Payroll Tax Act 2009

The Act is built around several foundational definitions. ‘Wages’ under section 13 includes salary, commission, bonuses, allowances, and amounts paid to office holders, directors, and insurance canvassers. Importantly, wages also include fringe benefits (section 14), superannuation contributions (section 17), termination payments (section 28), and the grant of shares and options that are ESS interests under Commonwealth tax law (section 18). Fringe benefits are valued using a formula that grosses up the taxable value by the fringe benefits tax rate (section 15). Superannuation contributions cover payments to funds, superannuation guarantee charges, and even unfunded schemes where the Treasurer estimates a contingent liability (section 17(3)-(5)). ‘Taxable wages’ are defined in section 10 as wages taxable in South Australia under the nexus rules in section 11. Those rules turn on where services are performed, where the employee is based (principal place of residence, section 11A), where the employer is based (registered business address or principal place of business, section 11B), and where wages are paid or payable (section 11C). For employees working in two or more Australian jurisdictions, South Australia taxes wages if the employee is based here, or if the employer is based here and the employee is not based in any jurisdiction, or if neither is based in a jurisdiction then the place of payment or main service location applies. The Act also creates deeming provisions in the contractor and employment agent divisions. Under Division 7 of Part 3, a ‘relevant contract’ can cause the principal to be treated as an employer and the contractor as an employee (sections 32 to 35). However, there are exclusions for contracts of service, ancillary services, short-term engagements (under 90 days in aggregate), and contracts with persons who ordinarily perform those services to the public (section 32(2)). Employment agents are taken to be employers of service providers (section 38), and amounts paid to or in relation to the service provider are wages (section 40). The concept of a ‘group’ is central to the Act. Groups can arise from corporate relationships (related bodies corporate, section 70), common employees (section 71), commonly controlled businesses (section 72), or tracing interests in corporations (section 73). Once grouped, the members are jointly and severally liable for the group's payroll tax (section 81). A designated group employer can be appointed to lodge joint returns and pay tax on behalf of the group (section 80, Schedule 2 clause 7). Exempt wages are categorised in Part 4 and Schedule 2 Part 3. Examples include wages paid by religious institutions, public benevolent institutions, and charitable non-profits (section 48), by councils (section 58), for maternity and adoption leave up to 14 weeks (section 53), and for services performed wholly outside Australia for more than six months (section 66A). South-Australia-specific exemptions cover public hospitals, kindergartens, child care centres, film production, and under clause 17A of Schedule 2, wages subsidised by the JobKeeper payment during the COVID-19 pandemic.

The Act directly affects any person or entity that pays wages in South Australia or that is deemed to be an employer. This includes the Crown in all its capacities (section 5), corporations, partnerships, trusts, and natural persons. Employers who are members of a group are affected collectively because of joint and several liability. The Act also affects contractors and their principals through the contractor provisions, and employment agents who procure services for clients. Liquidators, executors, administrators, agents, and trustees are separately captured by Part 8, which imposes obligations to pay tax from assets under their control. For example, a liquidator of a company that was an employer must notify the Commissioner within 14 days and set aside assets for payroll tax (section 99). Non-resident employers and their agents are affected: agents for absentee principals must retain money for tax and can be personally liable if they dispose of funds (section 96). The grouping provisions mean that businesses with common ownership or control, even if structured as separate legal entities, are treated as one employer for threshold and rate purposes. This catches corporate groups, trusts, and partnerships with overlapping controllers. The nexus rules in sections 11 to 11C affect employers with employees working across multiple states or territories. Such employers must determine whether wages are taxable in South Australia, which may require tracking where employees are based, where services are performed, and where payments are made. The exemption provisions affect non-profit organisations, health service providers, local governments, and other specified employers. For example, a non-profit with a charitable purpose must ensure wages are paid exclusively for work of that kind to claim the exemption (section 48(2)). The film production exemption in Schedule 2 clause 17 applies only if the Treasurer is satisfied the film is substantially produced in South Australia, employs South Australian residents, and benefits the state. JobKeeper-subsidised wages (since expired) were exempt under clause 17A. The Act also affects employees indirectly because it defines wages broadly to include fringe benefits and superannuation, potentially increasing the payroll tax burden on employers and influencing remuneration structures. Legal practitioners and accountants advising on payroll tax compliance, restructuring, or M&A transactions are directly affected by the grouping and anti-avoidance provisions.

