Grouping Provision & WorkCover (Payroll Tax) Review

How Grouping Affects Your WorkCover Premium

Who forms part of a Group?

When an employer has two or more connected enterprises operating under numerous different incorporated legal organisations, this is referred to as grouping. The Authority may examine whether all of these connected firms need to be grouped and whether they operate in the same or distinct workplaces. Under the Workers Compensation Act in each state, grouping permits the Authority to consider two or more enterprises as if they were one for the purposes of premium calculation and workplace industry categorisation. The members of a group where the total wages paid to workers employed by the members of the group exceed $750,000 per year must be grouped.

Payroll Tax under the Workers’ Compensation Microscope

A payroll tax is a tax levied by states and territories on wages paid to employees by their employers. The tax is computed based on the monthly wages you pay to employees across Australia. In certain states, combining your employees has no bearing on your workers’ compensation premium. It is mostly grouped for the purpose of identifying connected companies that are part of the group for the simplicity of handling this linked WorkCover insurance. If you have “connected” businesses and the group’s annual wages surpass the specified threshold for Payroll Tax reporting to the States Revenue Office, you must register for Payroll Tax and be grouped under the Workers’ Compensation grouping rule. Payroll tax legislation varies by state and territory, with different rates and levels.

Full Guide – Remuneration Matrix

Do Grouping Provisions apply to Employers Australia-wide?

Grouping regulations apply to all employers, regardless of where they operate. Employers can be grouped even if they employ people in various states. The companies would be grouped, and the combined group’s total Australia-wide wages (for both employers) would be used to determine deduction eligibility in each state. Each legislative state uses a different calculation to determine the Payroll Tax level.

Payroll tax rates from 1 July 2023 to 30 June 2024

State	Annual Taxable Wage Threshold	Rate
VIC	4.75% wages pay < $6.5 million    4.95% of wages pay > $6.5 million   Regional employers may be entitled to a 1% discount on the rate until 30 June 2023	4.85% Regional Victoria – 1.2125%
NSW	$1,200,000	4.85%
QLD	$1,300,000	4.75% wages pay < $6.5 million    4.95% wages pay > $6.5 million   Regional employers may be entitled to a 1% discount on the rate until 30 June 2023
SA	$1,500,000	4.95%
TAS	$1,250,001	4.00% wages between $1,250,001 < $2.0 million 6.10% wages > $2.0 million
NT	$1,500,000	5.50%
WA	$1,000,000	6.50%
ACT	$2,000,000	6.85%

If 2 or more businesses operate under one ABN, are they Grouped for Payroll Tax purposes?

When two or more businesses share the same Australian Business Number (ABN), they are treated as one employer for payroll tax purposes. The employer is referred to as a Non-Grouped employer for payroll tax purposes. When completing payroll tax returns and yearly reconciliation, the entire taxable wages paid for each business operating under the same ABN must be aggregated and reported by the Non-Grouped Employer (NGE). NGE employers are not gathered under the Workers’ Compensation microscope since there should only be one Workers’ Compensation policy with many organisations or workplaces registered under the same policy.

Under the Workers’ Compensation Grouping Provision, would the Authority consider Grouping Employers who are under the Group Payroll Tax threshold?

Yes, payroll tax and workers’ compensation are two different types of liabilities. Payroll tax provisions exist to prevent the avoidance or reduce payroll tax payments by distributing wages across many organisations. The grouping provisions tally up all of the wages paid by group employers and only allow the designated group employer to claim the deduction. The Payroll Tax Provision is used by the WorkCover Authority to group employers. The WorkCover Authority considers grouping for calculating premiums, collecting debts, classifying workplace industries, and implementing a WorkCover avoidance scheme. Payroll Tax works closely with each legislative WorkCover Authority to ensure that all group businesses complete their obligations.

