Today’s Tax Update is a continuation of our recent Tax Update article on payroll tax. This article details with how payroll tax is calculated where wages are paid by related entities in more than one State or Territory.


All States and Territories have ‘grouping’ laws which are anti-tax avoidance measures that seek to prevent employers from creating multiple entities to take advantage of multiple tax-free payroll tax thresholds.  Our recent article advised of those thresholds.

Who is Liable?

Where two or more entities are grouped, their wages are aggregated in order to determine whether a payroll tax liability exists. However, each employer in the group remains primarily responsible for the payment of payroll tax on its own wages. All group members must separately register for payroll tax.

Members of the group (irrespective of whether or not they are employers) become jointly and severally liable for the debts of the group which are incurred while they are members of that group. Therefore, if one member defaults in the payment of tax, that amount may be recovered from another group member.


The main circumstances in which entities will be grouped by the various State and Territory Revenue Authorities are where:

  • Companies are ‘related’ under the Corporations Act 2001 (for example in a holding/subsidiary relationship);
  • Employees of one entity perform duties solely or mainly for the benefit of another entity;
  • An agreement made between two entities relating to the performance of duties by employees of one entity, for the benefits of the other entity;
  • The same person (or persons) has a controlling interest in two or more entities. Different rules apply to companies, trusts, partnerships, or businesses owned by one person; and
  • An employer has controlling interest in another employer (being a corporation) under tracing rules.

The Commissioner of each State and Territory Revenue Authority determines whether a group exists, having regard to the circumstances of each particular case.

Excluded Entities

The Commissioner has a discretion to exclude an entity from the operation of the grouping rules if an entity can demonstrate that the grouped entities are substantially independent and unconnected. The following criteria will be considered by the Commissioner in excluding an entity from the grouping rules:

  • The nature of the entity;
  • The nature and degree of ownership and control of the entity; and
  • Any other matters that Commissioner considers relevant.

Each State and Territory has separate guidelines regarding circumstances in which an entity may seek to gain exclusion from the grouping rules.

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