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An employment agent is an agent who obtains the services of an individual worker for a client if:
An employment agency contract exists where an employment agent pays a worker to provide services to a client in return for a fee. The worker can provide these services individually or through a corporation or trust.
The employment agent is liable for payroll tax on wages they pay the worker directly or indirectly as:
Non-taxable amounts under these contracts include:
See Public Ruling PTA029—Recruitment agencies/placement agencies/job placement agencies for more information.
The Crown is a company for payroll tax purposes. As such, a government department or other government body can be a client of an employment agent.
Any remuneration paid or payable by an employment agent for a worker’s services obtained for a government department or other government body must be included in the agent’s taxable wages.
From 1 July 2008, if the client of the employment agent is exempt from payroll tax, the wages that an employment agent pays to any workers they provide to that exempt organisation are also exempt.
The client must be exempt under Part 2, Division 2 of the Payroll Tax Act 1971 for this exemption to apply. Certain charitable institutions and local governments may be exempt under this division. If the client is not exempt under this division, the wages will be taxable.
Example
Client Ltd runs a hospital, which is an exempt institution. Client Ltd does not pay payroll tax on employees at the hospital. Healthy Ltd provides nurses for Client Ltd’s hospital. Healthy Ltd does not have to pay tax on those nurses’ wages.
We can disregard employment agency contracts if they specifically aim to avoid payroll tax.
To claim this exemption, you must:
See Public Ruling PTA026—Employment agency contracts—declaration by exempt clients for more information.
You only need 1 declaration from the exempt client per financial year, as long as the services provided by all the on-hired workers are similar.
If the workers are on-hired for more than 1 financial year, only 1 declaration is required.
You will need a separate declaration for any workers on-hired to provide different services.
Example 1
Agent XYZ on-hired 6 workers to Client D (a public hospital) for 5 consecutive financial years. All 6 workers performed accounts payable work for Client D for the whole period.
Agent XYZ is entitled to the exemption as Client D and the services provided by the 6 workers are exempt from payroll tax. To claim this exemption, Agent XYZ must obtain a declaration from Client D for the 6 workers.
Example 2
In the 2011 calendar year, Agent XYZ on-hires 3 engineers to Client D in addition to the 6 accounts payable workers. The 3 engineers were engaged to conduct maintenance work on Client D's ventilation system. The services provided by the 3 engineers are also exempt.
To claim the exemption for the 3 engineers on-hired to Client D, Agent XYZ must obtain a separate declaration from Client D for the engineers.