Businesses Considered Related

• Shared ownership
• Corporations related under section 50 of the Corporations Act 2001
• Businesses that are commonly controlled – e.g., common directors, shareholders
• Commonly controlled businesses – For workers’ compensation purposes, a controlling interest in a business is defined as:
  • If an entity has a direct, indirect, or aggregate interest of greater than 50% in a corporation with share capital, the entity and the corporation are regarded as a primary group.
  • if the same person(s), corporation, partners, or trustees have ownership or have a “controlling interest” in a business greater than 50%; or if a person/set of persons is a beneficiary under a trust

A group will exist where a person has a ‘controlling interest’ in two or more businesses. The question of what constitutes a “controlling interest” varies in each state and according to the type of entity that operates the business. You can find more information by visiting each legislative state.

• Businesses that have common use or shared employees
  • inter-use of workers –
    • a worker performs duties for a business run by their employer and another entity
    • a worker of the employer is employed to perform duties for a business run by another entity
    • an employer has a formal or informal agreement for a worker to perform work for a business run by the other entity.

Grouping for Industry Classification

For premium calculation purposes, members of a group that share a workplace or have workplaces that are contiguous (have a common border; touch) may be classed as one workplace. Talk to myWorkCover Solutions if you’re not sure if you’re in compliance with WorkCover Authority or if you have any issues. We’re here to assist you.

Grouping Exemption

In some cases, the Authority has the authority to exclude a company from a group. The Authority will consider the following factors when deciding whether or not to exclude a company from a group:

• trade between the businesses
• sharing of resources between businesses
• common management between the businesses
• common financial arrangements between the businesses
• common customers between the businesses
• the extent of the connection between the businesses
• any other relevant matters
• The following employers are exempt from grouping provisions:
  • an employer who is insured by a specialised insurer (Self-Insured employers, Comcare)
  • an employer who is insured where the policy of insurance relates only to private household domestic workers.
  • members of a group where the total group wages payable to workers do not exceed the prescribed threshold of $750,000
  • self-insurers
  • government departments

Joint Ventures

It is quite likely that a group will form between the joint venture company and the joint venturers based on either the “inter-use of workers” grouping or the “common controlling” business grouping in the case of joint ventures. The joint venturers will not be grouped if they are not related under any of the grouping circumstances, except when they come together as joint venturers.

Joint ventures are treated in the same manner as the Office of State Revenue requirements for grouping for Payroll Tax purposes.

• where there is an individual employer included in the joint venture that has majority ownership of more than 50 per cent, the joint venture will be grouped.

• where no individual employer included in the joint venture has majority ownership of more than 50 per cent, the joint venture will not be grouped.

Professional Practice

Where a number of professional practices (for example, doctors, accountants) share the services of a common administrative services group, the Authority generally exercise the discretion not to group.

Grouping Provision in Victoria

Victoria’s grouping provision is more complex than in any other state. When compared to other states, grouping in Victoria can have a far bigger impact on an employer’s premium. WorkSafe Victoria will group two or more corporations when one is related to another under the grouping principle section 50 of the Corporations Act 2001 and Workplace Injury Rehabilitation and Compensation Act 2013

Premiums Order

WorkCover Insurance Premiums Order made under section 448 of the Workplace Injury Rehabilitation and Compensation Act 2013. Premiums Order (No. 29) applies to WorkCover insurance premiums for the year 2021/2022.

WorkSafe Definition below are some terminology WorkSafe uses under the grouping provision

• contiguous workplace – in relation to two or more areas of land, means areas of land that are within the same building or are separated only by a road or railway or other similar areas across or around which movement is reasonably possible

• constituent workplace – has the meaning given by clause 20(1)

• grouped workplace – has the meaning given by clause 20(1)

Grouping Provisions under the Premiums Order

• Part 3 – Clause 17 – Application of Grouping Provisions
  • (1) The grouping provisions in Part 10 of the Act shall not apply for any of the purposes of this
  • Order, other than clauses 19, 20 and 24(8)(e), unless the Authority makes a determination under subclause (2).
  • (2) The Authority itself may determine that an employer, which is a member of a group
• Part 4 – Clause 19 – Workplace
• Part 4 – Clause 20 – Workplaces of Group Employers
  • When the Authority May Treat Group Workplaces as a Single Workplace
    • (1) If two or more persons (the relevant persons) are:
      • (a) members of a *group; and
      • (b) carrying out their respective operations at two or more group workplaces (the constituent workplaces) which are *contiguous with each other or occupy (in whole or in part) the same area of land; and
      • (c) the Authority is satisfied with one or more of the matters set out in subclause (3), then the Authority may determine that some or all of the constituent workplaces are to be treated as a single workplace (the grouped workplace) for the purpose of determining the*predominant activity of each constituent workplace including (for the purpose of removing any doubt) for the purpose of determining the predominant activity under clause 27.

