Exposure draft  Information sheet


TPB(I) D22/2014

Payroll service providers

This exposure draft is also available as a PDF – TPB(I) D22/2014 Payroll service providers (PDF, 216KB)

The Tax Practitioners Board (TPB) has released this draft information sheet as an Exposure draft and invites comments and submissions in relation to the information contained in it within 45 days. The closing date for submissions is 25 August 2014. The TPB will then consider any submissions before settling its position, undertaking any further consultation required and finalising the information sheet.

Written submissions should be made by the closing date to the Secretary of the TPB via email at tpbsubmissions@tpb.gov.au or by mail to:

Tax Practitioners Board
PO Box 126
HURSTVILLE BC NSW 1481


Disclaimer

This document is in draft form, and when finalised, will be intended as information only. While it seeks to provide practical assistance and explanation, it does not exhaust, prescribe or limit the scope of the TPB's powers in the Tax Agent Services Act 2009 (TASA). The principles and examples in this paper do not constitute legal advice. They are also only at a preliminary stage. The TPB's conclusions and views may change as a result of comments received or as other circumstances change.


Document history

This draft information sheet was issued on 11 July 2014 and is based on the TASA, the Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 and the Tax Agent Services Regulations 2009 as at 1 May 2014.


Introduction

  1. This draft information sheet (TPB(I)) has been prepared by the Tax Practitioners Board (TPB) to assist payroll service providers to understand the operation of the tax agent services regime.

  2. In this TPB(I), you will find the following information:
    • background about the tax agent services regime (paragraphs 3 to 16)
    • examples of circumstances where a payroll service provider does not need to register as a tax agent or BAS agent (paragraph 17)
    • examples of circumstances where a payroll service provider may need to register as a tax agent or BAS agent (paragraphs 18 to 20)
    • options available to payroll service providers (paragraphs 21 to 22).

Background

  1. The TPB administers a system for the registration of tax agents and BAS agents under the Tax Agent Services Act 2009 (TASA). Being subject to the TASA means that individuals and entities providing certain services for a fee or other reward are required to register as tax or BAS agents with the TPB. 

  2. An individual, partnership or company must be registered as a tax agent or BAS agent to provide a ‘tax agent service’ or ‘BAS service’ for a fee or other reward (see paragraphs 7 to 15 for information on the meaning of ‘tax agent service’ and ‘BAS service’).

  3. It is important to note that the fee does not necessarily have to be separately charged to the client. It can form part of a package of services offered by the payroll service provider to the client.

  4. There are no separate or specific legislative provisions relating to whether payroll service providers need to be registered under the TASA.

Tax agent service

  1. A 'tax agent service’ is any service that relates to:
    • ascertaining liabilities, obligations or entitlements of an entity that arise, or could arise, under a taxation law
    • advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a taxation law
    • representing an entity in their dealings with the Commissioner of Taxation (Commissioner); and
    that is provided in circumstances where the entity can reasonably be expected to rely on the service to satisfy liabilities or obligations, or to claim entitlements, that arise or could arise under a taxation law.

  2. A tax agent service includes, but is not limited to:
    • preparing or lodging a return, notice, statement, application or other document about a taxpayer's liabilities, obligations or entitlements under a taxation law
    • giving a taxpayer advice about a taxation law that the taxpayer can reasonably be expected to rely upon to satisfy their taxation obligations
    • dealing with the Commissioner on behalf of a taxpayer.

  3. A taxation law includes BAS provisions and as such the definition of tax agent service includes BAS services.

  4. Any decision about whether advice constitutes a tax agent service or BAS service requires consideration of all the facts and circumstances to determine if the client can reasonably be expected to rely on that advice.

  5. Sometimes parties to a transaction might attempt to negate or to deny that certain results will occur or that a state of affairs exist, or simply state that it will not exist. An example could be whether the provider of the service will accept any liability for a transaction. Another could be that the party receiving the service should not rely on it. These are called disclaimers.

  6. While the TPB will consider a disclaimer in determining if a person could reasonably be expected to rely on a service, the mere existence of a disclaimer alone will not be determinative of whether any reliance was placed on the service and was reasonable. Evidence of other in-house practices and procedures that limit the service may also be relevant, as may other evidence of the circumstances.

BAS service

  1. A ‘BAS service’ is a ‘tax agent service’ that relates to:
    • ascertaining liabilities, obligations or entitlements of an entity that arise, or could arise, under a BAS provision
    • advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a BAS provision
    • representing an entity in their dealings with the Commissioner in relation to a BAS provision; and
    is provided in circumstances where the entity can reasonably be expected to rely on the service to satisfy liabilities or obligations, or to claim entitlements, that arise or could arise under a BAS provision.

  2. A BAS service also includes any service which the TPB, by legislative instrument, specifies to be a BAS service.[1]

  3. A BAS service therefore includes, but is not limited to:
    • preparing or lodging an approved form about a taxpayer's liabilities, obligations or entitlements under a BAS provision
    • giving a taxpayer advice about a BAS provision that the taxpayer can reasonably be expected to rely upon to satisfy their obligations
    • dealing with the Commissioner on behalf of a taxpayer in relation to a BAS provision.

