Payroll tax

States and Territories announce Payroll Tax change

All States and Territories have announced that agreement had been reached to implement new uniform payroll tax rules. These will apply where an employer pays wages that relate to an employee who works in more than one jurisdiction in a month, such as in the airline industry.

Under the proposed new rules, payroll tax is to be paid to the jurisdiction where the worker resides, rather than where they are paid, as is currently the case.

Where the worker does not reside in Australia, tax is to be paid to the jurisdiction where the registered Australian Business Number address of the employer is located.

Where possible, the new rules will come into operation on 1 July 2009.

It is expected that the new arrangements will provide greater clarity to affected employers, a more robust taxation regime in light of modern electronic payment methods, and will reduce potential compliance costs that could otherwise arise for employers under existing arrangements.

States and Territories will be progressively seeking to legislate the new arrangements as their Parliamentary timetables allow.

Legislation is currently being drafted to put the new nexus arrangements in place. It is expected that the new provisions will be uniform across jurisdictions.

The new legislation, once enacted, is to have retrospective effect to 1 July 2009.

It is recognised that there may be transitional and implementation issues for some employers who may have to make changes to their payroll systems. This may affect the timeliness or accuracy of their monthly returns while necessary changes are made.

Until the law is changed, there is no requirement for taxpayers to return under the new arrangements.

In NSW, the Chief Commissioner of State Revenue has indicated that it will be permissible for anyone facing such transitional issues to make any necessary adjustments without penalty as part of the annual reconciliation process for the 2009/10 assessment year.

It is stressed that these changes only affect wages for workers providing their services across jurisdictions. Where a worker provides their services solely in one jurisdiction, as is the case for the majority of workers, tax will continue to be paid to the jurisdiction where those services are performed.