An employer who pays or is liable to pay taxable wages must register with the Commissioner if monthly wages exceed the prescribed weekly amount ($28,846 from 1 January 2019, section 86(1)). Registration is required within 7 days after the month end (section 86(2)). Once registered, the employer must lodge monthly returns by the 7th day after each month (21 days for June, section 87(1)). Returns must include taxable wages for that month and, for June, an annual adjustment (section 83). The amount of payroll tax payable monthly is calculated under Schedule 2 Part 2. For non-group employers, the formula is TW × R minus the deductible amount (clause 5). The deductible amount is up to $50,000 per month, calculated by the employer using estimated wages and interstate wages, and notified to the Commissioner (clause 6). If the deductible amount exceeds taxable wages for the month, no tax is payable (clause 5(2)). Employers must keep records supporting their returns, including fringe benefit valuations, motor vehicle allowance records, and contractor documentation. For fringe benefits, an employer may elect under section 16 to use an estimate based on the prior FBT year, dividing the grossed-up amount by 12 for monthly returns. For motor vehicle allowances, employers must choose between the continuous recording method or the averaging method (Schedule 1 Part 4), recording odometer readings and business kilometres. The exempt component of motor vehicle allowances is calculated using the formula E = K × R, where R is the ATO cents per kilometre rate (section 29). Employers have the right to apply for a refund if the annual tax paid exceeds the correct amount (section 83), but the application must be made by the end of the next financial year (Schedule 2 clause 20). They also have the right to object to assessments under the Taxation Administration Act 1996 Part 10. Group members have the right to apply for exclusion from a group under section 79 if they can demonstrate their business is carried on independently and not connected with other group members. However, related bodies corporate cannot be excluded (section 79(3)). An employer who grants shares or options to employees may elect to treat the grant date or the vesting date as the relevant day for payroll tax (section 19). If the grant is not included in taxable wages, they are deemed to have chosen the vesting date (section 20). Employers also have the right to estimate superannuation contributions for unfunded schemes based on an actuarial assessment (section 17(3)-(5)). The Commissioner has the power to determine the correct amount of tax in cases of fluctuating wages (section 85) or to disregard avoidance arrangements (section 47).

The Act itself does not prescribe penalties for late payment or non-lodgment; those are governed by the Taxation Administration Act 1996, which applies by virtue of section 4. However, the Act contains specific offence provisions. A liquidator who fails to notify the Commissioner or who parts with assets without leave faces a maximum penalty of $5,000 (section 99(4)). An agent for an absentee principal who fails to notify the Commissioner of an intention to wind up the business faces a maximum penalty of $500 (section 97). An employer who fails to notify the Commissioner of a change in circumstances faces a maximum penalty of $2,000 (Schedule 2 clause 19). The regulations may prescribe fines not exceeding $2,500 for contravention (section 101(3)(c)). The Act gives the Commissioner powerful recovery tools. The Commissioner can make a determination under section 42 to disregard an employment agency contract that reduces liability and deem a party to be an employer. Similarly, section 47 allows the Commissioner to disregard any agreement, transaction, or arrangement that reduces or avoids payroll tax and to deem payments or benefits as wages. The Commissioner also has power to determine the value of wages paid in kind (section 43) and to accept returns based on estimates when exact amounts cannot be determined (section 40(3)). Joint and several liability under section 81 is a significant enforcement mechanism: if one group member fails to pay, the Commissioner can recover the full amount from any other member, including interest and penalty tax. In the case of a deceased employer, the Commissioner has powers against trustees of the estate, and the tax is a charge on the estate in priority to other encumbrances (section 93). For an absentee principal, the controller of the principal's money is personally liable if they dispose of funds after being required to pay (section 96(5)). Liquidators are personally liable to the extent of assets they have taken possession of if they fail to comply with section 99 (subsection (5)). The Taxation Administration Act 1996 provides for interest on unpaid tax, penalty tax for late payment or underpayment, and prosecution for offences. That Act also allows the Commissioner to make assessments where no return has been lodged, and to recover tax as a debt due to the Crown. The Act also provides for annual adjustments: if an employer has underpaid, they must pay the difference (section 83(2)); if they have overpaid, the Commissioner must refund (section 83(1)). There is no discretion for the Commissioner to waive tax itself, only to remit penalty tax or interest under the Taxation Administration Act.

