| Revenue Ruling Public Ruling
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| Preamble Payroll tax is a tax which is payable in all States and Territories of Australia and is administered by each State or Territory under their own separate legislation. An employer is required to determine the State or Territory in which payroll tax is payable. Generally, payroll tax is payable to the State or Territory where the services in their entirety are performed. For example, a Tasmanian employer is obliged to pay payroll tax in Victoria in relation to the wages of an employee whose services in their entirety were performed within Victoria. Generally, this determination is straight forward where the services are land based in a particular State or Territory and payment is made in that State or Territory. The purpose of this Ruling is to clarify an employer’s liability to pay payroll tax in respect of wages paid to expatriate employees. Whether the wages of an employer are subject to the payment of payroll tax in Tasmania will depend on where the work is performed by the employee and where payment is received by the employee. Employers who have expatriate employees should be aware that wages, which include a wide variety of payments made to or in relation to these employees, may be subject to payroll tax where payments are made in Tasmania in relation to employees working overseas under subsection 6(1AA) or payments are made overseas by overseas employers in respect of employees working in Tasmania under subsection 6(1)(c). Ruling Expatriate employees working overseas Under the provisions of subsection 6(1AA) of the Pay-roll Tax Act 1971 (the Act), wages paid in Tasmania to an expatriate employee who is working in another country, or countries, for less than six (6) continuous months, or for the first six (6) months of an assignment in another country, or countries, of greater than six (6) continuous months are subject to payroll tax. Under the provisions of subsection 6(1)(a)(ii) where services are performed by an employee on a continuous assignment of greater than six (6) months in another country, or countries, any wages paid in Tasmania for services that were performed in the seventh or subsequent months of that assignment are not subject to payroll tax. The six (6) month period does not have to be within one (1) financial year but must be a continuous period. Where an employee, working in another country, returns to Australia in the following circumstances, it will not be considered to be a break in continuity:
and in either case, the employee immediately returns to that overseas country to perform further work on the assignment. If only part of the wages earned are paid in Tasmania, then those part wages must be declared for payroll tax. Thus, if an employee’s wage, or part thereof, is received by an employee in Tasmania, or transferred directly by the employer to an agent of the employee located in Tasmania, or credited to a Tasmanian bank account of a financial institution, the payment of the wage, or part thereof, will be taxable. Note: The exemption allowed for services performed for greater than six (6) continuous months outside Australia is limited to apply only to wages in relation to services that are performed in another country or countries. Any wages that relate to services performed offshore and beyond the limits of the coastal waters of any Australian State or Territory, but not in another country, are, for the purposes of the Act, performed outside Australia and are fully taxable under section 6(1)(a). Please refer to Revenue Ruling PUB-PT-2002-15 Liability Where Services Performed Off-shore for further information. Expatriate employees working within Tasmania It is a common practice for overseas parent companies to send employees to work for their Tasmanian subsidiaries or branches on a permanent or temporary basis. Under the provisions of subsections 6(1)(b) and 6(1)(c) wages paid to such persons are subject to payroll tax in Tasmania in any calendar month where the employee works mainly in Tasmania. This applies regardless of where such wages are paid to the expatriate employee. Although the basis for determining whether payments made, or benefits provided, to expatriates are subject to payroll tax is essentially the same as applies to other wage payments, the following clarification is provided: Wages paid in a foreign currency The State Revenue Office will accept an exchange rate conversion, based upon the Reserve Bank of Australia’s daily mid-rate, for the day of payment. If this creates difficulties, the employer may use, as an alternative, the yearly average rate for the financial year, as published by the Australian Taxation Office. The previous year’s figure may be apportioned for the purpose of making monthly returns, provided that the current year’s rate is used to make an appropriate adjustment in the Annual Adjustment Return. Bonuses paid overseas to expatriates relating to employer/group performance Subject to the following paragraph, the value of bonuses paid overseas as a result of an employer’s, or employer’s group, performance is subject to payroll tax and should be declared in Tasmania to the extent to which the bonus relates to a period in which the expatriate worked in Tasmania, regardless of when the bonus is paid. If the bonus is paid for a period in which the expatriate worked wholly in Tasmania, the whole of the bonus is subject to payroll tax. The Commissioner of State Revenue has ruled that a bonus paid overseas for a financial year in which the expatriate worked at least partly in Tasmania, will be subject to payroll tax in Tasmania only if the expatriate worked in Australia for more than one-half of that financial year. The amount of the bonus to be declared should be calculated on a pro-rata basis using the number of calendar months in which the expatriate employee worked mainly in Tasmania. For example, where an annual bonus of $6 000 is paid overseas to an expatriate employee who worked in Australia for a total of eight months, of which four months were worked mainly in Tasmania, four-twelfths of $6 000 ($2 000) is subject to payroll tax in Tasmania. The bonus would not be taxable in Tasmania if the expatriate employee worked in Australia for less than six (6) months. Fringe benefits Benefits provided to expatriate employees which fall within the provisions of the Commonwealth Fringe Benefits Tax Assessment Act 1986 will be subject to payroll tax if paid or payable to a person whose wages, or other remuneration, are subject to payroll tax. Contributions to Central Fund Schemes Section 2AAB of the Act provides that employer contributions to a central fund, on behalf of an employee, to cover entitlements other than superannuation benefits, are treated as wages for the purposes of the Act. Trust Distributions in lieu of Wages Under section 2AAA of the Act, trust distributions, made from 1 July 2005, to a person as beneficiary in lieu of wages for work done for the trust may be liable to payroll tax. For further information on trust distributions refer to Revenue Ruling PUB-PT-2005-5 ‘Inclusion of distributions under trusts as wages for payroll tax purposes’. Employer contributions to superannuation funds Wages includes employer contributions to superannuation funds. The superannuation benefits of expatriate employees are taxable if paid or payable to a person whose wages, or other remuneration, are subject to payroll tax. Note: superannuation benefits paid or payable by an employer in respect of services rendered after 30 June 1997 are subject to payroll tax. This ruling must be read subject to Revenue Ruling PUB-GEN-2001-1. Enquiries in relation to this Revenue Ruling should be directed to the Revenue Advice and Audit Section on telephone 03 6233 5438 or e-mail audithelp@treasury.tas.gov.au. Copies of this ruling may be obtained from our Web site at www.treasury.tas.gov.au/tax and follow the "Revenue Rulings" link. Peter Coe Commissioner of State Revenue |