• Part 4 – Clause 21 – Treating One Workplace as Two or More Separate Workplaces
• Part 4 – Clause 22 – Homogenous Workplaces
• Part 4 – Clause 24 (8) – When a Relationship of Control is Taken to Exist

In Summary

WorkSafe may treat group workplaces as a single workplace if WorkSafe is satisfied that the operations carried on at the constituent workplaces are:

1. Not carried on independently of each other; and/or
2. Connected with each other; and/or
3. Carried on with an intention either directly or indirectly of minimising the amount of premium payable by one or other of the relevant persons under this Order.

If the predominant activity carried on in the area:

• is wholly or mainly dependent on; or
• occurs wholly or mainly as a consequence of; or
• is wholly or mainly ancillary to
• the predominant activity carried on at one or more of the other contiguous areas.

The predominant activity carried on in the contiguous area comes within one or more of the following categories of services:

• clerical services
• management services
• administrative services
• sales and marketing services
• buying services
• warehousing services associated with manufacturing, wholesaling or retailing
• that activity is carried on wholly or mainly in connection with the operations carried on in one or more of the other contiguous areas.

Premium Impacting Group Employers

If WorkSafe decides that your businesses are to be grouped, the following will have an effect on the premium:

• the predominant activity and the applicable industry rate for each constituent workplace will be the same. Normally, WorkSafe will select the highest applicable rate, the classification considered the predominant activity for the group and apply it to all workplaces.

• when all constituent workplaces are grouped, it is considered one business and one policy and therefore all constituent workplaces will have the same claim costs applied.

WorkSafe may determine one workplace to be two or more separate workplaces if:

• at a workplace of an employer that comprises two or more areas of land that are contiguous (the contiguous areas), the predominant activity carried on at each of those areas is different, WorkSafe may determine that each of those areas is a separate workplace.

If your businesses have been grouped and would like myWorkCover Solutions to review the Grouping Provision, please contact us for a free “health check”.

Grouping Provision in NSW – icare Workers Insurance (icare NSW)

icare Workers Insurance is the nominal insurer in NSW and is Governed by State Insurance Regulatory Authority (SIRA).

All members of a group will have their policies under the icare Grouping Provision; however, all policies must have the same renewal date. All members of the group must be assigned to the same employer size category for experience rating purposes.

Grouped Policies

• the employer’s size category is assessed at the group level, and this impacts how the premiums are calculated. 

• all members of the group will have the same renewal date and premiums for each group member will be calculated at the same time. 

Grouping for payroll tax purposes

For payroll tax purposes, businesses have the potential to be grouped with other businesses if there exists a connection or link between them. This grouping arrangement is irrespective of the geographical locations where these businesses operate. The concept of grouping carries significant implications when it comes to calculating threshold entitlements. When a group is formed, the gross wages of all its members are aggregated, and a singular threshold deduction is applied to the entire group. The threshold entitlement is then determined by the proportion of NSW wages in relation to the overall Australian wages within the group. An important aspect of grouping is that each member of the group bears responsibility for any unpaid payroll tax of other group members. In situations where a business is a part of more than one group, all businesses within each group are assimilated into a unified payroll tax group.