The Act is expressly to be read together with the Taxation Administration Act 1996 (section 4), which provides the administrative machinery for assessment, collection, objections, reviews, and enforcement. The Act also interacts extensively with Commonwealth legislation. Fringe benefits are defined by reference to the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTA Act), but excludes tax-exempt body entertainment fringe benefits and anything prescribed by regulation (section 3 definition of ‘fringe benefit’). The value of fringe benefits for payroll tax purposes is grossed up using the FBT rate as per section 15. Shares and options granted to employees are included as wages only if they are ESS interests under the Income Tax Assessment Act 1997 (Cth) (ITAA) section 83A-10 (section 18). For shares and options that are not ESS interests, they may still be taxable as fringe benefits under Division 2. The value of shares and options can be determined by Commonwealth income tax provisions (section 23). Motor vehicle allowance exemption uses the ATO's cents per kilometre rate (section 29(7)). Accommodation allowance exemptions rely on the ATO's reasonable travel allowance amount (section 30(3)). Superannuation contributions are defined by reference to Commonwealth superannuation legislation: the Superannuation Industry (Supervision) Act 1993, Superannuation Guarantee (Administration) Act 1992, and Small Superannuation Accounts Act 1995 (section 17(2)). Grouping provisions adopt the Corporations Act 2001 (Cth) definition of ‘related bodies corporate’ (section 70) and ‘voting share’ (section 3). The Act also interacts with other state payroll tax laws. The nexus rules in section 11 aim to ensure that wages are taxed only in one jurisdiction, using concepts of employee base, employer base, and place of payment. Interstate wages are taken into account when calculating thresholds and rates for South Australian liability (e.g., Schedule 1 clause 4 includes interstate wages in the threshold test). The Act is a ‘corresponding law’ for purposes of other states' payroll tax acts, meaning employers can credit tax paid in other jurisdictions against liability in South Australia (although the Act itself does not detail that credit mechanism; it is typically handled through the uniform legislation). The Act specifically excludes services performed wholly in one or more other countries for a continuous period of more than six months from being taxable (section 66A). For local government, the exemption is limited by excluding activities such as electricity supply, water, sewerage, abattoirs, etc. (sections 58 to 60). The Act also interacts with the Local Government Act 1999 for the definition of ‘council’. For film production, the exemption depends on a determination by the Treasurer, linking to state economic development objectives. The JobKeeper exemption (Schedule 2 clause 17A, now expired) specifically referenced the Commonwealth COVID-19 subsidy announced by the Prime Minister on 30 March 2020.

The Act received royal assent on 4 June 2009 and commenced on 1 July 2009, repealing the Pay-roll Tax Act 1971. Significant amendments include: Payroll Tax (Nexus) Amendment Act 2010 (No. 4 of 2010) which substituted sections 10, 11 and inserted sections 11A to 11C and 66A. This amendment operated retrospectively from 1 July 2009, along with transitional provisions (Schedule 1). Statutes Amendment (Budget 2010) Act 2010 (No. 22 of 2010) inserted a now-deleted clause 10A into Schedule 2 (education and training exemption) effective from 1 July 2010, and added a transitional provision for regulations to take effect from 1 July 2010. Payroll Tax (Miscellaneous) Amendment Act 2012 (No. 50 of 2012) made major changes to the shares and options regime from 1 July 2013, substituting section 18 to limit inclusion to ESS interests, amending sections 19, 23, 24, and inserting Part 3 of Schedule 3 to validate past elections and preserve transitional treatment. Statutes Amendment and Repeal (Budget 2012) Act 2012 (No. 54 of 2012) deleted clause 10A effective 1 July 2012. Payroll Tax (Exemption for Small Business) Amendment Act 2018 (No. 21 of 2018) was a significant amending Act. It introduced a two-period system for the 2018/19 financial year (Schedule 1A), increased the threshold from $600,000 to $1.5 million from 1 July 2018 (second period), introduced a progressive rate for wages between $1.5 million and $1.7 million, changed the registration threshold to $28,846 per week from 1 January 2019, and amended the grouping provisions for designated group employers (section 80). Statutes Amendment and Repeal (Budget Measures) Act 2018 (No. 35 of 2018) amended section 29 (motor vehicle allowance rate) with effect from 1 July 2016, and amended section 32 (contractor provisions) from 1 July 2018, inserting subsections (2a) to (2d) to clarify exclusions. COVID-19 Emergency Response Act 2020 (No. 7 of 2020) inserted clause 17A into Schedule 2, exempting JobKeeper-subsidised wages from 9 April 2020 until the cessation of the JobKeeper payment. Adelaide University Act 2023 (No. 32 of 2023) amended clause 16 of Schedule 2 from 8 March 2024 to extend the exemption to University College affiliated with Adelaide University (replacing the University of Adelaide) and from 31 March 2026 to update the name to Adelaide University. Statutes Amendment (Budget Measures) Act 2025 (No. 4 of 2025) inserted clauses 17B and 17C into Schedule 2 from 1 July 2024. Clause 17B allows regulations to exempt a percentage of wages paid to general practitioners in designated medical practices for bulk billed services. Clause 17C allows regulations to declare exemptions for any previous financial year, with power to modify the Act.

