Page 370 - Week 02 - Tuesday, 4 March 2008
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One of the other main changes in this bill is the introduction of provisions for the grouping of employers for the purposes of payroll tax liability. We discussed these changes at length with officials. The grouping provisions follow the provisions in New South Wales and Victoria. The bill provides that, where several employers are owned or operated in such a way that they form a group of related businesses, payroll tax will be calculated on the basis of the group as a whole. Businesses within the group will be jointly and severally liable to pay payroll tax for the group, and a designated business within the group will claim the payroll tax free threshold. For groups of businesses operating in more than one jurisdiction, employers will lodge payroll tax information in all relevant jurisdictions and will receive the payroll tax free threshold at a pro rata rate in each jurisdiction.
The purpose of these grouping provisions is to ensure that businesses are not able to avoid payroll tax by splitting into separate but related entities. Some of the cases in which businesses may be grouped together include cases of common control and cases where businesses share employees for relevant tasks.
I should say that I have some concerns about the grouping provisions contained in the bill, as they appear to me to give scope for some strange groupings to occur. I have a particular concern about section 3L, which groups all overlapping groups of businesses into a single group. That is, whenever groups have a common member they are automatically grouped into a single group composed of all of the members of both groups. Whilst this section may be sensible in some cases, it has the potential to group unrelated businesses into a single group where these businesses are each in a separate group with a common member. In some cases the groups combined in this way may have no real connection, and the common member of two groups may be a member of each group for reasons that have nothing to do with any relationship between the two groups themselves. This is not a quiz, by the way, Mr Speaker. It may sound like it, but this is a scenario we worked through.
For example, if a set of people are found to control two businesses together under the common control test in section 3J, and one of those people is also found to be in another group of people by virtue of an entirely separate business, then all of the people in each of the two groups would be grouped together by virtue of section 3L. In such a case the two groups may have no real connection even though they are automatically grouped by the legislation. I have discussed this concern with departmental officials. They have assured me that in such cases they would exercise their discretion to ensure that unrelated businesses are not grouped together.
I note from my briefings on this issue that the changes will have a negligible impact upon the overall tax burden. While the exemptions will reduce the tax payable by some businesses by small amounts, the grouping provisions will increase the taxation liability for groups of businesses. Taxation is a subject that is of particular interest to me as I believe that it is an area that has a significant impact on the ACT economy and on the people of Canberra—to use the oft-quoted expression from the governments both here and at the federal level, on “working families”.
In my time as shadow Treasurer, I was fortunate to be able to examine the relevant efficiency of different ACT taxes and to receive economic advice on this question. Whilst I am certainly on the record as an advocate of lower taxation, it is clear from
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