Payroll Tax Harmonisation

1
Pay-roll Tax Harmonisation

• Whats happened so far and lessons learnt
• Presented by
• Office of State Revenue, Queensland,
• Nov 2008

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What is Pay-roll Tax Harmonisation?

• Pay-roll tax harmonisation (PRTH) involved
  changes to Queensland's pay-roll tax legislation
  to harmonise key aspects of Queenslands pay-roll
  tax system with those of other jurisdictions with
  effect from 1 July 2008. The changes implemented
  measures which are currently in place in New
  South Wales and Victoria, who harmonised their
  pay-roll tax systems on 1 July 2007.
• Altogether, there were approximately 16 changes
  affecting taxpayers.

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Todays session

• What we did
• Project planning
• Products
• Statistics
• What clients did
• Government
• Employers
• What we learnt
• Challenges for PRTH Project team
• The future Compliance

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Project planning

• The PRTH project was planned using the Prince2
  methodology.
• Prince2 is now the preferred method of project
  management for most of the Qld government.
• A project planning day was held with all key
  stakeholders from the office for their input into
  the project.
• The project planning day was facilitated by a
  Prince2 practitioner.

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Prince2 methodology

• Prince2 methodology (PRINCE2 - PRojects IN
  Controlled Environments) is a process-based
  method for effective project management.
• The key features of Prince2 are its
• focus on business justification
• defined organisation structure for the project
  management team
• product-based planning approach
• emphasis on dividing the project into manageable
  and controllable stages
• flexibility to be applied at a level appropriate
  to the project.

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Product based planning

• Product based planning is a key component to the
  planning of a project with Prince2. Products are
  assigned quality criteria and are assigned to
  positions - e.g. Project manager, business area
  manager.
• Products are what needs to be completed for a
  project to be successful.
• For example In order for a cup of tea to be
  made, the water has to be boiled. Water boiling
  would be considered a product under the Prince2
  methodology.
• For PRTH, products were identified and assigned
  on the project planning day by all the internal
  stakeholders. Some of these products will be
  discussed today.

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What we did
December 2007
Government Agency target group phone call,
letter, presentation Email alert E-RQ newsletter
Project planning
14th Announcement by Treasurer Website update
January 2008
Presentations Flyers Website update E-RQ
newsletter Liaise with MBA
March
Presentations to peak industry bodies
February
Website update Flyers E-RQ newsletter
May
Peak body presentations MBA, TAPS, NIA,
CPA PRTH go-live Compliance begins
April
Website revamp Flyers E-RQ newsletter Revenue
Rulings adopted
July August
June
Presentations to clients Flyers
September 2008
Develop e-learning tool Continuing client
engagement De-grouping
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Product liaising with other jurisdictions

• Full day liaison meetings with NSW in December
  2007 and Vic in January 2008.
• NSW Vic met with their various branches
• education both client and internal staff
• client services
• policy
• technical advice.
• As the goal was harmonisation with NSW and Vic
  materials already created by these jurisdictions
  were adapted and used in Qld.

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Product liaising with other jurisdictions

• On the NSW Vic liaison days, each of the
  jurisdictions were able to share with Qld their
  experiences. In particular, these jurisdictions
  were able to discuss
• their problem areas with clients
• what was successful for them
• how they came to agreements between the states.
• The flow on effect of these discussions with NSW
  Vic was our ability to implement strategies to
  address potential problems and emulate the
  successes of the other states. This resulted in a
  greater level of efficiency for Qld and
  harmonisation amongst the states.

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Product keeping the Treasurer briefed

• As the legislation was revenue neutral, it
  received a lot of attention during the debate in
  parliament.
• Questions were put to the Treasurer during
  question time which needed to be answered
  immediately.
• The implementation time for the project was
  considered by some to be quite short.
• The Treasurer had to have confidence that
  businesses/clients were aware of the upcoming
  changes and would be adequately informed in time
  for the implementation of the new legislation
  needed faith in the project team.

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Product liaising with key industry bodies

• Phone contact made by the Director with
  identified key industry bodies.
• Held meetings with representatives from key
  industry bodies outlined the changes that were
  coming up.
• Discussed what the industry bodies could/would do
  and how they thought it best to interact with
  their members our clients.
• Industry bodies agreed to send out information
  through their own communication channels.

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Product engaging the clients

• The approach taken was a saturation of the
  client base no client would be able to say they
  werent informed of the changes.
• Clients received more than 1 notification,
  through various channels, of the changes over a
  period of 4 months in the lead up to the change.

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Communication channels

• Clients receive information through various
  networks, channels identified for our clients
  were
• seminars
• paper mail
• website
• electronic channels
• Email alerts
• Electronic Newsletters
• industry bodies
• client visits.

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Seminars

• OSR hosted seminars for businesses over 1000
  attendees registered
• Held at Brisbane, Gold Coast, Sunshine Coast,
  Toowoomba, Bundaberg, Rockhampton, Mackay,
  Townsville and Cairns.
• OSR hosted seminars for government departments
  over 100 attendees registered.
• OSR co-hosted seminars for Master Builders
  Association over 500 attendees.

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Seminars

• OSR presented for TAPS, NIA, CPA guest
  presenters at evening forums and major
  conferences over 25 different events reaching
  at least 400 registered attendees.
• OSR attended as guests for TIA at 2 major
  training conference days.
• Feedback was sought from attendees at the OSR
  hosted seminars. Attendees were asked to rate
  and comment on the organisation of the seminar,
  the relevance of the information provided and the
  effectiveness of delivery.
• Feedback was provided through an evaluation form.
  90 of feedback received rated the seminars as
  excellent or good.

