Application of regional rate

PTA-042

Preamble

1. Effective from 1 July 2017, a regional employer is eligible for a reduced payroll tax rate under Cl 2 of Sch 2 of the Payroll Tax 2007 (the Act).
2. Regional employer is defined in section 3A of the Act to mean an employer who meets the requirements set out in section 3(A)(2) and they are as follows:
   1. at least 85% of the total taxable wages that the employer pays, or are payable by the employer, to the employer's employees during a month, are paid or payable to the employer's regional employees (monthly threshold); and
   2. for a financial year, at least 85% of the total taxable wages that the employer pays, or are payable by the employer, to the employer's employees, are paid or payable to the employer's regional employees during that year (annual threshold).
3. If an employer meets the annual threshold in a financial year, there is no need for the employer to meet the monthly threshold every month in that financial year.
4. Where services are performed in more than one Australian jurisdictions in a month, the nexus provisions in sections 11, 11A, 11B and 11C of the Act provide tests to determine the jurisdiction in which payroll tax liability falls. The first test is the employee’s principal place of residence in that month. For more guidance on the application of the nexus provisions, please refer to Revenue Ruling PTA-039 Nexus provisions.
5. The regional rate provisions represent one of the minor areas in which Victorian and equivalent payroll tax legislation of the other jurisdictions are not fully harmonised. Therefore, these provisions only apply in Victoria.
6. The purpose of this Revenue Ruling is to clarify the meaning of regional employee and regional employer as defined in sections 3(1) and 3(A) of the Act respectively in the context of remote working environments. If your circumstances are not covered in this ruling, please consider applying for a private ruling in accordance with Revenue Ruling GEN-009v3 General Information on Private Rulings.

Ruling

7. There is a two-step process to determine whether an employer is entitled to the reduced payroll tax rate:
   • Step 1 – determine whether, in a given month, an employee is a regional employee
   • Step 2 - determine whether, in a given month and in a financial year, at least 85% of an employer’s total Victorian taxable wages are paid or payable to its regional employees.

Regional employee

8. Regional employee is defined in section 3(1) to mean an employee who, in a month, performs services for the employer mainly in regional Victoria. An employee includes a natural person taken to be an employee under section 34 or 39 of the Act.
9. Regional Victoria is defined in section 3(1) to have the same meaning as it has in section 18(8) of the First Home Owner Grant and Home Buyer Schemes Act 2000.
10. The word “mainly” is not defined in the Act. The Commissioner takes the approach that the definition should be construed in its ordinary meaning. This means that the definition of regional employee requires that, for more than 50% of the time in a month, the physical location of the employee when performing services for their employer, is in regional Victoria.
11. Under a remote working arrangement, for example, when an employee works from home, it is the location of the employee’s home that is relevant in determining whether the employee is a regional employee. In a situation where an employee works from home some of the time and from the employer’s premises some of the time, it is the location where the employee spends more than 50% of their time working that is relevant in determining whether the employee is a regional employee.

Regional employer

12. For the purpose of determining whether an employer is a regional employer, the 85% threshold in the definition under section 3A of the Act is a firm, minimum threshold. The employer’s registered office or principal place of business is irrelevant.

Evidentiary requirements

13. Part 8 of the Taxation Administration Act 1997 requires a person to keep all records that are necessary to enable the person's tax liability under a taxation law to be properly assessed. An employer who has claimed the reduced regional rate must properly retain all necessary evidence that supports its regional employer status.
14. Depending on the nature of the employer’s business and the employee’s role and responsibilities, the types of evidence that supports a regional employer status includes:
    1. Documents detailing the work location of employees and their responsibilities
    2. Payroll report detailing salary breakdown of each employee
    3. Complete employment contracts
    4. Documents evidencing working from home arrangements (eg. hybrid agreements
    5. Motor vehicle allowance logbooks (must be contemporaneously completed with specific details) - backdated, unspecific or imprecise information will not be accepted
    6. National Driver Work Diary
    7. GPS data of trucks etc
    8. Access card records
    9. Appointment records, calendars, Medicare claims (for Telehealth appointments)– for medical profession

Commissioner of State Revenue

Rulings do not have the force of law. Each decision made by the State Revenue Office is made on the merits of each individual case having regard to any relevant ruling. All rulings must be read subject to Revenue Ruling GEN-001.