Public Ruling PTA021.3 Contractors who ordinarily perform services to the public

What this ruling is about

1. The purpose of this public ruling is to explain how s.13B(2)(b)(iv) of the Payroll Tax Act 1971 (Payroll Tax Act) applies to exclude a contract from the definition of ‘relevant contract’ for the purposes of the contractor provisions in Part 2, Division 1A of the Payroll Tax Act (contractor provisions).
2. PTA021.3 replaces the earlier versions of PTA021 to address the decision in Nationwide Towing & Transport Pty Ltd & Ors v Commissioner of State Revenue [2018] VSC 262. The effect of that case is that the Commissioner does not need to be satisfied that a contractor conducts a genuine independent business to exclude the contract under s.13B(2)(b)(iv) of the Payroll Tax Act. PTA021.3 removes that requirement and clarifies the application of the exclusion under s.13B(2)(b)(iv).
3. A contract between a principal and a contractor may be a ‘relevant contract’ under the contractor provisions.
4. If the contract is a relevant contract, the principal who engages the contractor is deemed to be an employer, the contractor is deemed to be an employee and payments made under the contract for the performance of work are deemed to be wages.¹ Deemed wages are wages and are taxable in Queensland if they meet the nexus provisions of the Payroll Tax Act. Taxable wages are subject to payroll tax under s.10 of the Payroll Tax Act.
5. Whereas most contracts for the provision of services come within the meaning of relevant contract under s.13B(1) of the Payroll Tax Act, a contract is not a relevant contract if any of the exclusions under s.13B(2) applies.
6. If a contract is not excluded under any of the exclusions under s.13B(2)(b)(i) to (iii) of the Payroll Tax Act, the exclusion in s.13B(2)(b)(iv) may apply. Section 13B(2)(b)(iv) provides that a contract is not a ‘relevant contract’ in relation to a financial year if the Commissioner is satisfied that the person who performed the services under the contract ordinarily performs services of that kind to the public generally in that financial year.

Ruling and explanation

Factors that may be relevant to the exclusion

7. In determining whether a contractor who performed services under a contract ordinarily performs services of that kind to the public generally in a financial year, the Commissioner will consider a range of factors in the context of the contractor’s particular circumstances. The Commissioner considers that the following factors may be relevant and would generally support a finding that the exclusion applies:
   1. The contractor provides the same type of services to a range of principals in the financial year (however, providing the same type of service to members of the same payroll tax group is not a strong factor supporting a finding that the contract is not a relevant contract).
   2. The contractor derives income from principals other than the principal claiming the exclusion in the financial year. The case of exclusion is stronger when the proportion of the contractor’s income obtained from other principals is greater.
   3. The contractor enters into contracts that do not tie the contractor to the principal and do not restrict the contractor from providing the same type of services to other principals in the financial year.
   4. The contractor is proactive in sourcing work from a range of principals in the financial year; for example, by advertising to the public. However, merely advertising to the public without actually providing services to the public is not a strong factor supporting a finding that contract is not a relevant contract.
   5. The contractor performs work on separate contracts with separate principals concurrently in the financial year.
8. None of the above factors is conclusive on its own. In addition to the above list of factors, the Commissioner will also consider any other factors that are relevant to the particular circumstances. In some circumstances, the Commissioner may determine that the exclusion applies to a contract for one financial year but not another financial year. In such cases, the exclusion will only apply to the amounts paid or payable under the contract in the financial year in which the Commissioner has determined that the exclusion applies.

Example 1

Example 2

Determination from the Commissioner

9. A principal may apply to the Commissioner for an exclusion determination under s.13B(2)(b)(iv) of the Payroll Tax Act.
10. In applying to the Commissioner for a determination, the principal should include all the information and documentation available to the principal that would assist the Commissioner in determining whether the contractor performing services under the contract ordinarily performs services of that kind to the public generally in the relevant financial years.
11. In determining whether the exclusion under s.13B(2)(b)(iv) of the Payroll Tax Act applies, the Commissioner may also obtain and consider information directly from the contractor, as well as from other sources, such as the Australian Taxation Office and WorkCover Queensland.

The 10 days or less per month method

12. The Commissioner will accept that a contract is excluded under s.13B(2)(b)(iv) of the Payroll Tax Act in the following circumstances, in which case the principal can exclude the payments made to the contractor from its taxable wages without obtaining a determination from the Commissioner. The circumstances are where:
    1. the contractor provides services of the same type to the principal claiming the exclusion and to one or more other principals (not being members of a group) during the financial year
    2. the contractor provides services of that type to the principal claiming the exclusion for an average of 10 days or less per month (excluding the months in which no services were provided to that principal).²

Example 3

Example 4

Record keeping requirement

13. Principals must keep all records necessary to enable a payroll tax liability to be ascertained (including records that substantiate an exclusion) for a period of five years.³

Date of effect

14. This public ruling takes effect from the date of issue.

Mark Jackson
Commissioner of State Revenue
Date of issue: 17 December 2020

References

Footnotes