Payroll tax
The Act:
imposes pay-roll tax on employer contributions to employee share schemes and on any similar contribution provided by way of remuneration to a company director, a member of the governing body of a company, or a relevant contractor (effective from 1 July 2003);
mposes pay-roll tax on any amount payable to a director or member of the governing body of a company (or a former director or member), as a consequence of a termination of services or office, that would be an eligible termination payment under the relevant Commonwealth legislation had it been paid as a consequence of termination of employment (effective from 1 July 2003);
exempts from pay-roll tax, wages paid or payable to new trainees, appointed on or after 1 January 2004.
Contributions to share schemes
Under the amendments, the value of any contribution to a share scheme that is provided or liable to be provided to or in relation to an employee will constitute wages for the purposes of the Pay-roll Tax Act 1971, and is taxable accordingly. A share scheme is a scheme by which an employer provides shares, rights (including options) to acquire shares, units in a unit trust scheme, or rights to acquire such units, whether directly or indirectly, to or in relation to an employee in respect of services performed or rendered by the employee.
The amendments provide for the method of determining the value of such a contribution. In particular, if the contribution is a share, unit in a unit trust scheme or right to acquire a share or unit, provision is made for calculating the market value of that share, unit or right, based on:
the quoted price of the share, unit or right; or
an independent valuation; or
another approved method.
Similar provisions will apply in respect of any contribution made to a share scheme by a company, by way of remuneration, to a director or member of the governing body of the company (or a former director or member). The value of any such contribution will constitute wages for the purposes of the Pay-roll Tax Act 1971 and will be taxable accordingly. Amounts actually paid or payable by way of remuneration to a director or a member of the governing body of a company are already taxable as wages under section 3AA of the Pay-roll Tax Act 1971.
In addition, similar provisions will apply in respect of contributions made to a share scheme by employers of relevant contractors. The Pay-roll Tax Act 1971 treats persons who supply services under certain contracts as employees for the purposes of the Act, and any person to whom services are supplied under the contract is treated as an employer. Amounts paid under the contract are taxable as wages accordingly. The amendments make it clear that the provisions relating to contributions to share schemes also apply in respect of such contract workers. That is, any such share scheme contributions will also constitute wages and be taxable accordingly.
Termination payments
From 1 July 2003, the Pay-roll Tax Act 1971 provided that an amount that constitutes an eligible termination payment under the Income Tax Assessment Act 1936 of the Commonwealth is wages for the purposes of the Act and is taxable accordingly.
The amendments make similar provision in respect of termination payments made to directors or members of the governing body of a company, or to contract workers to whom the Act applies.
For companies, any payment made to or in relation to a director or member of the governing body (or a former director or member) as a consequence of the termination of the services or office of the director or member, that would be an eligible termination payment under the Commonwealth legislation if it had been made as a consequence of termination of employment, will be taken to constitute wages and be taxable accordingly.
Exemption for trainees
The amendments exempt from pay-roll tax, with effect from 1 January 2004, wages paid or payable to persons who are trainees under the Apprenticeship and Traineeship Act 2001. Wages paid or payable to apprentices are already exempt from pay-roll tax. The exemption will not apply in respect of trainees who are registered as existing worker trainees under that Act.
