Payroll Tax Grouping: When Are Related Businesses Treated as One?
Many business owners assume that each company within their corporate structure is assessed separately for payroll tax.
However, under Australia's payroll tax legislation, this is not always the case.
If two or more entities are considered a payroll tax group, they may be treated as a single employer for payroll tax purposes. This can significantly affect the payroll tax threshold available to the businesses and, ultimately, increase their payroll tax liability.
Understanding how the grouping rules work is essential for businesses operating multiple entities, family businesses, joint ventures, or companies that share management and administrative resources.
What Is Payroll Tax Grouping?
Payroll tax grouping is designed to prevent businesses from splitting their operations across multiple entities simply to access multiple payroll tax thresholds.
Where businesses are sufficiently connected, state revenue authorities may treat them as one group when assessing payroll tax.
While the exact rules vary slightly between states and territories, grouping commonly arises where businesses share:
Common ownership or controlling interests
Common directors or decision-makers
Employees working across multiple entities
Shared payroll, HR or accounting functions
Interdependent business operations or financial arrangements
Once grouped, the businesses generally share a single payroll tax threshold rather than each receiving their own.
Does Sharing Services Automatically Mean Businesses Are Grouped?
Not necessarily.
Many growing businesses centralise functions such as finance, payroll, HR, IT or marketing to improve efficiency and reduce administrative costs.
While these arrangements may be one factor considered by revenue authorities, they do not automatically mean that businesses should be grouped.
The overall relationship between the entities, including the level of ownership, control and operational independence, is what ultimately matters.
Each case depends on its own facts.
Can Businesses Be Excluded From a Payroll Tax Group?
Yes.
Even where the legislation may technically establish a payroll tax group, businesses may be able to apply for an exclusion if they can demonstrate that their operations are conducted independently.
Factors that may support an exclusion include:
Independent business management
Separate commercial decision-making
Independent day-to-day operations
Limited operational control by related entities
The assessment focuses on the practical reality of how the business operates rather than simply its legal structure.
Case study
A recent decision by the NSW Civil and Administrative Tribunal illustrates this principle.
In the case involving Winya Indigenous Office Furniture Pty Ltd, the business shared directors, received accounting, HR, payroll and IT services from related entities, and had ongoing commercial dealings within the broader corporate group.
Despite these connections, the Tribunal found that the company continued to operate independently and determined that it should be excluded from the relevant payroll tax group.
The decision reinforces an important point: shared ownership or shared services alone are not enough to determine whether businesses should be grouped for payroll tax purposes.
Key Takeaway
Payroll tax grouping is one of the more complex areas of Australia's state tax system and is often overlooked until a review or audit occurs.
Businesses operating through multiple entities should regularly review their ownership structure, governance arrangements and operational relationships to understand whether the grouping rules may apply—or whether an exclusion could be available.
Obtaining professional advice early can help businesses manage compliance obligations while ensuring they are not paying more payroll tax than required under the law.
