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Payroll tax update - expatriate employees
- By Michael van Schaik
- Published 1/08/2007
- Beyond Numbers
- Unrated
The Victorian and New South Wales Payroll Tax Acts have been harmonized effective 1 July 2007 with one of the key areas being the treatment of wages for Payroll Tax purposes of expatriate employees.
The Victorian State Revenue Office has issued a revenue ruling (PTA 002) outlining the Payroll Tax treatment from 1 July 2007.
Therefore whilst the ruling takes about Victoria, it has equal application to New South Wales.
A number of the changes represent a significant departure from the previous treatment for Payroll Tax purposes.
Expatriate employees working overseas:
1. Assignment for 6 months or less
Wages received in Victoria by an expatriate employee who is working overseas remain subject to Payroll Tax
2. Assignment for more than 6 months
Where the services are performed by an employee outside of Australia for a continuous period of greater than 6 months, any wages received in Victoria are NOT subject to Payroll Tax from the beginning of the assignment.
This represents a significant departure from the previous position in Victoria as Payroll Tax was due on the wages paid in Victoria for the
first 6 months.
The 6 month period does not need to be within the same financial year (1 July to 30 June), but must be a continuous period. A
break in continuity will not occur in the following circumstances:
- The employee returns on holiday; or
-The employee returns to perform work exclusively related to the overseas assignment for a period of less than one month; and
- In either case the employee immediately returns to the overseas location to perform further work on the assignment
3. Assignment performed offshore, but not in another country
Wages received in Victoria remain fully taxable, irrespective of the duration of the assignment.
Expatriate employees working within Victoria or paid in Victoria
Wages paid to an expatriate employee working in Victoria are subject to Payroll Tax in Victoria in any calendar month where the
expatriate employee works wholly or partly in Victoria.
Wages that are paid in another State or Territory are subject to Payroll Tax in Victoria in any calendar month where the expatriate
employee works mainly in Victoria.
Wages paid outside of Australia are subject to Payroll Tax in Victoria in any calendar month where the expatriate employee works mainly
in Victoria.
The following clarifications have also been provided:
1. Bonuses paid overseas relating to employer/group performance
-As a general rule, the value of bonuses paid overseas are subject to Payroll Tax in Victoria to the extent to which they relate to period in which the expatriate worked in Victoria, regardless of when the bonus is paid.
-If the bonus is paid for a period in which the expatriate employee worked wholly in Victoria, the whole of the bonus is subject to tax.
-A bonus paid overseas for a financial year in which the expatriate employee worked at least partly in Victoria will be subject to Payroll Tax in Victoria only if the expatriate employee worked in Australia for more than one half of that financial year (I July to 30 June).
-The amount of bonus subject to payroll Tax in this instance is calculated on a pro rata basis using the number of calendar months in which the expatriate worked mainly in Victoria
-The bonus would not be subject to Payroll Tax if the employee worked in Australia for less than 6 months.
2. Fringe benefits
-Fringe benefits provided to expatriate employees are subject to Payroll Tax based on the taxable value of the fringe benefit provided grossed up using the Type 2 gross up factor (currently 1.8692).
Please note that where the fringe benefit is exempt from FBT, no Payroll Tax liability will arise.
3. Employer contribution to superannuation funds
-The definition of wages includes employer contributions to superannuation funds, whether those funds are located in Australia or overseas.
Questions
Please contact Michael van Schaik, Associate
Director, Employment & Remuneration Services.
Phone: +61 (0) 3 8635 1835
Email: mvanschaik@moorestephens.com.au
The Victorian State Revenue Office has issued a revenue ruling (PTA 002) outlining the Payroll Tax treatment from 1 July 2007.
Therefore whilst the ruling takes about Victoria, it has equal application to New South Wales.
A number of the changes represent a significant departure from the previous treatment for Payroll Tax purposes.
Expatriate employees working overseas:
1. Assignment for 6 months or less
Wages received in Victoria by an expatriate employee who is working overseas remain subject to Payroll Tax
2. Assignment for more than 6 months
Where the services are performed by an employee outside of Australia for a continuous period of greater than 6 months, any wages received in Victoria are NOT subject to Payroll Tax from the beginning of the assignment.
This represents a significant departure from the previous position in Victoria as Payroll Tax was due on the wages paid in Victoria for the
first 6 months.
The 6 month period does not need to be within the same financial year (1 July to 30 June), but must be a continuous period. A
break in continuity will not occur in the following circumstances:
- The employee returns on holiday; or
-The employee returns to perform work exclusively related to the overseas assignment for a period of less than one month; and
- In either case the employee immediately returns to the overseas location to perform further work on the assignment
3. Assignment performed offshore, but not in another country
Wages received in Victoria remain fully taxable, irrespective of the duration of the assignment.
Expatriate employees working within Victoria or paid in Victoria
Wages paid to an expatriate employee working in Victoria are subject to Payroll Tax in Victoria in any calendar month where the
expatriate employee works wholly or partly in Victoria.
Wages that are paid in another State or Territory are subject to Payroll Tax in Victoria in any calendar month where the expatriate
employee works mainly in Victoria.
Wages paid outside of Australia are subject to Payroll Tax in Victoria in any calendar month where the expatriate employee works mainly
in Victoria.
The following clarifications have also been provided:
1. Bonuses paid overseas relating to employer/group performance
-As a general rule, the value of bonuses paid overseas are subject to Payroll Tax in Victoria to the extent to which they relate to period in which the expatriate worked in Victoria, regardless of when the bonus is paid.
-If the bonus is paid for a period in which the expatriate employee worked wholly in Victoria, the whole of the bonus is subject to tax.
-A bonus paid overseas for a financial year in which the expatriate employee worked at least partly in Victoria will be subject to Payroll Tax in Victoria only if the expatriate employee worked in Australia for more than one half of that financial year (I July to 30 June).
-The amount of bonus subject to payroll Tax in this instance is calculated on a pro rata basis using the number of calendar months in which the expatriate worked mainly in Victoria
-The bonus would not be subject to Payroll Tax if the employee worked in Australia for less than 6 months.
2. Fringe benefits
-Fringe benefits provided to expatriate employees are subject to Payroll Tax based on the taxable value of the fringe benefit provided grossed up using the Type 2 gross up factor (currently 1.8692).
Please note that where the fringe benefit is exempt from FBT, no Payroll Tax liability will arise.
3. Employer contribution to superannuation funds
-The definition of wages includes employer contributions to superannuation funds, whether those funds are located in Australia or overseas.
Questions
Please contact Michael van Schaik, Associate
Director, Employment & Remuneration Services.
Phone: +61 (0) 3 8635 1835
Email: mvanschaik@moorestephens.com.au
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