  4. Under section 995-1 of the Income Tax Assessment Act 1997, BAS provisions means:
    • Part VII of the Fringe Benefits Tax Assessment Act 1986 (the collection and recovery of tax provisions)
    • Indirect tax laws, including goods and services tax (GST) law, wine equalisation tax (WET) law, luxury car tax (LCT) law and fuel tax law
    • Parts 2-5 and 2-10 in Schedule 1 to the Taxation Administration Act 1953 (the pay as you go (PAYG) withholding and instalments systems).

Circumstances where a payroll service provider does not need to register as a tax agent or BAS agent

  1. A payroll service provider does not need to register as a tax agent or BAS agent if:
    • The services are provided to an organisation where the persons delivering the service would generally be considered to be in house employees. 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 services). Such services include, for example:
      • data entry
      • coding of transactions based on instructions provided
      • processing of payments
      • preparing bank reconciliations
      • determining obligations or entitlements in relation to State or Territory payroll taxes.

Circumstances where a payroll service provider may need to register as a tax agent or BAS agent

  1. The following are examples of services that may be provided by a payroll service provider, which the TPB considers would be covered by the definition of BAS service and may require the payroll service provider to be registered as a BAS agent or tax agent.
    • Services which include advice and/or calculation of liabilities, obligations or entitlements under the pay as you go (PAYG) withholding and instalments system, under Parts 2-5 and 2-10 in Schedule 1 to the Taxation Administration Act 1953.
    • Services which include dealing with the Commissioner on behalf of a taxpayer – for example, lodging statements, forms or other documents in respect of a BAS provision to the Australian Taxation Office (ATO) on behalf of a taxpayer.

  2. The following are examples of services that may be provided by a payroll service provider, which the TPB considers would be covered by the definition of tax agent service and may require the payroll service provider to be registered as a tax agent.
    • Services which include advice and/or ascertainment of liabilities, obligations or entitlements in respect of the quotation of tax file numbers by recipients of eligible PAYG payments, under Part IVA, Division 3 of the Income Tax Assessment Act 1936.
    • Services which include advice and/or ascertainment of liabilities, obligations or entitlements in respect of the rule affecting employees and other taxpayers receiving PAYG withholding payments, under Part 2-40 of the Income Tax Assessment Act 1997.
    • Services which include advice and/or ascertainment of liabilities, obligations or entitlements in respect of the superannuation guarantee charge, under the Superannuation Guarantee (Administration) Act 1993 and the Superannuation Guarantee Charge Act 1992. [2] 
    • Services relating to the superannuation data and payment regulations and standards under Part 3B of the Superannuation Industry (Supervision) Act 1993. [3] 
    • Services which include dealing with the Commissioner on behalf of a taxpayer – for example, lodging statements, forms or other documents in respect of a taxation law to the ATO on behalf of a taxpayer.

  3. If an unregistered payroll service provider provides a tax agent service or BAS service for a fee or other reward, the provider will contravene a civil penalty provision. In this case, the TPB may apply to the Federal Court for an order requiring the provider to pay a civil penalty, or may seek an injunction to restrain the provider from engaging in the unregistered conduct.

Options available to payroll service providers

  1. If a payroll service provider is not providing a tax agent service or BAS service for a fee or other reward, they will not be required to register with the TPB.

  2. If a payroll service provider intends to provide a tax agent service or a BAS service for a fee or other reward, the following options are available:
    1. Subject to meeting the eligibility requirements, the payroll service provider could register as a tax agent or BAS agent.

      For partnership or company registration, this does not necessarily require the person providing the service, for example the employee, to be registered in their own right. The partnership or company can be registered if they have a sufficient number of registered individuals, being registered agents, to provide services to a competent standard and to carry out necessary supervisory arrangements.

      For information about how to register, see About registration.

    2. Engage a registered tax agent or BAS agent to provide tax agent services.

      This can be achieved through the use of contractors who are registered agents to undertake the work personally or to supervise non-registered individuals who are providing the tax agent service. This arrangement may not require the engagement of a registered agent on a full time basis.

      Example [4]

      Wayne is a registered tax agent. Wayne outsources payroll-related BAS services to Leigh who is not a registered agent. The nature of this arrangement is such that

      Leigh is a contractor providing payroll-related services on behalf of Wayne. While direct supervision and control by Wayne is not possible in the circumstances, to comply with his obligations under the Code of Professional Conduct (Code) in the TASA, Wayne must ensure that the payroll services provided on his behalf by Leigh are provided competently by reviewing Leigh’s work to ensure its accuracy.

      Alternatively, if Leigh is a registered BAS agent whose expertise is in payroll services, then Wayne may meet this requirement of the Code without reviewing Leigh’s work.

      For more information about contractors, refer to TPB(I) 13/2012 Contractors



[1] See subsection 90-10(1A) of the TASA.

[2] The TPB is in the process of declaring, by way of legislative instrument, this service to be a ‘BAS service’ under subsection 90-10(1A) of the TASA.

[3] The TPB is in the process of declaring, by way of legislative instrument, this service to be a ‘BAS service’ under subsection 90-10(1A) of the TASA.

[4] This example is based on example 3.34 on page 57 of the Explanatory Memorandum to the Tax Agent Services Bill 2008.