We have recently experienced an increase in investigations (being either audits or reviews) conducted by the Queensland Office of State Revenue (“OSR”) regarding payroll tax. This is a state-based tax collected by each State’s OSR.
Broadly, payroll tax is payable by employers (or groups of employers) with total annual Australian taxable wages that exceed the applicable threshold in each state. Currently the annual threshold in Queensland is $1.1 million.
Investigations are conducted to ensure that payroll tax is being calculated correctly and that employers are registering for payroll tax when required. Investigations may be triggered through the following processes conducted by the OSR:
- data matching with information requested from the Australian Taxation Office (“ATO”), other State OSRs and government agencies
- information received from the general public
- referrals from other government agencies
- random sampling.
Common errors made in connection with payroll tax include:
- not including all applicable contractor payments, corporate contractors in particular
- incorrectly grossing up fringe benefits
- applying the group employer provisions incorrectly.
The initial contact with the OSR and the next few steps are the most important part of a review or audit.
Depending on the circumstances, a voluntary disclosure may be necessary and if so, it will save time and generally result in a lesser penalty. Pilot can recommend practical strategies to finalise the review or audit.
To assist with minimising the risk of a payroll tax audit, it is prudent to reconcile your wages monthly by comparing your payroll tax lodgements with your ATO lodgements. If you are not registered for payroll tax and have total wages and associated costs (such as contractor payments and fringe benefits close to the payroll tax threshold), we recommend monitoring these costs for payroll tax purposes monthly to identify when you are required to be registered.
As a final note, it is best practice to hold current audit insurance to protect your business against the unexpected costs of an audit conducted by a revenue authority such as the Queensland OSR.
In the event that the OSR makes contact with you or if you would like to know more about registering for payroll tax, please contact our tax team: Murray Howlett, Kylee Smith and Josh Meggs on (07) 3023 1300.