Page 4021 - Week 13 - Thursday, 6 December 2007
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The next measure provides uniform treatment for fringe benefits that are included as wages. The use of both type 1 and type 2 gross-up factors has been discarded. Agreement has been reached to adopt the lower type 2 gross-up factor to calculate the amount deemed to be wages for payroll tax purposes. Employers must declare in their monthly payroll tax returns the actual value of the total fringe benefits provided each month, grossed up by the type 2 factor. For administrative ease, the bill allows an employer to make a formal election to adopt an alternative method whereby the amounts declared are based on the fringe benefit tax returns made to the Australian Taxation Office.
Another provision new to the ACT comes with the adoption of an exemption for wages paid in the ACT for employees who work in another country for a continuous period of six months or more. To qualify for exemption, the employee must be on continuous assignment outside Australia for a period of six months or more. If the wages qualify, the exemption applies to the whole assignment, including the first six months. However, wages paid for services in another country for less than six months will continue to be liable to payroll tax.
The question of continuity of the absence from Australia will be dealt with uniformly across jurisdictions. Returning to Australia for a holiday or to perform work related to the assignment for less than a month will not be considered a break in continuity if the employee returns to the overseas country to continue the assignment.
The bill will also introduce new grouping provisions. The ACT has agreed to adopt a model consistent with Victoria and New South Wales in relation to the grouping of businesses for payroll tax purposes. The grouping of related or associated businesses is an anti-avoidance measure that prevents employers from obtaining the full tax-free threshold more than once by dividing their business into separate but still related entities. Without grouping, an entity could split its operations into several businesses, all of which have wages below the threshold and consequently none of them incur a payroll tax liability.
The ACT already has grouping provisions, but they are not consistent with those agreed by all the jurisdictions. Entities will now be grouped where they use common employees, where they are commonly controlled companies or where controlling interests can be traced to give a more than 50 per cent interest. Interests may be held directly and indirectly by the entities, and can be aggregated to form a controlling interest. The formation of these groups will use common tests across the states and territories. Related corporations under the Corporations Act 2001 of the commonwealth will automatically be grouped with no discretion to exclude a member from the group for any reason.
The commissioner has a discretion to exclude a member from a group where they operate independently. This currently applies in the ACT only to entities that are grouped because of the use of common employees. The bill widens this discretion to members that have been grouped under any of the grouping provisions, other than related corporations. The commissioner will consider all relevant matters, including the nature and degree of ownership and control of the businesses and the nature of the businesses, in exercising the discretion.
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