Rates and thresholds

Wages are only paid for part of the year

If you commence or conclude employment in the region of New South Wales (NSW) during a fiscal year, you shall not be entitled to the full threshold. Instead, a proportional share of the threshold awaits you, equating to the number of days you were employed divided by the total number of days in the fiscal year. To illustrate, consider an employer who only disbursed wages from 1st July to 31st December within a financial year and terminated employment on 31st December. Since they were employed for merely 184 days in the fiscal year, they would receive only 50 per cent (184 / 365 or 366) of the annual threshold

Unveiling the Intricacies of Cross-State Wage Taxation

When a business extends its operations to other states or territories within Australia and pays taxable wages therein, the threshold calculation takes on a nuanced aspect. This computation involves determining the proportion of NSW wages concerning the total Australian wages. For instance, if 80 per cent of the total wages are disbursed in NSW, the corresponding threshold would amount to 80 per cent as well.

Furthermore, if an employer remunerates its workforce for only a fraction of the financial year while also paying taxable wages in another state or territory, a further reduction in the threshold occurs. To illustrate, let’s consider a scenario where the employer provides wages solely from 1st July to 31st December. In this case, they would receive only 50 per cent of the yearly threshold. However, this amount would be subject to additional reduction if 80 per cent of their total wages originate from NSW. Consequently, the employer’s threshold would be diminished to a mere 40 per cent (50 per cent X 80 per cent) of the annual threshold.

The Dynamics of Group Inclusion for Businesses and Their Impact on Threshold Calculation

When a business becomes part of a group comprising multiple enterprises, a singular threshold becomes applicable to the entire consortium. Moreover, it becomes imperative for the business to incorporate the taxable wages of all its fellow group members in their financial returns. For those grouped employers seeking to claim a threshold, the calculation revolves around the proportionate relationship between the aggregate NSW wages of the entire group and the cumulative Australian wages of the group as a whole.

To elucidate further, let’s consider an example where one employer exclusively pays taxable wages in NSW, while another employer in the same group solely disburses taxable wages in Victoria. In such a scenario, both employers must declare their wages in their returns to facilitate the computation of the total group Australian wages. If, for instance, 80 per cent of the total wages within the group are attributed to NSW, the employer who is claiming the group’s threshold shall only be entitled to 80 per cent of the said threshold.

Grouping Related Corporations

The concept of related corporations entails the grouping of all corporations that fulfil the criteria specified in section 50 of the Corporations Act 2001. These criteria include:

1. Being a holding company and a subsidiary of one another.
2. Being subsidiaries of the same holding company.

All related corporations that pay Australian wages are grouped together, regardless of whether they have an overseas holding company. It is essential to note that trustee or nominee companies do not fall under the purview of this provision and cannot be grouped. Furthermore, corporations grouped under this provision are not eligible to seek an exclusion from the group as per section 79 of the Payroll Tax Act 2007.

Grouping Common Employees

When it comes to payroll tax purposes, businesses have the potential to be grouped based on common employees’ circumstances. Grouping can occur under the following conditions:

1. If one or more employees of a business perform duties that are associated with another business conducted by the same employer and another individual, including joint ventures.
2. If an employee is hired exclusively or primarily to perform duties related to one or more businesses operated by another individual.
3. If an employee performs duties as part of an employer’s obligation to provide services to another individual under a mutual arrangement or agreement.

In such scenarios, the employer and the other person (or persons) involved come together to form a group for payroll tax purposes.

Grouping Common Control

For the purpose of payroll tax grouping, businesses come together if an individual or a group of persons collectively hold a controlling interest in two or more businesses. The term ‘person’ encompasses natural individuals, sets of persons, trustees, or corporations.

The definition of ‘controlling interest’ varies depending on the type of business:

1. Sole owner: When a person is the sole owner of a business, whether as a trustee or not, they automatically possess a controlling interest in that business.
2. Joint owners: In the case of joint owners who collectively hold sole ownership of a business, including trustees, they are deemed to have a controlling interest in that business.
3. Company: A controlling interest is established if any individual or set of persons is entitled to exercise more than 50 per cent of the voting power at director meetings, or if they hold more than 50 per cent of the voting rights attached to the company’s issued voting shares.
4. Body corporate or unincorporated entity: For these entities, a controlling interest is confirmed if any individual or set of persons controls more than 50 per cent of the board of management.
5. Partnership: In a partnership, a controlling interest exists if any individual or set of persons own more than 50 per cent of the partnership capital or are entitled to more than 50 per cent of the partnership profits.
6. Trust: When dealing with a trust that operates a business, a controlling interest is present if any beneficiary holds entitlement to more than 50 per cent of the value of the interests in the trust. It is important to note that in the case of a discretionary trust, every beneficiary is considered to have a controlling interest in the trust.

