Principal contractors
Liability of principal contractors
Principal contractors are liable for the unpaid payroll tax liabilities of their sub-contractors if they provided service to the principal contractor.
The principal contractor is relieved of that liability if the subcontractor provides a written statement declaring that the requirements of the NSW Payroll Tax Act 2007 regarding registration and payment have been met or that the sub-contractor is not liable.
Principal contractors are required to obtain a written statement from their subcontractor within 60 days of the end of each financial year.
It should be noted that this provision is only a recovery position and does not affect the application of the contracting provisions contained in Division 7 of the NSW Payroll Tax Act 2007.
Liability of principal contractor for payroll tax payable in respect of employees of subcontractor
If a principal contractor has entered into a contract for carrying out of work by a subcontractor, and the employees of that subcontractor are engaged in carrying out the work of that contract in connection with a business of the principal contractor.
Written statement relieves principal contractor of liability
The principal contractor is not liable for the payment of unpaid payroll tax for work done in connection with a contract if the principal contractor has been given a written statement by the subcontractor for the period in respect of which the unpaid payroll tax is due and payable.
The written statement is a statement by the subcontractor that:
a) the subcontractor is registered as an employer under this Act or is not required to be registered under this Act, and
b) any unpaid payroll tax payable by the subcontractor in respect of wages paid to the relevant employees for work done in connection with the contract for any period up to the date of the statement has been paid.
The written statement may include any statement made by the subcontractor for the purposes of section 127 of the Industrial Relations Act 1996 or section 175B of the Workers Compensation Act 1987.
The subcontractor must keep a copy of any written statement under this section for at least 5 years after it was given.
The principal contractor may withhold any payment due to the subcontractor under the contract until the subcontractor gives a written statement under this section for any period up to the date of the statement. Any penalty for late payment under the contract does not apply to any payment withheld under this subsection.
The written statement is not effective to relieve the principal contractor of liability if the principal contractor had, when given the statement, reason to believe it was false.
A subcontractor who gives the principal contractor a written statement knowing it to be false is guilty of an offence.
Maximum penalty: 100 penalty units. The monetary value of a penalty unit is defined in the Crimes (Sentencing Procedures) Act 1999.
For more information on workers compensation, see subcontractor's statement.
Right of recovery
The principal contractor is entitled to recover from the subcontractor as a debt in a court of competent jurisdiction any payment made by the principal contractor as a consequence of a liability arising.
