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Payroll tax State taxes State & indirect taxes

NSW Legislative Council inquiry: application of the contractor and employment agency provisions in the Payroll Tax Act 2007 (NSW)

Published: 24 Mar 2025

   

Julie Abdalla speaks at the Senate Hearing

On Friday 21 March 2025, our Head of Tax & Legal, Julie Abdalla, FTI, attended the NSW Legislative Council Committee inquiry into the contractor and employment agent provisions of the Payroll Tax Act 2007 (NSW). 

We previously made a submission to the NSW Legislative Council, which was widely well-received by the Chair, the government and the opposition.

The contractor and employment agent provisions were originally intended as anti-avoidance measures directed to arrangements that are in substance employment relationships. Over time, changes in the approach to interpretation of these provisions have meant that certain arrangements that do not fall within the policy intent have been caught. This has introduced greater complexity in the system and uncertainty for taxpayers. 

Our submission was intended as a starting point for further discussion and consultation, and we consider it essential to ensure an ongoing dialogue between the NSW Treasury, Revenue NSW, and the tax profession on these matters. 

The matters that our submission covered include: 

  • The challenges that have arisen over time due to changes in the approach to interpretation of the provisions
  • The evolution of modern work arrangements
  • Practical difficulties faced by taxpayers in navigating the rules and exemptions
  • The far-reaching impacts of the measures, not only for employers but for the broader community and economy
  • Recommendations for addressing these issues, including through legislative amendments and updated administrative guidance
  • The need for public consultation on such changes

We're proud to have been invited to appear to give evidence at a hearing for the inquiry to ensure our members' voices are heard. 

Opening statement by Julie Abdalla, FTI, Head of Tax & Legal at The Tax Institute

On behalf of The Tax Institute, I thank the Committee for inviting me to give evidence in this hearing. The Tax Institute is an independent notfor-profit education organisation, with a diverse membership base of tax professionals including lawyers and accountants, from sole practitioners to large firms, academics, and revenue officers across Australia. Our role is to educate our members, government, and the broader community on the tax system, and to advocate for its improvement for the benefit of all Australians.

Payroll tax is a significant source of revenue for New South Wales, accounting for approximately 30% of its total revenue, so it’s important to get the settings right.

The contractor and employment agent provisions were originally intended as anti-avoidance measures, to bring to tax amounts paid in respect of in substance employment relationships that are masked as contractor arrangements.

The evolution of modern work models, including the on-demand and gig economy have introduced new engagements that blur the lines between traditional employment and contracting. These practices have brought about new challenges in the application of these rules.

Likewise, changes over time in the interpretation of the law by the regulator, adopting a more literal approach, have brought into scope longstanding arrangements that were never intended to be caught by the policy.

The volume of litigation around these provisions in recent years, and much of the courts’ comments, clearly indicate the harshness and deficiencies of the current law. While amnesties and certain initiatives in NSW and other states have been beneficial for some businesses, they do not cover all affected arrangements, nor do they go to the heart of the issues that can only truly be resolved through legislative amendment. 

These provisions directly impact the viability of Australian businesses, and they have broader public policy implications. They affect workers, consumers, and patients, in both our metropolitan and rural communities, onto whom these costs are ultimately passed, or who may lose access to fundamental services altogether.

We need a sustainable, fair system that can accommodate an evolving economic landscape. The contractor and employment agent provisions need to be appropriately targeted, so they do not capture bona fide independent contractor arrangements.

Any amendments need to be designed with the principles of good tax policy in mind, and with an aim of providing much-needed certainty for taxpayers.

Importantly, the input of stakeholders with expertise should be considered through consultation starting as early in the process as possible. Early stakeholder involvement facilitates the integration of expert knowledge, and ensures that diverse perspectives are taken into account.

This approach can foster a better understanding of real-life issues and potential challenges, and help to identify practical solutions, while aligning with the community's needs and expectations.

I would be pleased to answer any questions to assist the Committee.

Thank you.

 

More advocacy news

Interested in how The Tax Institute advocates for members and the wider community?

You can browse our latest submissions here. Members who are interested in advocacy efforts can also apply to get involved with writing submissions or representing their fellow members in driving the direction of The Tax Institute’s stance on key issues.