Amendments to Pay-roll Tax Act 2005
Amendments to the Pay-roll Tax Act 1971 No. 22
The amendments to the Pay-roll Tax Act 1971 No.22 commenced on date of assent (7 December 2005) except where otherwise specified.
Industry long service and redundancy schemes
From 1 July 2006, taxable wages will include contributions by employers into portable industry based long service leave funds and redundancy benefits schemes. (Section 3AA(6)). Levies paid under the Building and Construction Industry Long Service Leave Payments Act 1998 are not liable for tax under these amendments.
In some industries, such as the building industry, a large number of workers are employed for short periods of time by the same employer, but may work for a number of employers over an extended period of time. In order to ensure these workers receive long service leave and redundancy entitlements, industry schemes have been established under which workers accrue entitlements based on their service in the industry rather than the length of service with a particular employer. The employer pays a contribution for employee leave or redundancy entitlements, based on the employee's length of service with them.
Workers can apply to take paid leave and may be paid by the Fund or by the employer. If the employer pays and is reimbursed from the industry fund for any leave the employee takes that accrued whilst working for a previous employer, the refunded amount will not be taxable as wages. (Section 3AG)
The amendments also ensure that if any contributions are classified as exempt fringe benefits under the Commonwealth Fringe Benefits Tax Assessment Act, 1986, they will still be liable wages. (Section 3AA(3))
These amendments commence on 1 July 2006.
Share schemes
The amendments reinsert a provision enabling employers to deduct “any consideration for the acquisition of the shares” when calculating the taxable value (Section 3AE). This amendment applies from 1 July 2005.
Grouping of State Owned Corporations (SOCs)
Corporations are grouped for pay-roll tax purposes if they are related to each other within the meaning of the Commonwealth Corporations Act 2001. These grouping provisions do not apply to statutory SOCs.
However, other grouping provisions in part 10A of the Taxation Administration Act group statutory SOCs if they have the same two Government Ministers as their notional shareholders.
Statutory SOCs operate separate and distinct businesses, which are independent of each other and may be in direct or indirect competition eg electricity businesses.
The amendments therefore amend the grouping provisions to remove the application of the indirect grouping provisions to statutory SOCs (section 106I(10) of the Taxation Administration Act 1996). This will not affect the grouping of a statutory SOC with a subsidiary company established under the Corporations Act where the SOC owns more than 50% of the company's shares.
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