The Queensland Office of State Revenue (OSR) recently issued a media release advising they are targeting payroll tax compliance in the mining industry.
The OSR's main focus will be on ensuring workers are correctly included in a company's payroll tax liability. The payroll tax contractor laws were strengthened across the country a few years ago to ensure that labour only "contractors", whether operating through their own ABN, or a separate company, could be brought into the payroll tax loop. Penalties of up to 75% plus unpaid penalty interest can apply for non compliance resulting in a very expensive outcome for non-compliance .
This compliance review will affect not only mining companies but service companies to the mining industry.
A recent Court case involving the Australian Taxation Office also highlights the need to ensure businesses are correctly classifying their workers as "employees".
In this case, a company "contracted" various drivers to drive the company's own trucks in its delivery business. The workers were paid as contractors under individual ABNs and no tax was withheld from their payments. The Court found that a "common law employment relationship" existed so the workers should have been treated as employees and had PAYG withholding tax withheld from their wages and remitted to the ATO.
The company was issued with a non-deductible penalty equal to the amount of the PAYG tax that should have been withheld. While not part of the Court case, the company will most likely be issued with a (non deductible) Superannuation Guarantee Charge in relation to superannuation it should have paid for the workers. In addition, if the company had incorrectly disclosed wages for payroll tax and workers compensation purposes, it could be liable for further penalties under those regimes. This case highlights the need for companies to assess all payments to individuals supplying labour and to correctly identify employment relationships.
Hanrick Curran can assist businesses with a "Business Tax Health Check" to identify and correctly classify payments to ensure tax obligations are being met. If compliance errors are identified and disclosed prior to an audit, penalties can often be waived or reduced. Please contact your usual Hanrick Curran advisor to discuss this service.
This article was published in the Spring 2013 Horizon. For a pdf version of the newsletter please click here.