The Act itself does not list or refer to any specific judicial decisions. However, litigation concerning payroll tax in South Australia would generally arise under the Taxation Administration Act 1996, which provides for objections and appeals. Appeals from the Commissioner's determinations go to the South Australian Civil and Administrative Tribunal (SACAT) or the Supreme Court of South Australia depending on the amount in issue. The nexus provisions (sections 11 to 11C) have been the subject of disputes in other states with similar uniform legislation, focusing on the interpretation of ‘based’ in relation to employees and employers. The contractor provisions (section 32) have generated significant litigation across Australia, particularly regarding the exclusion for services of a kind not ordinarily required by the principal or provided for less than 90 days. The 2018 amendments to section 32 (inserting subsections (2a) to (2d)) were a legislative response to clarify the exclusions and limit avoidance. The grouping provisions, especially the tracing rules in Division 3 of Part 5, are complex and have led to disputes over whether entities have a controlling interest. No specific cases are cited in the Act’s legislative history, but practitioners should be aware that the Act has been judicially considered in unreported decisions and in other jurisdictions interpreting identical or substantially similar provisions under the harmonised regime. The Act's savings and transitional provisions (Schedule 3) preserve the application of the repealed Act for pre-1 July 2009 wages and validate certain past decisions regarding shares and options.

Several provisions create traps for the unwary. The contractor provisions in section 32 are particularly complex. The exclusions in subsection (2) are nuanced: for example, the exclusion for services of a kind not ordinarily required by the principal (section 32(2)(b)(i)) does not apply if additional services not of that kind are supplied under the same contract (section 32(2a)). Similarly, the 90-day exclusion (section 32(2)(b)(iii)) does not apply if the services are provided for more than 90 days in aggregate in the financial year, or if similar services are provided by the same contractor for more than 90 days. The Commissioner can disregard the exclusions if the contract was entered into to avoid tax (section 32(2d)). Employment agents must be careful: even if a contract is not an employment agency contract because it creates a direct employment relationship between the service provider and client (section 37(2)), the agent may still be liable if the arrangement is structured to avoid tax (section 42). The deemed wages provisions in section 40 apply to amounts paid ‘to or in relation to’ the service provider, which can capture payments to third parties. The anti-avoidance provision in section 42 allows the Commissioner to disregard any contract and deem any party an employer. For shares and options, the choice of relevant day (section 19) is critical: if an employer does not include the value in taxable wages for the year of grant, they are deemed to have elected the vesting date (section 20), which could be up to seven years later. A rescission of shares due to unmet conditions allows a reduction in taxable wages (section 21(2)), but this does not apply if the employee simply fails to exercise an option (section 21(3)). The value of shares and options must be determined using market value on the relevant day, less consideration paid by the employee (section 23). GST is excluded from wages except for fringe benefits (section 44). However, the deduction requires calculating the relevant proportion of GST payable. Grouping is a minefield. Under section 71, groups can arise from the use of common employees, even if there is no common ownership. For example, a company that provides staff to a related entity under a service agreement may group both entities. The tracing-of-interests rules (section 76) treat an entity as having a direct interest if it can ‘substantially influence’ voting power, a broad test. Joint and several liability under section 81 applies whether or not the person was an employer during the relevant period (section 81(5)). The exclusion power in section 79 is discretionary, and related bodies corporate cannot be excluded (section 79(3)). Monthly payroll tax calculations use an estimate-based deductible amount (Schedule 2 clause 6). If an employer overestimates their deductible amount, they may underpay monthly tax and face a top-up at annual adjustment plus potential interest and penalty tax. The annual refund application is time-limited to the end of the next financial year (Schedule 2 clause 20). Missing this deadline forfeits the refund. The JobKeeper exemption (clause 17A) expired when the Commonwealth payment ceased; employers cannot rely on it after that date. The exemption for general practitioners under clause 17B is not yet operative; it depends on regulations being made. Employers should also note that the Act's definition of ‘wages’ includes amounts paid to directors (section 13(1)(c)), insurance canvassers or collectors (section 13(1)(d)), and that section 13(2a) extends the definition to persons who are not employees in the traditional sense.

