Payroll Advisory: Quarter in Review - Global Expatriate & Employment Taxes

Australia’s employer obligations and industrial relations environment is one of the most challenging in the world, with constant changes in superannuation, tax and award interpretations contributing to the complexity. 

To assist organisations in staying up to date, BDO’s Payroll Advisory specialists developed a ‘Quarter in Review’ video, assisting employers to better navigate and understand their ever-changing obligations.

Watch our in-depth video review.

This quarter (January-March 2023), Expatriate and Employment Tax Partner, Stefanie Merlino, highlights four key areas for employers to be mindful of, as outlined below.

   1. FBT electric car exemption

Our first update for the quarter relates to the FBT electric car exemption, which the ATO has recently issued a factsheet on to assist employers’ in determining their FBT obligations when providing an employee with an electric vehicle.

The exemption will not apply where luxury car tax (LCT) has become payable at any stage. Where an electric vehicle is second hand, employers will need to look at the sale price of the electric vehicle each time it has been sold to see if any LCT was payable. In the absence of a sales history, the ATO has suggested this be conducted by way of an internet search, car report or an independent valuation.

We await further guidance from the ATO on some other aspects associated with the exemption, including a proposed methodology to assist with determining the electricity cost when an employee charges their electric vehicle at home.

   2. Payroll tax and medical practices

Our second update relates to payroll tax and the public ruling issued by the Queensland Revenue Office in December, regarding the application of the relevant contract provisions to medical centres and other similar health care providers.

Queensland’s public ruling sets out that payroll tax obligations are likely to arise for Queensland medical centres and other health care providers if amounts are paid under a relevant contract with a practitioner. A relevant contract will arise where there is the provision of services between the parties. This may include where a medical practice has operational control over a practitioner - which includes having influence over who practices at the centre, the hours or days of practice, the space within the clinic and where the practice provides administrative services to the practitioner.

For medical centres and other health care providers operating outside of Queensland, we recommend consideration of Queensland’s ruling together with the recent guidelines. Given harmonisation of payroll tax across the various jurisdictions, in the absence of further guidance being issued by other States or Territories, it is recommended employers consider their obligations in line with treatment in Queensland.

   3. Employee versus contractor rulings

This area continues to attract significant attention by the regulators. The ATO issued a draft ruling and draft PCG in December of last year, TR 2022/D3, which is a draft income tax ruling and considers who is an employee for pay-as-you-go withholding purposes, together with draft PCG 2022/D5 which sets out the ATO’s compliance approach when classifying a worker as an employee or an independent contractor. The draft ruling and draft PCG are issued for consultation purposes only with submissions having closed on 17 Feb 2023. The draft PCG provides practical guidance for employers to consider when providing a risk framework for entering into contract arrangements.

The ATO is currently reviewing a number of existing rulings in relation to the ever-important distinction between employee versus contractor. The ATO has indicated an expected completion of this review in late 2023.

In the meantime, we encourage all organisations to review their existing procurement processes when engaging with contractors, noting the ATO’s refreshed views in this space, with more to come.

   4. Payroll tax and employment agency provisions

Our final update for the quarter is another payroll tax update in relation to the employment agency provisions, which continue to be a matter of scrutiny across the various jurisdictions.

For organisations who engage services through an intermediary, the key test to consider is how integrated the service provider is in the client’s business, and whether they are providing services ‘in and for’ the conduct of the client’s business. Where they are, the employment agency provisions will likely have application, leading to a payroll tax obligation.

Additional insights from our Payroll Advisory team you may have missed this quarter include: 

Questions? Contact us for more information

Our Employment and Expatriation team has extensive experience in payroll compliance, the design and taxation of employee remuneration, incentive arrangements and employee share schemes.

Contact your local BDO adviser today to find out how we can help you manage the challenges of employment tax compliance.