Page 1819 - Week 06 - Thursday, 5 June 2014
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The Payroll Tax Amendment Bill 2014 introduces an important change to the territory’s payroll tax legislation and will have a positive long-term impact on competition and equity within the subcontracting labour market. Like all jurisdictions in Australia, the ACT collects payroll tax on wages paid by employment agents to subcontractors. Schedule 2 of the Payroll Tax Act 2011 provides payroll tax relief for employment agents in certain circumstances.
The ACT is the only jurisdiction where a genuine employer exemption exists in the calculation of payroll tax for employment agents. Under current legislation, the criteria for establishing a genuine employer for this purpose are not clear, which has made the tax legislation complex and difficult to interpret in this respect. The Payroll Tax Act will be amended to remove the genuine employer exemption to harmonise ACT legislation more in line with the other states and territories.
The ACT will continue to offer six other exemption categories that employment agents may claim. This amendment will provide more certainty to Canberra employment agents and to the contractor community with regard to their payroll tax liabilities.
Recent evidence suggests that some, but not all, employment agents and subcontractors have been aggressively taking advantage of the exemption being repealed by this bill. The exemption in its current form allows single-person companies to be considered genuine employers and for employment agents contracting with them to exempt their wages from payroll taxation. This exploitation of the current regime results in an unequal playing field for employment agents competing for subcontractors. Furthermore, repealing the provision brings into alignment the treatment of wages paid to some subcontractors who aggressively utilise the provision with those subcontractors who do not.
The bill I present to the Assembly today will ensure that the taxation environment is the same for all employment agents and subcontractors, regardless of the industry they operate in or how they are structured. This will result in subcontractors’ wages being treated in the same way as other contractors for payroll tax purposes.
The bill will also ensure that the territory’s approach to employment agent exemptions is more consistent with that of other Australian jurisdictions. This amendment will provide certainty to the Canberra employment agent and subcontractor communities with regard to their payroll tax liabilities. Repealing the genuine employer exemption provision will remove the confusion around the exemption of wages under the act, increase the certainty of the territory’s taxation regime and promote economic growth.
The act will continue to provide six exemptions in the appropriate circumstances for employment agents paying wages to subcontractors. Where a subcontractor is a body corporate, partnership or sole trader and has at least two persons working on a contract, one of whom is an employee of the business, a payroll tax exemption is provided under the remaining bona fide employer provisions. Wages paid by employment agents to subcontracting single-person companies will no longer be eligible for payroll tax exemptions under these provisions.
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