Subsuming

A larger group can be formed out of multiple smaller groups when a business is a member of two or more groups at the same time, or the members of a group share a controlling interest in another business.

Tracing of interest

If an entity has a direct, indirect or aggregate interest of more than 50 per cent in any corporation, that corporation is grouped with that entity.

Experience-rated group employer

Employers with a based premium greater than $30K are considered experience-rated employers and their premium will be impacted by claim costs. However, the claims of individual group members do not impact the premium of other group members.

Claiming the threshold

Only one member of a payroll tax group can claim the threshold. The threshold can be claimed either as the Designated Group Employer or the single lodger.

Calculating the group liability

From 1 July 2023 the payroll tax rate and threshold are 5.45% and $1,200,000.

Lodging as a DGE or single lodger does not affect the total group liability\.

Premium Impacting Group Employers

Each group member will be allocated to the same employer size category. It is the group’s total APP that will determine the employer size category for each employer within the group.  

The size category is:

• by adding the Average Performance Premium (APP) of all employers in the group

Below are eight Employer Categories by APP ranges

icare Grouping Benefits

Once a group’s employer size has been determined and allocated to each policy, the premium formula is the same as for any other experience-rated policy. Any group members have low claims costs, and their claims performance rate is better than the scheme performance rate, using the group’s employer size category in the premium calculation is likely to produce a lower premium than if the employer’s policy was not grouped.  In this way, grouping can be beneficial to employers, however, any group members who have demonstrated poor performance will likely be impacted.

Grouping Exclusion

icare NSW may grant an exclusion if the following are satisfied that the businesses are conducted independently and are not connected with any other group members. When making their decision, icare will consider:

• commonly controlled businesses
• use of employees
• nature and degree of ownership
• nature and degree of control
• nature of businesses
• conducting business together
• sharing of resources or customers
• financial relationships/dependencies.

For more information regarding exclusions, refer to Revenue Ruling PTA 031.

Note: If businesses are grouped because they are related corporations under the Corporations Act 2001, they cannot apply for an exclusion from the group. If an exempt employer is a related entity, they are required under the Workers Compensation Act 1987 to maintain a policy and be grouped.

Grouping Provision in South Australia

South Australian employers (or a member of a group of employers) need to be grouped and registered for Payroll Tax with Revenues SA. In South Australia, the total Australia-wide wages are also used to determine the rate of payroll tax that applies. Payroll tax in South Australia is administered under the following legislation:

• Payroll Tax Act 2009
• Taxation Administration Act 1996

What does it mean under SA WorkCover Grouping Provision?

The Grouping Provision under the Workers Rehabilitation and Compensation (Employer Payments) Amendment Act 2011 states that:

• each employer in the group will be liable to pay premiums in accordance with a WorkCover premium order under this Division (rather than on the basis of aggregate base premiums)

• the Corporation may apply any claims experience, rating or other principles to all members of the group on a combined basis (rather than on an individual basis) in accordance with the provisions of a WorkCover premium order

• the Corporation may aggregate the employers in such manner (in any way or for such other purposes) as the Corporation thinks fit under a WorkCover premium order (including by treating 1 employer within the group as if the employer were the employer of all workers employed by the members of the group or by rating them together or according to a common factor).

• Despite being grouped, each employer will be taken to be subject to the relevant WorkCover premium provisions in its own right (but with premiums being aggregated or divided according to principles specified in a WorkCover premium order).

• The employers in a group are jointly and severally liable for the payment of premiums attributable to the group.

In conclusion, SA WorkCover Grouping Provision does not affect your premium, each group member pays their own respective liable premium.

Grouping Provision in Queensland

WorkCover Queensland is government-owned but self-funded. All Queensland employers must hold a WorkCover Accident Insurance policy unless they qualify as a self-insurer.

