Payroll tax grouping provisions prevent related businesses from splitting their wage bill across multiple entities to avoid the payroll tax threshold. Under the rules in every Australian state and territory, related companies and entities are treated as a single employer for threshold purposes. The group shares one threshold — not one per entity. This means a business owner with three companies each paying $700,000 in wages cannot avoid Victorian payroll tax (threshold: $700,000) by arguing each company is below the threshold individually.
Why Grouping Provisions Exist
Without grouping rules, a large employer could establish multiple smaller entities — each employing a fraction of the workforce — and keep each entity’s wages below the relevant state threshold. Every entity would be exempt from payroll tax despite the combined wage bill being substantial. Grouping provisions close this loophole by aggregating wages across related entities.
Who Is Grouped?
Entities are grouped when they are related under the applicable payroll tax legislation. Each state uses broadly similar (but not identical) definitions. The main grouping tests are:
1. Commonly Controlled Entities
Entities are grouped when the same person or group of persons controls each entity. “Control” is typically defined as owning more than 50% of the voting shares or having the ability to direct the operations of the entity.
Example: A husband and wife own 100% of Company A and 100% of Company B. Both companies are controlled by the same persons — they form a group.
2. Employer/Employee Relationships
An entity that provides employees to another entity under a labour hire arrangement may be grouped with the entity receiving the services.
3. Common Employees
If the same employees work for more than one entity in a group, this may trigger or confirm a grouping relationship.
4. Controlling Interest (50%+ Share Ownership)
A holding company that owns 50% or more of a subsidiary is grouped with that subsidiary. All wages paid by both entities (and any other companies in the corporate structure) are aggregated.
5. Discretionary Trusts
Where a discretionary trust controls or is controlled by a company (or where the same persons are beneficiaries and shareholders across entities), the trust and company may be grouped.
How Grouping Affects Your Threshold
Once grouped, the threshold is shared across the entire group — it is not multiplied by the number of entities.
Example (NSW, threshold $1,200,000):
| Entity | Wages |
|---|---|
| Company A (holding company) | $600,000 |
| Company B (subsidiary) | $700,000 |
| Company C (subsidiary) | $400,000 |
| Group total | $1,700,000 |
Without grouping, no individual entity exceeds $1,200,000 — no payroll tax. With grouping, the group’s total wages are $1,700,000. After deducting the shared threshold:
$$\text{Payroll tax} = ($1,700,000 - $1,200,000) \times 5.45% = $27,250$$
The group pays $27,250 in NSW payroll tax. The threshold is apportioned across the group members in proportion to each entity’s wages, and each entity pays its share.
Designated Group Employer
Where a group exists, the state revenue authority may designate one entity as the Designated Group Employer (DGE). The DGE claims the threshold for the group and is responsible for lodging and paying payroll tax on behalf of the group — or each entity in the group may lodge separately (depending on the state’s rules).
Exemptions from Grouping
Some relationships are excluded from grouping even if control exists:
- Genuine contractors: Payments to genuine independent contractors are not wages and do not trigger grouping
- Excluded entities: Charitable organisations, government bodies, and other exempt entities may be excluded from grouping
- Arm’s length commercial relationships: Where there is no control or common beneficial ownership
De-Grouping Applications
If you believe entities have been incorrectly grouped — for example, where a controlling interest exists on paper but there is genuine commercial independence — you can apply to the relevant state revenue authority for a de-grouping determination. De-grouping is granted only in limited circumstances where the grouping result is genuinely inequitable.
Contractor Provisions and Grouping
The contractor provisions in payroll tax legislation (which may include certain contractor payments as wages) operate in addition to the grouping provisions. This means a business could face payroll tax liability both on direct wages (amplified by grouping) and on contractor payments included in the wages definition.
Related Articles
- Payroll Tax Australia — State-by-State Guide
- What Is Payroll Tax and Who Pays It?
- GST and Business Tax hub
Frequently Asked Questions
I run two businesses through two separate companies. Are they automatically grouped? If you own and control both companies (even if through different ownership structures), they are likely grouped under the commonly controlled entities test. The key is who ultimately controls each entity, not the formal structure.
Can a trust and a company be grouped? Yes. If the same persons who control the company are also the beneficiaries or controllers of the trust, the entities may be grouped. The exact rules vary by state, but most states have trust-specific grouping provisions.
Does grouping apply across state borders? Yes. Wages paid by all group members across Australia are aggregated to determine whether the threshold (in any given state) is exceeded. The threshold is then apportioned to the state where wages were paid, and payroll tax is charged on the excess in that state.
This article provides general tax information. Payroll tax grouping is a complex area and the rules differ between states. For advice tailored to your business structure, speak with a registered tax agent. Find one through the Tax Practitioners Board register.