The Real Estate industry is a big employee of people in the state, and is also a heavily regulated sector, which has important licencing requirements, due to the significant sums of money held of third parties. This creates numerous ways agencies cross refer, conjunct, partner and profit-share with employees, contractors or other businesses, given the main turnover of the sector relies on executing an exchanged property contract between a willing vendor and buyer, whom often are introduced by different agents.

There is currently plenty of discussion in the industry about the Office of State Revenue looking closely at payroll tax compliance, so to help, I thought I would outline some points for business owners to think about, especially if you are worrying about these matters in the middle of the night.

A common problem is confusing the issues that are typically addressed during an OSR review. Also, there is nothing out of the ordinary for OSR to review a business to check how they are complying with the legislation.

On the matter of the specific issues that are commonly mistakenly  two spring to mind. Firstly, Grouping for Payroll Tax, and secondly, Exempt Independent Contractors.

So let’s address Contractors first.

Independent Contractors

1. Know the law and its specific requirements. To do this, speak to your independent professional advisor, someone who understands the details of the law.

2. Contractors are specifically discussed (for NSW) in the following link NSW payroll tax information 2013-14. It clearly states the grounds on which exempt status is granted.

3. Don’t generalise. Payroll tax is legislated in states separately, and applies to services provided to achieve the core income production of the company.
4. The wording says, where a contractor agreement is “not exempt” then they are included for payroll tax purposes. Therefore understanding the meaning of an exempt agreement is crucial.

5. The biggest mistake for people is not doing the hard work up front to properly understand what is required to correctly implement a legal contractual agreement.

6. No two agreements are identical. Therefore you’ll need to look at each contract on its own and the outcomes that you and your professional advisor determine. The paper work matters and it is a case by case basis whether a contractor agreement is exempt. Ultimately it comes down to the paperwork and how the money is handled. 

As I mentioned, people often confuse the above matter with “Grouping”. Grouping is a matter that relates to the common ownership of separate entities. Should the OSR deem that companies are grouped for payroll tax purposes, then the grouped companies will share the payroll tax free threshold and, combine all qualifying payroll amounts in each of the grouped entities to calculate the amount payable for payroll tax.

Grouping

1. Speak to your accountant about all tax implications (including payroll tax) before you establish or incorporate any entity which will employ staff.
2. Grouping( for NSW) is explained by the OSR  on their website in the following link OSR NSW explanation of Grouping

3. Essentially, keep it simple. If two companies have a common majority shareholding, they will be grouped. 

I need to make it clear that I am not writing this blog to provide answers to specific circumstances of any business, but to clearly separate the issues where the real estate industry has been in the spot light. If you’re confused about the above matters, then I reiterate, go and speak to your trusted professional Tax Accountant to review your situation in detail, and follow their advise based on your particular circumstances.

As trusted bookkeepers for many real estate agencies, our team at Live Bookkeeping assist our clients where we can to help clear up any confusion there might be for owners trying to clarify their payroll tax liabilities, and should you want us to point you in the right direction, or refer you to a professional tax accountant to talk to you, then don’t hesitate to contact us info@live-bookkeeping.com.au

I will write about accounting for Payroll tax and how to cost it in to your business plan in a blog at a later date.

Chris Mercer