Compliance requires a systematic approach. First, determine if the entity is an employer under the Act. This includes checking whether any contractors fall within the relevant contract provisions (Part 3 Division 7). If a contractor arrangement is excluded (e.g. because the contractor provides services of a kind not ordinarily required and for less than 90 days), maintain documentation to support the exclusion, including copies of contracts, invoices, and evidence of the public nature of the contractor's business. For employment agency contracts, ensure the agent is registered and properly reports all amounts paid to or for service providers. If the client provides a declaration that the amounts would be exempt if paid directly, the agent can exclude those amounts (section 40(2)). Second, calculate taxable wages for each month. Gather data on ordinary wages, fringe benefits (grossed up using the formula in section 15), superannuation contributions, termination payments, and shares or options granted. For fringe benefits, decide whether to use the monthly actual or the annual estimate method under section 16. For motor vehicle allowances, choose the continuous recording or averaging method and maintain detailed odometer logs. For shares and options, decide on the election of the relevant day (grant date or vesting date) and value them using market value or the Commonwealth income tax provisions. Third, determine the nexus under sections 11 to 11C. For employees working solely in South Australia, all wages are taxable here. For employees working in multiple states, identify the employee's base jurisdiction (principal place of residence for individuals, or for corporate employees, treat them under section 11B as if an employer). If the employee is based in South Australia, all wages for that month are taxable here. If the employee is not based in any Australian jurisdiction, check the employer's base (registered business address or principal place of business). If that is also not in Australia, the place of payment or main service location determines liability. Maintain a record of each employee's principal place of residence and any changes. Fourth, group analysis: identify all entities that may be grouped under Part 5. This includes related corporations (section 70), common employee arrangements (section 71), and common control (section 72). For trusts, the controlling interest test is based on beneficiaries holding more than 50% of the value of interests, with discretionary beneficiaries deemed to hold such interest (section 72(6)). Use the tracing rules in sections 76-78 to calculate direct and indirect interests. If a group exists, the members must appoint a designated group employer (section 80) or the Commissioner may do so. The designated group employer lodges returns and pays tax for the group (or joint returns with approval). All members are jointly and severally liable (section 81). Apply to the Commissioner for exclusion if a business is genuinely independent (section 79). Fifth, register with the Commissioner if monthly wages exceed the threshold ($28,846 per week from 1 January 2019). Registration must occur within 7 days after the month end (section 86). Then lodge monthly returns by the 7th day after each month (21st day for June, section 87). Use the Commissioner's approved form (section 100). For monthly tax calculation, apply the formula in Schedule 2 clause 5: taxable wages for the month multiplied by the appropriate rate (4.95% or the transitional rate between $1.5m and $1.7m), minus the deductible amount (up to $50,000). The deductible amount must be notified to the Commissioner (clause 6). If wages are below the deductible, no tax is payable for that month. At year-end, perform an annual adjustment (section 83): recalculate the correct tax using annual totals and the threshold in Schedule 1. If overpaid, apply for a refund before the end of the following financial year (Schedule 2 clause 20). If underpaid, pay the difference by the June return due date. Sixth, keep all records for at least five years (as required by section 53 of the Taxation Administration Act 1996, referenced in the note to section 54). This includes medical certificates for maternity leave exemptions, statutory declarations for adoption leave, odometer records, fringe benefit calculations, and copies of returns. Notify the Commissioner within 14 days of any change in name, address, partnership membership, or ceasing to be an employer or group member (Schedule 2 clause 19). For liquidators, notify the Commissioner within 14 days of appointment (section 99). Finally, review any restructuring or new arrangements for anti-avoidance risk under sections 42 and 47, which give the Commissioner power to disregard arrangements that reduce liability. Seek legal advice if uncertain about grouping, contractor status, or nexus.