Queensland’s workers’ compensation legal framework includes:

• the Workers’ Compensation and Rehabilitation Act 2003
• the Workers’ Compensation and Rehabilitation Regulation 2014

The Act and the Regulation together form Queensland’s workers’ compensation scheme. They also establish legislation governing workers’ compensation and rehabilitation, as well as insurance, compensation, rehabilitation, damages, and expense management. WorkCover Grouping Provision in Queensland has no effect on premiums for individual members of the group. The objective of grouping an employer is to identify related businesses for ease of policy management. WorkCover would determine each group member’s primary activity and classify each member’s business activity using the WorkCover Industry Classification (WIC). However, if group members are serving their own members (or distinct service business), they have not been deemed a group under the Act.

Under the Act, Schedule 1 – Definition:

separate service entity is defined as a business entity whose predominant business activity is the provision of any support, service or performance function for a principal business entity.

The provision under Gazette Notice, Workers’ Compensation and Rehabilitation Act 2003 (Qld) – WorkCover Queensland Notice (No. 1) of 2021 – Section 23 of the Act does explain if a separate service entity is set up to provide services to the principal business (parent company), WorkCover may determine that the separate service entity is part of one business. WorkCover will allocate the separate service entity the WIC allocated to the principal business entity that attracts the higher or highest WorkCover industry premium rate.

Under Gazette Notice, Workers’ Compensation and Rehabilitation Act 2003 (Qld) – WorkCover Queensland Notice (No. 1) of 2021:

Section 23 of the Act: Separate service entities

23.1 If an employer is a separate service entity, WorkCover will allocate to the employer’s policy the same WIC allocated to the principal business entity of the separate service entity.

23.2 Subject to Section 23.3, where WorkCover has allocated to the principal business entity more than one WIC (whether or not those WICs have been allocated under the same policy), the WIC WorkCover will allocate to the separate service entity is the WIC allocated to the principal business entity that attracts the higher or highest WorkCover industry premium rate in Schedule 3 Column 3 of the WIC table.

23.3 Where an employer can satisfy WorkCover of the proportions of its wages which were paid, or estimated to be paid, for work attributable to each WIC allocated to the principal business entity, WorkCover will allocate to the policy of the separate service entity each WIC allocated to the policy of the principal business entity.

23.4 Where the principal business entity is not obliged under the Act to hold a policy with WorkCover, the WIC to be allocated to the separate service entity’s policy is the WIC that WorkCover considers would apply to the principal business entity in Queensland, applying the principles in Section 21, if the principal business entity did have a policy.

23.5 Where an entity is concurrently both a separate service entity and a principal business entity, WorkCover will allocate to the entity the WIC that attracts the higher or highest WorkCover industry premium rate in Schedule 3 Column 3 of the WIC table.

Grouping Provision in the Underwritten States

NT | WA | ACT | TAS

These states are Underwritten states and is underwritten by private insurers. The grouping has no effect on the premium.

Free “Health Check”

myWorkCover Solutions can undertake a free review of your businesses that have been grouped and you believe the Authority’s decision was erroneous. For a free, no-obligation health check, please contact us.

Author: Yon Ta, updated 27 July 2023.

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Disclaimer:

The information in this post is strictly for informational and educational purposes only and should not be construed as legal advice. It is not intended to express specific opinions about specific cases. Before acting on any of the issues discussed in this post, seek additional advice. The information provided should not be relied on for any purpose other than to assist you to understand how Workers’ Compensation insurance works. It is for illustrative purposes only and My WorkCover Solutions Pty Ltd does not accept liability for any loss or damage suffered by any person resulting in any way from the use of or reliance on, the information provided. The information in this article is believed to be correct as of the date of publication. However, changes in the applicable laws may have an impact on the accuracy of the material. This article contains general information that is not tailored to any specific person’s situation. This publication may contain information that relates to the regulation of Workers’ Compensation insurance in your State or Territory. To ensure you comply with your legal obligations, we would recommend you refer to the appropriate legislation as currently in force in the State or Territory you conduct your business. You can find up-to-date legislation by visiting each state’s WorkCover Authority website, alternatively, contact myWorkCover for updated information.