Employment agents

An employment agent is an agent who obtains the services of an individual worker for a client if:

• the worker does not become an employee of the client or the agent
• the worker carries out functions similar to those of an employee
• remuneration is paid or payable by the agent for the worker’s services
• the agent is entitled to receive payment for the period for which the worker supplies services to the client.

Employment agents and labour hire companies

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:

• money
• fringe benefits
• superannuation contributions.

Non-taxable amounts under these contracts include:

• GST components of a payment
• fees the client company pays the agent.
  

Example—How a labour hire arrangement works

See Public Ruling PTA029—Recruitment agencies/placement agencies/job placement agencies for more information.

Government departments and other government bodies

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.

Exemption from paying payroll tax

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.

Note: 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 goverments may be exempt under this division. If the client is not exempt under this division, the wages will be taxable.

For an employment agent to claim this exemption, their client must complete a Form OSR P9—Employment agency contracts—declaration by exempt client (PDF 125 K). The employment agent must keep this declaration for 5 years. Do not send us the declaration unless we request it.

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.