Payroll Tax Tenancy/Agency Model Focus

Payroll Tax Tenancy Agency model

The State Revenue Authorities are renewing their focus on taxpayers compliance with the contractor provisions, particularly those operating under the tenancy/agency model as was seen in the Optical Superstore Pty Ltd case in Victoria.

Medical practices, allied health practices, franchise networks, real estate agents and others who have structured their affairs under the tenancy/agency model, or through the engagement of practitioners as “independent contractors” should review those arrangements

Commissioner of State Revenue (Vic) v Optical Superstore Pty Ltd

The Optical Superstore used a tenancy/agency model where the practice collected the fees from the customer, deducted a fee for providing the management service (usually to cover overheads such as rent, admin staff, marketing, store supplies etc) and then paid the balance to the optometrist (which were treated as fees/revenue to the optometrist rather than wages).

The issue with this arrangement

The Supreme Court of Victoria adopted a broad view of what constituted a contract for work and determined that these payments were subject to payroll tax under the contractor provisions.

The flow on effect to other industries…real estate, medical, franchise networks

The  increased scrutiny by the State Revenue Authorities in this space is one of many reasons for other industries that use this model to seek expert advice about current and future structuring arrangements, and to make sure that arrangements being used are compliant with laws as they are being applied today.

Also refer to our dedicated article on contractors v employee and the consequences if wrong.

Its not all about contractors……

Its no surprise that the common theme to all State Revenue Authority compliance activities is contractors, however other areas of focus are:

  • Victoria: Contractors, Grouping, Employee Share Schemes, underdisclosure of Fringe Benefits
  • New South Wales: Investigating discrepancies with ATO, Fringe Benefits, Salary & Wages & Contractors
  • Queensland: Employee Share Schemes, Salary Sacrifice Arrangements, Grouping, Contractors, ETP’s
  • South Australia: Contractors, Grouping, Rebate Scheme
  • Western Australia: Labour Hire, Large Employers, Contractors
  • Tasmania: Contractors, Grouping, Rebate Scheme, Fringe Benefits
  • Australian Capital Territory: Salary Sacrifice Arrangements, Grouping, Contractors
  • Northern Territory: Grouping, Refund Requests, Contractors, late lodgers

The Optical Superstore case highlights that all businesses using the tenancy/agency model should urgently review their payroll tax obligations as this case will impact them

Contact us to have a chat about the above and how it applies to the facts and circumstances surrounding your contractual arrangements.