From 1 July 2016, the wages paid or payable to an out-of-trade apprentice or trainee are exempt if they satisfy the exemption requirements.
The mere act of hiring of an out-of-trade apprentice or trainee does not mean that the relevant employer automatically qualifies for the exemption.
You do not need to apply for this exemption. If you are certain that the exemption requirements are satisfied and the wages paid to the re-employed apprentice or trainee are exempt wages, you do not have to include them in your taxable wages on payroll tax returns.
We also have information on the exemption from payroll tax available to a group training organisation (GTO) that employs apprentices and trainees and hires them to other businesses, called host employers, while they are undertaking their training.
Exemption requirements
The exemption requirements are all of the following:
- The apprentice or trainee who is employed by an employer (current employer) under a training contract in accordance with the requirements of an approved training scheme must have been previously employed by another employer (previous employer) as an apprentice or trainee in the same apprenticeship or traineeship.
- The apprentice or trainee must have commenced employment with the current employer under a training contract on or after 1 July 2016.
- The employment of the apprentice or trainee with the previous employer ceased before they completed their apprenticeship or traineeship.
- The current employer must not be a member of a payroll tax group with the previous employer.
What is a training contract for exemption purposes?
It is a training contract complying with the requirements of a training scheme approved by the Victorian Registrations and Qualifications Authority.
What is an approved training scheme?
Approved training schemes establish specific industry training package qualifications available as apprenticeships and traineeships in Victoria. They outline, among other things:
- The nominal duration of the apprenticeship or traineeship.
- Any requirements for a probationary period.
- The nature and content of the training scheme.
- The standards of skill and knowledge required to adequately perform the activities or tasks of the vocation being obtained.
Find out more about approved training schemes.
Will this exemption apply to an apprentice or trainee that is re-employed under a different type of apprenticeship or traineeship?
No. The apprentice or trainee must be re-employed under the same type of training contract.
Will this exemption apply if the apprentice or trainee ends the employment with the previous employer?
Yes. The exemption applies as long as the apprentice or trainee is re-employed under the same type of apprenticeship or traineeship they undertook with their previous employer.
What documents do I need to keep?
As an employer, you should keep records relating to the employment of an eligible re-employed apprentice or trainee under an approved training contract. These records may include:
- The name of the re-employed apprentice or trainee.
- Commencement dates of the apprentice or trainee with the current and previous employers.
- Expected completion date of the apprenticeship or traineeship.
- Evidence of the approved training contract of the apprentice or trainee with their previous employer and name of previous employer.
- Evidence of the approved training contract of the apprentice or trainee with the current employer.
- Amount of wages paid to the apprentice or trainee.
Examples
Example 1
Jack started a carpentry apprenticeship with Company A under an approved training contract. Company A terminated Jack’s employment on 2 June 2020. Jack found employment with a separate company, Company B, under the same type of training contract on 7 July 2020. Company A and Company B are not grouped for payroll tax purposes.
Company B is eligible for a payroll tax exemption for wages paid to Jack for as long as he is still an apprentice under the approved training contract.
Example 2
Lucy started as an electrical apprentice with Company A under an approved training contract. Company A terminated her employment on 8 February 2020. A month later, Lucy found employment with a separate company, Company B, under the same type of training contract. She worked with Company B for 2 months before her employment was terminated. A month later, she was employed by another separate company, Company C.
Company B is eligible for a payroll tax exemption for wages paid to Lucy for the 2 months she was employed. Company C is also eligible for a payroll tax exemption for wages paid to Lucy, for as long as she is still an apprentice under an approved training contract.
Note: These companies are not grouped for payroll tax purposes.
Example 3
Matt began his plumbing apprenticeship with Company A (which is not an approved Group Training Organisation) under an approved training contract on 1 July 2019 but his employment was terminated on 30 September 2019. Matt then found employment with Company B (a separate company and not a member of a payroll tax group with Company A), under the same type of training contract and worked with Company B for 2 months before his employment was terminated. On 1 March 2020, Company A re-hired Matt under the same type of training contract that he originally had with them.
Company B is eligible for a payroll tax exemption for wages paid to Matt for the 2 months while he was employed. Company A is also eligible for an exemption for the wages paid to Matt from 1 March 2020. They will not be eligible for an exemption for the wages paid from 1 July 2019 to 30 September 2019.
Example 4
Company A and Company C are grouped for payroll tax purposes.
Chloe began her aviation apprenticeship with Company A under an approved training contract on 1 July 2019. After working for 4 months, Company A terminated Chloe’s employment. A month later, she was employed by a separate company, Company B, under a similar training contract. Chloe worked with Company B for 2 months before her employment was terminated. Company B is not grouped with Company A and Company C.
Chloe was then re-employed by Company C, continuing her apprenticeship. Both Company B and Company C are eligible for the exemption for wages paid to Chloe, for employing her after her employment with Company A was terminated. Although Company C is grouped with Company A for payroll tax purposes, when Company C hired Chloe, Company B was her previous employer and was not a member of a payroll tax group with Company C.
