The COVID-19 crisis has introduced unprecedented disruptions to the workforce, pushing employees and employers to work in remote capacities and in expedited ways across many industries.

This will mean that employers will soon have to turn their minds to considerations never contemplated before, such as their base line payroll tax assumptions and whether or not changes in the ways we will be working in the coming months, will shift payroll tax liabilities to a different jurisdiction.

When we layer this with overriding complications on the different payroll tax stimulus measures States and Territories are providing across Australia in response to this pandemic (summarised here), many businesses will find themselves in very different payroll tax positions than what they had originally thought in the start of 2020.

Affected businesses

Businesses that now have employees working from a different state or country may face changes in the applicable jurisdiction for payroll purposes. This may include:

• On-the-road staff who usually work across work sites but are now required to operate in one location due to border closures;

• Fly-in fly-out (FIFO) workers who are no longer able to freely move between borders and may be required to stay onsite in different states for extended periods;

• Where staff who needed to, or chose to, move in with family members in other states to avoid being isolated prior to border closures;

• Guest lecturers or academics at education institutes who are now presenting lectures and courses online, rather than in person;

• Workers located in border communities, such as Albury and Wodonga, that are no longer able to cross the border to perform duties; and

• Where businesses have moved staff to high demand locations, such as manufacturing workers who have been relocated to different factories as demand for products change. 

The payroll tax nexus provisions

Where services are performed wholly in one Australian jurisdiction, payroll tax will be payable in that jurisdiction. For example Aaron is a receptionist and fully performs his job at an office in regional Victoria. His employer qualifies for payroll tax being charged at the regional rate, Aaron’s wages will be payable in Victoria at regional rates.

As a result of COVID-19 Aaron now must perform his duties from home, in a neighbouring town which is across the Victorian border. As a result, the services performed are not wholly in Victoria. The payroll tax provisions of the other state must therefore be considered.

Where services are performed in more than one jurisdiction taxpayers will have to consider the payroll tax nexus provisions to determine where payroll tax is payable. These provisions have largely been standardised across Australia, The nexus provisions provide a four-tiered test. Where the situation changes on a monthly basis, the tiered test must be considered on the facts as at each month.

What should businesses be doing in relation to payroll tax?

The effects of COVID-19 crisis on businesses continues to change as do the issues to consider. Whilst State and Territory Governments have announced payroll tax relief measures, understanding where a business’ obligations lie during these unprecedented times adds a further layer of complexity for business. Businesses should review, on a monthly basis, the location of staff and the effects of this on payroll tax liabilities.

If you are unsure how these rules apply or the implications for your business, contact our state tax specialists: 

Denise Tan
Senior Associate
T +61 3 9611 0160 | M +61 438 714 965
E dtan@sladen.com.au

Laura Spencer
Senior Associate
T +61 3 9611 0110
E lspencer@sladen.com.au

Phil Broderick
Principal
T +61 3 9611 0163  l M +61 419 512 801   
E  pbroderick@sladen.com.au