persons who conduct the other business in respect of the employment or the performance of duties by an employee (section 71 of the
Payroll Tax Act 2008).
Where the same person or persons acting together have a controlling interest in each of two businesses, the persons who carry on those businesses constitute a group.
A person or persons are considered to have a controlling interest in each of two or more businesses if that person has (or those persons acting together have):
- a controlling interest in one business under any one of the following situations; and also
- have a controlling interest in another business under the same or another of the following situations.
The Commissioner has the discretion to exclude an employer from a group provided the business carried on by the employer seeking exclusion is carried on independently of, and is not connected with, the business carried on by any other member of that group (section 79 of the
Payroll Tax Act 2008
In considering whether the businesses are operating independently of each other and are not connected, the Commissioner will have regard to a range of factors including:
- who makes the day-to-day management decisions for each business;
- the extent the persons who commonly control each business get involved in the day-to-day operations of the businesses;
- any common customers;
- whether the principal activities of the businesses are complementary or supplementary to each other, including group purchasing or supply arrangements;
- the extent that the business seeking an exclusion, trades with or provides services to any other group member;
- the extent that the businesses share resources;
- the extent of financial dependence between group members including provision of initial or on-going working capital;
- if a group member provides a loan to another member, whether this capital was provided on a strictly commercial basis; for example, the Commissioner would consider such things as formal agreements, commercial interest charged, if repayment schedules were adhered to and the extent of security provided for the loan where appropriate.
There is no provision to allow for the de-grouping of corporations that are related under the
Corporations Act (see Section 70 of the
Payroll Tax Act 2008).