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State & Territory Taxes

The team at Meyer Vandenberg has extensive experience in dealing with State and Territory taxes like payroll tax, land tax and stamp duty.

There are many transactions and situations that give rise to the imposition of a State or Territory tax, from buying land to having employees in your business. Just like the Federal Commissioner of Taxation, State and Territory Revenue Commissioners are increasingly focussed on the level of compliance with local taxing laws and collecting the maximum amount of revenue for local governments to deliver services.

Also like the Federal Commissioner of Taxation, State and Territory Revenue Commissioners have broad powers to access taxpayer records, can impose steep penalties for incorrect amounts of tax paid, and routinely engage in litigation with taxpayers about assessments of tax and penalty payable.

Our experienced lawyers can guide you through the complexities of local tax law to explain when and how a transaction will attract local tax, and help you deal with any investigation by or litigation against a local Revenue Office about the amount of tax properly payable.

What we do

Take the time to properly understand the facts, evidence and surrounding circumstances of your situation to analyse whether a local tax is payable and its effect.
Consider your legal position based on the current state of relevant law and determine the best strategy to protect your interests, including whether an alternate structure or situation may exist.
Deliver advice in plain-English about your legal position, options for the next steps and our recommendations tailored to your situation and based on our expertise.
Liaise and negotiate on your behalf with compliance officers from the local Revenue Office investigating your affairs.
Prepare payroll tax degrouping applications.
Prepare objections to notices of assessment of tax and penalties.
Prepare and run litigation for you challenging an objection decision about a notice of assessment.
Prepare and help you execute documents recording and giving effect to settlement reached with the local Revenue Office or court orders.

The mv difference

Experts in State and Territory taxes, working with property developers, accountants and multi-level corporate groups.
A commitment to protecting your interests having regard to both legal and non-legal interests.
A focus on practical and plain-English advice, with commercial recommendations to resolve issues.
A commitment to collaboration with your representatives and other advisers to determine and implement the best strategy to protect your interests and ensure your tax obligations are met.
True passion for this area of law.
Strong connections with Australia’s leading tax barristers.
Frank and fearless advice to you about the strength of your legal position, and the likely outcome of any dispute.
Full and frank disclosure of all legal costs to ensure a properly informed decision about the next steps is made, and there are no unhappy legal costs surprises along the way.

Faqs

What is payroll tax and when does it apply?

Payroll tax is a self-assessed State and Territory tax on wages that employers pay employees. The tax is calculated based on the amount of wages you pay employees Australia-wide per month.

For employers in the ACT, payroll tax is only payable if your total taxable wages, or the total taxable wages of the group of employers you belong to, exceed the payroll tax threshold. As of July 2016, the monthly payroll tax threshold in the ACT is $166,666.66, or $2 million per year.

The payroll tax rate and threshold in the other States and the Northern Territory differ.

What are taxable wages?

Payroll tax is applied to payments that are ‘taxable wages’. Taxable wages refer to any payment that an employer provides to an employee in return for services. For payroll tax in the ACT, this includes:

remuneration, wages, salary, commission, bonuses, allowances or other benefits
superannuation contributions
payments to contractors
director’s fees
payments to employees (before or after retirement or termination) that relate to their employment term, such as accrued leave and any other bonuses or loading
eligible termination payments
the value of any payments made in kind (where no money is involved but goods or services are exchanged for other goods or services);
payments to employment agencies
benefits, including fringe benefits
wages paid to sick or injured employees, and
employer contributions to employee share schemes.

What is a payroll tax group?

A ‘group’ for the purposes of assessing an employer’s liability to pay payroll tax in the ACT is two or more employers that:

Are related bodies corporate
Use a common set of employees
The same people have a controlling interest in two or more businesses, and “business” is defined to include the carrying on of a trust including a dormant trust, or
One employer has a controlling interest in another (being a corporation).

If an employer is a member of two or more groups, all the members of those groups constitute one group.

The grouping provisions in payroll tax legislation – particularly as relate to common control – are complex and far-reaching. In our experience, many business owners are caught out by these provisions where the business has a discretionary trust in its structure.

Furthermore, the grouping provisions are absolute in that employers either are or are not grouped. It is irrelevant whether the employers actually run their business together or run them separately. In situations where grouped business actually run separately to each other, an application to the relevant Revenue Commissioner must be made asking the Commissioner to exercise his discretion to degroup the businesses.

What is land tax and when does it apply?

Land tax rules vary between each State and Territory. The land tax rules in the ACT vary wildly from the land tax rules in NSW, for example.

In the ACT, land tax is paid by the owner on all rateable land that is rented residential land, or residential land owned by a corporation or a trustee. Land tax is not payable on commercial land in the ACT.

However some land, such as rural land, is exempt from land tax in certain circumstances.

An owner of rateable land that is subject to land tax in the ACT must advise the ACT Revenue Office if the property is rented.

How is land tax assessed?

Land tax is assessed on land which is owned/rented, on the first day of each quarter.

There is no threshold amount in the ACT. Land tax is calculated on the unimproved value of the land.

What is stamp duty and when does it apply?

Stamp duty is generally payable on the transfer of, or declaration of a trust over, dutiable property. Dutiable property includes all forms of land and land use entitlements, and may include some types of goods in certain circumstances.

Importantly, stamp duty can be triggered when an interest in a partnership, company or trust that owns dutiable property, is transferred. Furthermore, from 1 July 2018, land tax was extended to apply to all residential dwellings that are not the owner’s principal place of residence, whether they are rented or not.

How is stamp duty assessed?

Different rates of stamp duty apply to commercial and residential property.

Stamp duty is assessed on the greater of consideration (price) or market value of the duitable property.

What is barrier free stamp duty?

In September 2017 the ACT Government introduced the barrier free model for the payment of stamp duty. This means that for most property transactions, stamp duty becomes payable 14 days after settlement, when the transfer of title is lodged with the ACT Land Titles Office for registration.

Do you have to pay a disputed tax debt?

Yes, all tax debts assessed by a local Revenue Commissioner are payable, even disputed debts.

Where tax is paid and the dispute is resolved in your favour (in whole or in part), the Revenue Commissioner will generally pay interest on the overpayment.

Debt recovery action may be commenced against you at any time for an unpaid tax debt unless there is an approved payment plan in place between you and the local Revenue Office.

What happens if you do not pay a disputed tax debt on time?

The local Revenue Commissioner (via the local Revenue Office ATO) may initiate recovery action for collection of unpaid disputed debts at any time, even before determining an objection, based on an analysis of the risk associated with the case, including your past conduct.

Some of the ways in which the local Revenue Commissioner can recover an unpaid tax debt include:

using an external debt collection agency to deal with you
issuing a garnishee notice
placing a caveat or statutory charge on property
forcibly repossessing land for sale
issuing a creditors statutory demand under the Corporations Act 2001 (Cth)
issuing a court claim, including against the directors of a defaulting company
seeking winding up orders by a court against a company, and
issuing a bankruptcy notice and seeking a sequestration order by a court against individual directors.