Excluded contracts

​​​​​​​​​​​​​​​​​​​​​​​​​​​If the requirements of any one of the following seven exclusions are satisfied, the payments made under the contract are excluded for payroll tax purposes. The exclusions do not apply where: 

  • the Commissioner determines that the contract or arrangement under which the services were supplied was entered into with an intention either directly or indirectly of avoiding or evading the payment of tax by any person; or
  • a contract under which any additional services or work (of a kind not covered by the relevant exclusion) are supplied or performed under the contract.​​
Excluded ​​​contracts are:​

​​ ​​​

Contracts where the supply of a person's labour is ancillary to the supply of goods or the use of goods which are owned by the person (refer to section 32(2)(a) of the Act)  
​This exclusion recognises that there are circumstances in which a contractor may provide a considerable amount of labour in supplying goods​ or the use of goods, but the supply of goods is the fundamental object of the contract.  The associated labour is ancillary to the contract itself.

For example, where a person contracts to supply and install an air-conditioning system – in such a case, the associated labour is ancillary to the contract itself. ​​

Contracts for services not ordinarily required by the employer and provided by a person who performs such services of a similar kind to the public generally in the same financial year (refer to section 32(2)(b)(i) of the Payroll Tax Act 2008
​There are two parts to this exclusion.  For the exclusion to apply both parts must be satisfied.
  • the first looks at the business or ‘taxpayer’ and relies on answers to the following questions – “What is the principal activity of the business?” and “Is this service normally required?”
  • the second examines the contractor hired by the taxpayer and relies on answers to the following questions – “Does the contractor render services to others?” and “Has this service been provided to other entities in the same financial year?”
This exclusion recognises that many transactions are contracts for service that are not part of the mainstream of a person’s business (that is, they relate to services not normally required by the business in an ongoing sense).  It applies where contractors perform work of this type for other businesses and the public generally.  

For example, if a small retailer engages a shopfitter to refit the interior of their premises, it would not be a regular requirement of the retailer’s business. The exclusion test would be satisfied if the shopfitter has provided services to shopkeepers generally during that year. ​​ 

Conversely, where a large chain store engages a shopfitter permanently on contract in a series of contracts, because the scale of its operations requires ongoing shop fitting in various stores, payment for the shopfitter’s services would be subject to payroll tax. ​

Contracts for services normally required by an employer for less than 180 days in the year (refer to section 32(2)(b)(ii) of the Payroll Tax Act 2008)​
This provision recognises that businesses require various ad hoc services allied to the main stream of work, but so infrequently that permanent employees are not engaged. The requirements of the business are a crucial part of the exemption. 

For example, a ski school operator in the Tasmanian snow fields engages a number of contract ski instructors each year for 120 days during the snow season. The business has no requirement for the services of ski instructors outside of the snow season. Section 32(2)(b)(ii) of the Payroll Tax Act 2008 would ordinarily be satisfied in this situation as the services are required for less than 180 days in a financial year. ​

Consequently, the contracts that the ski instructors entered into with the ski school operator are not ‘relevant contracts’. Accordingly, payments made to the contract ski instructors are not subject to payroll tax even if each ski instructor has worked more than 90 days in a particular financial year. If, on the other hand, the service is provided for more than 180 days, it is not ad hoc and payroll tax is applicable.​

Contracts where services are performed by one contractor on no more than 90 days in total during a financial year (refer to section 32(2)(b)(iii) of the Payroll Tax Act 2008)
This provision excludes payments to contractors who are generally employed for a short term by the same employer in one financial year. However, if the contractor performs similar services for the same employer under a different contract arrangement, the total days worked by the contractor under one or more relevant contracts must be included in counting the total number of days worked.
For example:
  • If a person contracts as a concreter in the first instance and as a cement mixer operator in the second, but is providing the same services, then both terms of services must be included; or
  • If ‘Alpha Pty Ltd’ provides services in July and August and ’Beta Pty Ltd’ provides similar services in November and December, and the persons actually performing the work are the same, then these periods must be aggregated.
Where a contractor has performed services for 80 days only, the contract is excluded at that point. However, if a further 11 days’ work are performed by the same person later in the same financial year, the contract can no longer be excluded and payroll tax is payable on all payments relating to the full 91 days. 

In these circumstances employers are only required to declare these payments on a monthly basis when 90 days is exceeded and not amend previous monthly returns.  However, the aggregate total of payments must be included in the Annual Adjustment Return as contractors. 

The word ‘days’ refers to the number of days on which work is performed.  The number of hours worked each day is not relevant.  That is, if only two hours are worked on one day then this must still be counted as a ‘day’. ​

Contracts where the Commissioner is satisfied that the services are provided by a person who has provided services to the public generally in the same financial year (refer to section 32(2)(b)(iv) of the Payroll Tax Act 2008)
This exclusion allows for anomalous (unusual or unconventional) cases not intended to be caught by the legislation but which do not satisfy the exclusions in section 32(2)(b)(i)-(iii).  

To rely on this exclusion, the employer must apply to the Commissioner of State Revenue for a determination. 

An application for exclusion may be granted if it can be demonstrated to the Commissioner that the contractor:
  • regularly conducts an independent trade or business; and 
  • has been consistently performing such services to a wide range of clients in the same financial year. ​

Contracts where the person, who contracts to provide services, engages labour  to perform those services (refer to section 32(2)(c) of the Payroll Tax Act 2008)
   Contracts will not be considered relevant contracts where the party who contracts to provide the services:
  • including a corporation and or partnership, engages two or more people to perform the actual work under the contract; or
  • is a partnership of natural persons and the work is performed by one or more partners plus one or more people engaged by the partnership to perform some of the actual work required under the contract; or
  • ​is a natural person and that person, together with at least one other person engaged by him or her, performs the actual work required by the contract.
In all cases, the person engaged by the contractor must perform the work that is the object of the contract. 

For example, if the contract relates to building work, the section 32(2)(c) exclusion provision would not be satisfied if a spouse of one of the partners in a partnership that was contracted to perform the building work performed purely clerical work, as he or she would not be engaged in the work to which the contract relates.  

This exclusion will not apply if the Commissioner determines that any part of the arrangement was entered into with the intention of avoiding the payment of tax. 

Contracts for the provision of services by Owner Drivers (refer to section 32(2)(d) of the Payroll Tax Act 2008)
Contracts will not be considered relevant contracts where services are provided by an owner driver where the services are solely for or ancillary to the conveyance of goods by means of a vehicle provided by the person conveying them. ​
​ ​​​
Refer to the payroll tax Contactors rulings.
Relevant contracts
  Allowances for equipment and material costs​​​​​


Back Home