Grouping

Payroll tax

For payroll tax purposes, businesses may be grouped with other businesses if there is a link between the companies as defined below. When a group exists:

  • Only a single threshold deduction applies to the group.

  • Each member of the group is liable for any outstanding payroll tax of the other group members.

How is a group defined?

A group can be defined in the following ways:

Related companies

All corporations that meet the definition of related companies provided in the Corporations Act 2001 are grouped. Companies are taken to be related if two or more companies are:

  • a holding company and a subsidiary

  • both subsidiaries of the same holding company.

Any related companies paying Australian wages are grouped, even if they have a holding company located overseas. Trustee or nominee companies are not able to be grouped under this provision.

The related corporations grouping only applies to companies.

Exclusion provisions: Companies grouped under this provision cannot apply for an exclusion from the group.

Use of common employees

Businesses are grouped when an agreement for services between two or more businesses results in the employees of one business performing duties as an employee for another business.

This provision does not apply to all inter-business agreements for services. The agreement must specify the duties to be performed by the employees of the first business for or in connection with the other business.

Example

Michael and Sons Pty Ltd is a legal practice. There are four legal practitioners who receive a wage including superannuation from the corporation.

Smith’s Servicing Pty Ltd has an agreement to supply receptionist, secretarial and other administrative duties for Michael and Sons Pty Ltd. Such an agreement will result in the employees of Smiths Servicing Pty Ltd performing duties connected with the business of Michael and Sons Pty Ltd. A grouping between the two businesses exists.

Exclusion provisions: Under this provision a business may apply for an exclusion from the group.

Commonly controlled businesses

Two businesses controlled by the same person or persons are grouped. All persons common to two businesses will have their interests combined. A ‘person’ means a natural person, trustee or corporate entity.

A controlling interest can occur when a person(s) together have a controlling interest of more than 50% across different entities.

  • Sole owner
    One person is the sole business owner (whether or not as trustee).

  • Joint owners
    A set of persons, together as trustees, are the sole business owners.

  • Company
    A person or set of persons are entitled to exercise more than 50% of the voting power at directors meetings or more than 50% of voting rights attached to voting shares that the company has issued.

  • Body corporate or unincorporate
    A person or set of persons constitute or control more than 50% of the board of management.

  • Partnership
    A person or set of persons own more than 50% of the capital or are entitled to more than 50% of the profits.

  • Trust
    A person or set of persons are a beneficiary of more than 50% of the value of the trust that carries on the business. Under a discretionary trust, all beneficiaries are deemed to have a controlling interest.

Examples

Mr Able and Ms Bravo are the majority shareholders of Ginger Pty Ltd and Cloves Pty Ltd. As both businesses are commonly controlled, they are grouped.

Mr Red and Ms Green are the only directors of Kilo Pty Ltd. Mr Red and Ms Green are both beneficiaries of the Blue discretionary trust. As Kilo Pty Ltd and the Blue discretionary trust are commonly controlled, they are grouped.

Exclusion provisions: under this provision a business may apply for an exclusion from the group.

Tracing of interests in corporations

If an entity has a direct, indirect or aggregate interest of more than 50% in any corporation, that corporation is grouped with that entity.

Example

Example of grouping

  • Mr Smith has a controlling interest in Able Pty Ltd of 80%

  • Mr Smith has an interest in Charlie Pty Ltd of 50%

  • Mr Smith has an indirect interest in Charlie Pty Ltd of 80% x 40% x 50% = 16%

  • Mr Smith has an aggregate interest in Charlie Pty Ltd of 50% + 16% = 66%

  • Mr Smith has a controlling interest in both Able Pty Ltd and Charlie Pty Ltd.

  • Able Pty Ltd, and Charlie Pty Ltd are grouped as Mr Smith has an interest of greater than 50% in both companies.

  • Bravo Pty Ltd is not part of the group as the level of interest is 50% or less.

Exclusion provisions: Under this provision a business may apply for an exclusion from the group.

Subsuming

A larger group can be formed out of multiple smaller groups using the following two methods:

  1. A business is a member of two or more groups at the same time.

    Example

    1. Red Pty Ltd is grouped with Green Pty Ltd.

    2. Green Pty Ltd is grouped with Blue Pty Ltd.

    3. Green Pty Ltd is common to two groups and so subsuming applies.

  2. The members of a group have together a controlling interest in another business.

    Example

    1. Delta Pty Ltd and Echo Pty Ltd have common shareholders and are grouped.

    2. Delta Pty Ltd holds 30% of the units in the Foxtrot Unit trust.

    3. Echo Pty Ltd holds 30% of the units in the Foxtrot Unit trust.

    As Delta Pty Ltd and Echo Pty Ltd are grouped, their interest in the unit trust are combined, forming a group of all three businesses.

Exclusion provision: Under this provision a business may apply for an exclusion from the group in certain circumstances.

How does the group threshold work?

Only one member of the group can claim the group’s NSW threshold entitlement.

A group may choose one of two ways to use the threshold entitlement:

  1. A business with NSW wages in excess of the group’s NSW threshold entitlement can claim the full threshold and the remaining members pay a flat rate. This member is known as the Designated Group Employer (DGE).

  2. One member of the group becomes the group single lodger who is responsible for lodging and paying payroll tax on behalf of all members in the group and they must include the total Australian group wages in their return. No other group member lodges a return. This is mandatory if no one NSW employer has sufficient wages to claim the threshold but is optional for any other group.

How do I nominate a group single lodger?

To become the nominated group single lodger for your group you must complete a Single Lodger Application Form (OPT 015) (PDF).

Can a business be excluded from a group?

A business may apply in writing to be excluded from the group. Businesses must submit an Application for exclusion from grouping – payroll tax form (OPT 018) (PDF) to the Chief Commissioner of State Revenue.

The Chief Commissioner may grant an exclusion if satisfied the business is conducted independently and not connected with any other group member. When making a determination the Chief Commissioner will consider any matters he considers relevant in addition to the nature of the business and nature and degree of ownership and control.

For more information, view Revenue ruling PTA 031.

Last updated: 19 May 2016