Contracts for services of a kind usually needed by the business for less than 180 days in a financial year are exempt relevant contracts.
It is the type of service required by the business that is relevant, so it doesn’t matter:
- whether a contractor or employee provides these services
- how many people provide these services at a time
- whether your business requires these services on consecutive days.
'Employee' and 'contractor' may have different meanings for payroll tax purposes from what you might expect.
Please review the meanings of employees and contractors to determine which definition applies to each employment arrangement. If the contractor has an employee/employer relationship with the principal, the contractor provisions will not apply.
This exemption in no way extends the 90-day exemption.
Example 1
A building company hires a contract landscape gardener (Landscaper A) to perform landscaping services for 100 days in a financial year. A second contract landscape gardener (Landscaper B) is hired to perform the same services concurrently (i.e. at the same time) for 95 days. No other landscaping work is required by this building company for the rest of the financial year.
As the building company only requires landscaping services for 100 days in the financial year, it is exempt under the 180-day exemption. No payroll tax is payable on payments made under both contracts with Landscaper A and Landscaper B, as they are exempt relevant contracts.
However, if Landscaper B performed the 95 days of service after Landscaper A has completed his 100 days of service, the 180-day exemption does not apply. This is because the total number of days that the building company requires landscaping services is 195 (100 days + 95 days). As a result, contracts entered into with Landscaper A and Landscaper B are relevant contracts. Payments made under these contracts are subject to payroll tax, unless one of the other exemptions under the contractor provisions applies.
Example 2
Two librarians are given a fixed fee to work in a legal firm's library. They only work on weekends and are the only librarians of the firm. The 180-day exemption will apply because the legal firm needs librarian services for less than 180 days in that financial year.
Example 3
A ski resort requires instructors for 160 days in each financial year. For the busiest times in that period, the resort hires extra contractors for 100 days. As the ski resort requires instructors for less than 180 days (ie. 160 days), the contracts are exempt.
For more information, see the following Public Rulings: