Businesses constitute a group where any one (or more) of the following criteria are met:
- corporations are related bodies corporate within the meaning of section 50 of the Corporations Act 2001 (Cth)
- common employees are used between businesses
- the same person has (or the same persons together have), a controlling interest in at least two businesses
- an entity has a direct, indirect or aggregate controlling interest in a corporation or
- smaller groups are subsumed into one larger group.
Effect of grouping
Show moreWhen businesses are grouped, the taxable wages of all the businesses in a group are combined to determine whether a member is required to register for payroll tax.
Only one member of the group, the designated group employer (DGE), is entitled to claim the deductable amount throughout the financial year.
- The members of a group can nominate one member to be the DGE.
- If a group doesn't nominate a DGE, we may nominate a DGE on behalf of the group. In most cases, this is the member with the highest proportion of WA wages.
- If a business is the only member of its group that employs in WA, the business is automatically nominated as the DGE of the group in WA.
Although each member of the group must register for payroll tax and lodge a separate return, the businesses which constitute the group are treated as one entity and the calculation of their payroll tax liability is based on the group’s aggregate wages. All members of the group become jointly and severally liable for the debts of the group. This means that if one member defaults in the payment of tax, that amount may be recovered from any of the other group members.
Grouping exclusions
Show moreIf you're grouped for payroll tax purposes, the wages of all your group members are combined to determine:
- if you must register for payroll tax
- whether you're liable for payroll tax
- the deductable amount claimed by the Designated Group Employer.
If you're a registered employer in WA and part of a group, you may be eligible for an exclusion from grouping in relation to:
- employees used in another business
- commonly controlled business
- tracing of interests in a corporation
- small groups are subsumed into one group.
We can't exclude a corporation from a group if it is related to another corporation which is a member of the group.
Professional practices may be grouped if two or more businesses use the services of a single administrative service.
To apply for an exclusion from grouping, submit form FPRT2 ‘Application: Exclusion from Grouping’ and supporting documentation
See Commissioner’s Practice PTA 031 ‘Payroll Tax – Commissioner's Discretion to Exclude from a Group’ for information about the tests that must be satisfied and the matters taken into account by the Commissioner.
Grouping provisions
Show moreRelated bodies corporate
Corporations constitute a group for payroll tax purposes if they are related to each other within the meaning of section 50 of the Corporations Act. This is commonly described as a holding/subsidiary relationship.
Where this holding/subsidiary company structure exists, the holding company and all its subsidiary companies are grouped for payroll tax purposes.
The Commissioner cannot exclude a corporation from such a group, even if the business carried on by that corporation is independent of, and not connected with, the business of other corporations in the group.
Employees used in another business
An employer will be grouped with another business if one or more of the employer’s employees
- performs duties solely or mainly for that other business or
- works for other businesses due to an agreement.
Common control
A group exists where a person has, or a set of persons have together, a controlling interest in each of two businesses. An interest of more than 50 per cent is a controlling interest because that person (or set of persons) can effectively determine how each business is carried on.
What constitutes a controlling interest depends on the type of person/entity which operates the business.
| Business type | Person(s) with control | Control established by |
|---|---|---|
| Company s. 33(1) & s. 33(2) | Director(s) Shareholder(s) | >50% voting power or >50% shareholder voting rights |
| Body Corporate or unincorporated body s. 33(2A) | Board of Management | >50% Board of Management |
| Partnership s. 33(3) | Partner(s) | >50% capital or profits |
| Trust s. 33(4) | Beneficiaries | >50% beneficial interest Under a discretionary trust, all beneficiaries are deemed to have a controlling interest. |
| Individual s. 33(5) | One person | Sole owner |
Tracing of interests in corporations
Under the tracing provisions an entity and a corporation will be grouped if the entity has a controlling interest in the corporation.
A controlling interest will exist if the entity has:
- a direct interest in the corporation
- an indirect interest in the corporation
- an aggregate interest in the corporation.
In each case, the value of the interest must be greater than 50 per cent.
Entity means a person, or two or more persons who are associated persons and may include direct family members, partners in a partnership, private companies that have common majority interest shareholders and trustees where there are common beneficiaries. For a complete definition of the terms entity, associated persons and related person, see section 35A of the PTA Act.
Direct interests
A direct interest exists if the entity can directly or indirectly:
- exercise the voting power attached to the voting shares in the corporation
- control the exercise of voting power attached to the voting shares in the corporation or
- substantially influence the exercise of the voting power attached to the voting shares in the corporation.
Indirect interests
An indirect interest in a corporation exists where an entity has a direct interest in a corporation (i.e. the directly-controlled corporation) that is linked to another corporation.
The value of the indirect interest is calculated by multiplying the value of the entity’s direct interest in the directly-controlled corporation with the value of that corporation’s direct interest in the next corporation in the chain, and so on as necessary.
Aggregate interests
An aggregate interest is the sum of an entity’s direct and indirect interests in a corporation and occurs when an entity has:
- a direct and indirect interest in a corporation or
- more than one indirect interest in a corporation.
The value of the aggregate interest is the sum of the value of the entity’s direct interest in the corporation and the value of each indirect interest.
Subsuming
Smaller groups will be subsumed into one large group in the following circumstances:
- when a business is a member of two or more groups, the members of all of the groups together are considered to be one large group
- when two or more members of a group together have a controlling interest in a business, the business and all the members of the group form one large group.
Declaring group changes
Show moreIf you are the Account Administrator of your Revenue Online (ROL) account, you can request grouping changes by using the Maintain Clients function in the left-hand menu. Select ‘Modify Client Registration’ then either ‘Join/Create Group’, ‘Leave a Group’, or ‘Interchange Designated Group Employer (DGE)’ and follow the prompts.
If you are a contact person for the account and don’t have access to the Maintain Clients function in ROL, ask your ROL Account Administrator to request the change or contact us with details of the grouping changes and the effective date. Please include any relevant Client IDs, entity names and ABNs in your request.
We will notify you once your request has been completed.
