Your payments to contractors may be subject to payroll tax if the worker is considered as an employee. The NSW Revenue considers a wide range of factors to determine whether a worker is an employee or contractor for payroll tax purposes. Even if a worker is identified as a contractor rather than an employee, your payments to the contractor may still be taxable for payroll tax purposes if a ‘relevant contract’ exists.
According to the Payroll Tax Act 2007 (“Act”), a ‘relevant contract’ is any kind of arrangement where you:
– supply services;
– are supplied with services; or
– give out goods for re-supply after work has been performed in relation to goods.
If your arrangement with contractors is identified as a ‘relevant contract’, your payments to contractors are deemed to be wages, which are subject to payroll tax.
There are some exemptions to the rule relating to ‘relevant contract’:
• The main purpose of a contract is to supply goods, and the services provided by the contractor are only ancillary to the main purpose.
• The services obtained from the contractor are not ordinarily required by your business and the contractor provides the same type of services to the general public.
• Your business ordinarily requires a specific type of service for less than 180 days in a financial year.
• The contractor provides the same or similar services to your business for less than 90 days in a financial year.
• There are certain services approved by the Commissioner as exempt.
• The contractor engages two or more workers to provide the contracted services to your business.
• The services provided by the contractor are incidental to the transportation and delivery of goods by means of a vehicle provided by the contractor.
If no exemption applies, you may still be able to claim a deduction for the non-labour component of the payments where the contractor provides materials and/or equipment.
Everingham Solomons have experienced Solicitors who can assist you in determining if your contractor payments are subject to payroll tax, or any other taxation advice you may require, because Helping You is Our Business.
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