What has the TPB said to you about what you do and how you do it?
Providing Payroll Services
Information Sheet 31/2017
Circumstances where a payroll service provider does not need to register as a tax agent or BAS agent
- A payroll service provider does not need to register as a tax agent or BAS agent if:
- the services provided are considered to be ‘in-house services’. This includes arrangements where there may be a cost recovery and/ or shared services arrangement in place for the provision of the services by entities regarded as in-house service providers
- the services are not provided for a fee or other reward
- the services provided do not meet the definition of tax agent service (which includes BAS service). Such services include, for example:
- data entry, providing the data entry does not require the interpretation or application of a taxation law
- coding of transactions based on instructions provided
- processing of payments
- preparing bank reconciliations
- determining State/Territory obligations or entitlements (including payroll tax and WorkCover).
Circumstances where a payroll service provider must register as a tax agent or BAS agent
- The following are examples of services that may be provided by a payroll service provider, which the TPB considers would most likely be covered by the definition of a tax agent service (including a BAS service) and therefore would require the payroll service provider to be registered.
Example 1 – A client outsources their entire payroll and accounts work to a payroll service provider. In the provision of this service, the payroll service provider interprets and applies a taxation law, which includes a BAS provision, and/or represents the client in their dealings with the Commissioner and it would be reasonable to expect that their client will rely on those services.
Example 2 – A payroll service provider offers a help desk which provides customised advice to assist their client to meet a specific tax outcome. For advice to constitute a tax agent service, the advice would need to relate to the client’s particular circumstances and would require the interpretation of taxation laws. It must also be reasonable for the client to rely on the advice. If these conditions are met, such advice will be a tax agent service.
Example 3 – A payroll service provider undertakes a payroll compliance review for their client to ensure compliance with taxation obligations. For the payroll compliance review to constitute a tax agent service, it would need to involve the payroll service provider providing an assessment and/or opinion as to whether their client is compliant with their taxation obligations under one or more taxation laws.
Example 4 – A payroll service provider offers tax related advice to their client that is specific to the client’s circumstances. For the advice to constitute a tax agent service, it would need to relate to the client’s particular circumstances and would require the interpretation of taxation laws. It must also be reasonable to expect the client to rely on the advice. The advice may be verbal or written. Examples of tax related advice typically provided by payroll service providers that would require registration include advice regarding:
- PAYG withholding liability
- Superannuation Guarantee obligations
- fringe benefits tax laws
- termination and redundancy payments.
Example 5 – A payroll service provider prepares and/or lodges documents with the ATO on behalf of their client. The preparation and/or lodgement of documents with the ATO on behalf of a client is a tax agent service and will require the payroll service provider to be registered.
Example 6 – A payroll service provider deals with the Commissioner on behalf of their client. For this type of activity to constitute a tax agent service, it must involve the payroll service provider dealing with the Commissioner on behalf of a client in respect of a taxation law.
If an unregistered payroll service provider provides a tax agent service or BAS service for a fee or other reward, they may contravene a civil penalty provision in the TASA. In this case, the TPB may apply to the Federal Court for an order requiring the payroll service provider to pay a civil penalty, or may seek an injunction to restrain the payroll service provider from engaging in the unregistered conduct.
Updated: 27th April, 2018