Skip to main content Go to home page

Under section 32(2)(b)(iv) of the Payroll Tax Act 2007 (the Act), a contract for services is not a relevant contract if the Commissioner of State Revenue (the Commissioner) is satisfied that services rendered under that contract are rendered by a contractor who ordinarily renders such services to the general public in a financial year.

Employers can apply for this exemption through a private ruling. Details on how to apply for a private ruling are set out in Revenue Ruling GEN-009v3.

Key considerations

In exercising his discretion, the Commissioner needs to be satisfied that the contractor who performs services under the contract also ordinarily renders services of that kind to the general public in the relevant financial year.

Below is a list of factors that the Commissioner may take into consideration in exercising his discretion under section 32(2)(b)(iv) of the Act.

  • the extent and nature of advertising undertaken by the contractor
  • the range of clients serviced by the contractor
  • the extent and nature of plant and equipment provided by the contractor in execution of the services
  • the engagement of staff or sub-contractors by the contractor
  • the potential for entrepreneurial risk
  • the nature of contracts entered into (e.g. formal long term or informal rolled over contracts)
  • how the contractor won the contract
  • whether work is performed on separate contracts concurrently
  • whether the contractor bears the cost and responsibility for faulty materials or workmanship
  • whether the contractor quotes competitively for jobs on an all-inclusive basis (all labour and materials)
  • whether the contractor merely charges for services on an hourly rate and adds on the cost of materials.

None of the above factors is conclusive on its own. This list is not an exhaustive list of factors that the Commissioner will take into account in exercising his discretion under section 32(2)(b)(iv) of the Act as he will also consider any other matters relevant to his decision.

However, the Commissioner will accept that a contractor ordinarily renders services to the public generally where, in the financial year in which services were provided under the contract in question, the contractor provided services of that type to:

  • two or more principals (not being members of a group) during the financial year, and
  • the principal claiming the exemption for an average of 10 days or less per month (excluding the months in which no services were provided).

Revenue Ruling PTA-014 explains what constitutes a day’s work.

If a contractor, who has supplied services under a contract to a principal in a particular financial year, meets these 2 criteria, the exemption in section 32(2)(b)(iv) of the Act applies. Under these circumstances, there is no need for the principal to obtain a private ruling from the Commissioner.

Example 1

Michael is a computer programmer. During the financial year, he provided services to Principal A and Principal B.

Under his contract for service with Principal A, he provided his services as follows:

  • July – 5 days
  • August – 3 days
  • September – 7 days
  • October – 5 days
  • November – 16 days
  • December – 9 days
  • January – 13 days
  • February – 4 days
  • March – 8 days
  • April – 5 days
  • May – 14 days
  • June – 11 days.

TOTAL – 100 days

In that financial year, Michael worked for a total of 100 days for Principal A which is an average of 8.3 (100 days divided by 12 months) days per month. 

As a result, payments made by Principal A to Michael for the financial year are exempt from payroll tax because the 2 criteria were met.

This is because, in the financial year in which services were provided under the contract in question, the contractor provided services of that type to:

  • two or more principals (not being members of a group) during the financial year, and
  • the principal claiming the exemption for an average of 10 days or less per month (excluding the months in which no services were provided).

Example 2

Shelly is also a computer programmer. During the financial year, she provided services to Principal C and Principal D.

Under her contract for service with Principal C, she provided her services as follows:

  • July – 11 days
  • August – 16 days
  • September, October, November – Nil days
  • December – 22 days
  • January – 21 days
  • February – 20 days
  • March and April – Nil days
  • May – 18 days
  • June – Nil days

TOTAL – 108 days

In that financial year, Shelly worked for a total of 108 days for Principal C. This worked out to be 18 (108 days divided by 6 months) days per month. 

As a result, payments made by Principal C to Shelly are subject to payroll tax. This is because, unlike in Example 1, Shelly worked more than an average of 10 days or less per month (excluding the months in which no services were provided). This calculation should be reviewed at the annual reconciliation.

Last modified: 27 November 2023
Back to top