Payroll Tax Grouping Provisions with Tony Ince

Monday April 30, 2018

Tony Ince WebTony Ince has over 25 years' experience in the indirect tax field. Most of his work is in the area of GST, payroll tax and fuel tax credits. For several years, Tony sat on the Western Australian State Revenue Liaison Committee as part of his role as chairman of the Taxation Committee at the WA Chamber of Commerce and Industry. He continues to have an interest in federal/state tax relationships with involvement on committees at The Tax Institute and CCI WA. Tony has been involved in GST since 1999 and was the CPA spokesperson on GST implementation in Western Australia. He is passionate about tax matters, and continues to be involved in various organisations. One of his current roles is as a sessional lecturer in postgraduate tax at Curtin University. Tony also presents regularly at state and national tax conferences.

We had the pleasure of sitting down with Tony recently to discuss key challenges and opportunities facing the industry today.

Read the Q&A below and hear more from Tony at the Tax Intensive for SME Advisers seminar, being held on Wednesday 20 June at the Crown Perth, Burswood.


Can you tell us a little bit about yourself (experience, your company, expertise, etc)?

I have been involved in areas of indirect tax for many years. Having joined Ernst & Young last century as an “Indirect tax” manager, I quickly found out that indirect tax was not limited to my area of expertise, being sales tax (some of you may remember sales tax). It encompassed anything that wasn’t income tax. One of the main areas of concern for clients at that time was Payroll Tax. As time (and sales tax) have passed, the issues with Payroll Tax remain.

Over the years, I have seen developments in Payroll Tax legislation and administration mostly for the better. One of the most significant has been the national “harmonisation” of Payroll Tax. While each state and territory is responsible for its own legislation and how it is interpreted and applied, recent changes have meant that it has been considerably easier for businesses who employ workers in different jurisdictions. It is still not perfect, but court decisions can now be applied more universally in seeking to resolve Payroll Tax grouping disputes.

What are some of the challenges facing employers in terms of payroll tax?

Not much has changed over the years in terms of challenges for employers. The two main issues facing employers are employee versus contractor determinations (and the variations of that), and the grouping provisions.

The legislation in regard to these areas can still be vague, but the implications for getting it wrong substantial.

The legislation relating to grouping in particular can be very broad. Many businesses may be grouped for payroll tax purposes without knowing it or even contemplating that a liability may exist.

Assessments going back up to six years can be substantial, especially when penalties are added.

What are the common mistakes practitioners usually make when they work in this area?

Practitioners assume that they understand the basics of Payroll Tax grouping provisions. That is, they understand that if a person has more than 50% ownership in two or more businesses, those businesses can be grouped for Payroll tax purposes.

What they don’t appreciate is the very broad grouping provisions that may apply apart from ”common control”. The powers of the Commissioners to group businesses are very wide, scarily so. There are also subtleties in the legislation that can lead to unforeseen grouping outcomes.

But it’s not all bad news. Recent amendments have meant that the Commissioners have discretion to exclude grouped businesses in certain circumstances. While relying on the Commissioner’s discretion may not always be the best way to apply legislation, it is still available.

What are some of the big trends and developments you see ahead for the area?

The states and territories rely on a narrow range of taxes to raise revenue. This results in vertical fiscal imbalance, which means that the states are reliant on the Commonwealth for most of their revenue.

A tax on “wages” is a very twentieth century concept, especially in these days of the “gig economy”.

The states are looking at alternate ways to raise revenue, including such things as a state income tax. While such concepts may be some way into the future, the problems of Commonwealth/state relationships and vertical fiscal imbalance will demand some interesting solutions for the states and territories.

Your topic focuses on ‘Grouping Issues’. Why is it important for practitioners to attend your session?

Practitioners have different levels of understanding of the payroll Tax grouping provisions, but many are not aware of the breadth of the grouping provisions and how their clients might be impacted.

Unfortunately, the legislation gives the Commissioner very broad powers to group, and leaves the discretion to exclude from a group also with the Commissioner. While ultimately the Tribunals and courts can have a say, the application to everyday arrangements can be difficult to navigate. It is important to know what the courts and, from a practical perspective, the Commissioners are looking for.

What do you see are some of the key takeaways and benefits for practitioners for their practice from attending your session?

We don’t want clients coming to their accountants with a large Payroll Tax assessment and saying “why didn’t you tell me I had a Payroll Tax problem?”

This session will go through the Payroll Tax grouping provisions in the legislation to show when businesses may be grouped.

It will also look at the practical applications of these provisions so that potential issues with businesses can be identified.

The session will also look at the things that the Commissioners take into account when deciding whether or not businesses that are otherwise grouped may be excluded from a Payroll Tax group.

You can hear more from Tony at the Tax Intensive for SME Advisers seminar, being held on Wednesday 20 June at the Crown Perth, Burswood.


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