Employment agencies
What is an employment agency contract?
An employment agency contract is a contract under which an employment agency or labour hire firm obtains the services of an individual worker for a client. The worker can provide these services individually, through a corporation or a trust.
An employment agency contract is not a relevant contract under the contractor provisions. This means that none of the contractor exemptions apply.
Who is liable for payroll tax?
Under an employment agency contract, the amounts paid by the agency in connection with the work performed by the service provider are wages and the employment agency is liable. This is so even if the service provider is paid through a corporation.
The amounts paid to the employment agency by the end user client are not wages.
Example
An end user client pays $12,000 to an agency and the agency pays $10,000 to David Hunt, the service provider. The liable employer is the agency and the $10,000 is a liable wage.
A business pays $1,000,000 to an agency for the services of John Green. The agency pays $800,000 to Green Pty Ltd. Green Pty Ltd then pays $700 000 to John Green. The liable wages are the $800,000 paid by the agency to Green Pty Ltd.
What is liable?
Any monies, benefits and superannuation contributions paid to or on behalf of the contract worker are liable wages for the employment agency.
What is not liable?
An employment agency contract is not liable:
when the employment agency only receives a 'one-off' fee to place a person with a client under a contract of employment. In this situation the employer accepts the employer/employee relationship and is responsible for any liability.
where the client of the employment agency signs an approved declaration form stating they are an employer paying exempt wages (such as public hospital or charitable body).
Note: The Crown is a company for payroll tax purposes. As such, a government department or other government body can be a client of an employment agent.
Any monies paid by an employment agent for a worker’s services obtained for a government department or other government body must be included in the agent’s taxable wages.
What clients are exempt?
Payments made by the agency to the service provider are exempt from payroll tax if the client of the agency is exempt from payroll tax. Exempt clients should provide to the agency an approved declaration that they are exempt.
What if several employment agencies supply a service provider?
If two or more employment agencies are involved in providing a worker to a client, the liable employment agency is the one paid by the client. In most cases the amounts paid by the employment agency to secure the worker from another employment agency will be liable wages.
Example
A business seeking labour pays $120,000 to Agency 1 which pays $110,000 to Agency 2 which pays $100,000 to the service provider.
Only Agency 1 is liable and the liable wages are the $110,000 paid to Agency 2.
Anti - avoidance provisions
If the Chief Commissioner of State Revenue determines that the effect of an employment agency contract is to reduce or avoid the liability of any party to the contract to payroll tax he may determine that any party to the contract is the liable employer.
More information