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Paper mail and the website

• Paper mail
• Flyers were mailed out on a monthly basis. Each
  flyer contained information on the changes. Over
  15,000 flyers each month from February to June
  were mailed.
• Website
• Created new content and design which would
  reflect the upcoming style of the website.

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Electronic channels

• OSR has an email subscription service which
  contains around 4000 registered users for
  pay-roll tax. As information is received, an
  email is sent to registered users providing this
  information efficiently and effectively.
• You can choose to sign up for just pay-roll tax
  information or for all areas administered by OSR.
• You can sign up for OSRs e-alerts at the
  following address
• http//www.osr.qld.gov.au/clients/email_service.sh
  tml
• OSR produces a monthly electronic newsletter
  called E-Revenue Queensland. This newsletter is
  used to highlight exciting events in the Office
  and provides information about the various
  streams administered by OSR.

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What clients did government

• Some government departments implemented new
  accounting codes to capture the information they
  needed to meet their obligations.
• These departments then held internal training
  sessions for managers who signed off on the
  invoices in question. OSR attended these sessions
  as guests and to provide any further
  clarification for the managers.
• Other government departments identified whether
  the changes would have an impact, and if so, the
  extent of this impact on their every day
  business.

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Meeting government department requirements

• Understanding the specific issues relating to the
  implementation of the harmonisation changes for
  government departments biggest challenge was
  Shared Service Agency and the size of the
  government departments.
• Attended internal training session.
• Provided separate specific seminars for
  government departments.
• All government departments were phoned by a
  project team member to make them aware of the
  impending changes.

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What we learnt

• Further liaising was required with our Compliance
  division perhaps a permanent contact who was
  part of the project team representing
  Compliances view at all times.
• Separating the businesses and government
  departments was important, as we were able to
  specialise in our discussions with each group.
  Unique view of government departments versus
  businesses was catered for.
• The website should have received a high priority
  at the beginning of the project. The result of
  this could have been reduced workflows as the
  project proceeded, as clients would have had a
  one stop shop for their needs.

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What we learnt

• The co-ordination of the training for internal
  and external clients could have been aligned.
• Earlier identification of groups of industries
  most likely to be affected by the changes to a
  greater degree than other industries.
• For example building industry affected,
  therefore work closely with Master Builders
  Association and Housing Industry Association.

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Challenges

• Education giving out relevant and appropriate
  amount of information for clients to be informed
  when internal knowledge, processes and procedures
  were still being decided upon.
• Preparedness ensuring all clients were ready for
  the change, as it was a very quick change-over
  time period from announcement to implementation.

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Challenges

• Geography the vastness of the Queensland state
  made reaching clients on a personal level
  difficult. Seminars were held in all major
  centres, however, there were still a number of
  clients who were not able to be reached through
  this effective method.
• Disparity of client base Some organisations are
  quite large and operate in more than 1 state. The
  changes implemented were welcome and easy for
  them to integrate into their systems. Other
  smaller business operate only in Queensland and
  faced new challenges with harmonisation being
  implemented.

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Did we meet the challenge?

• Yes! On the whole, reports and responses show
  that clients were fully aware of and informed on
  the changes that were implemented on 1 July 2008.

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The future where to from here?

• Relationships with the clients and especially
  with industry bodies were firmly established
  for future changes these contacts will provide a
  useful starting point for disseminating
  information.
• Establishing relationships with industry bodies
  provides an external stakeholder for OSR to
  consult with on changes or proposed changes to
  legislation.
• Client Engagement continues creation of the
  E-learning tool, launching soon.
• Compliance.

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The future compliance

• Background.
• Methodology.
• What is happening currently.
• What will happen moving forward .

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OSRs approach to compliance

• The OSR aims to deliver and administer simple,
  efficient and equitable revenue management
  services.
• One of OSRs key priorities is to position OSR as
  a leading e-business agency, with excellent
  client support and firm and fair enforcement.
• OSR will treat clients fairly and respectfully,
  and provide information and education services
  targeted to client needs.
• The OSR Client Charter recognises the need to
  conduct compliance and enforcement activities in
  cases where clients do not comply.

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The compliance model

• The compliance model is based on the premise that
  revenue authorities are able to influence client
  behaviour through their interventions and
  responses.
• The model seeks to address the cause rather than
  the symptoms of non-compliance.
• The model encompasses education, support
  investigation and enforcement as integrated
  approaches to client management.
• The models core principle is to make compliance
  easy for those clients who want to comply, while
  using the full force of the law, where
  appropriate, for those clients who have decided
  not to comply.

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High

Have decided not to comply
Use full force of the law
Don't want to comply
Deter by detection
Help to comply
Try to, but don't always succeed
Level of compliance costs
Willing to do the right thing
Make it easy
Low
Create pressure down
Compliance strategy
Attitude to compliance
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Make it easy to comply/assist to comply

• For those clients who are willing to do the right
  thing, OSR aims to make compliance as easy as
  possible.
• Achieved by providing clients and their advisors
  with the information they need, through its
  website, direct contact with clients and the
  Client Contact Centre.
• Education activities are primarily carried out by
  the Client Engagement Team.

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Verification, investigation and enforcement
activities

• The focus of the Investigations Program 2008-09
  is on the verification, investigation and
  enforcement activities carried out by the
  Investigations Division.
• These activities will generally include
• developing risk profiles for groups of clients,
  or particular types of transactions. OSRs
  Revenue Risk Register profiles high, medium and
  low risks to OSRs revenue base
• data matching, identifying inconsistencies,
  unreported transactions and other risks through
  checking OSR and third party data
• auditing clients, and investigating transactions
  where risk is identified.

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Compliance activity in relation to PRTH

• The nature of the contact with the client will
  depend upon the nature of the risk. Contact will
  typically commence with desk audits (letters and
  phone calls seeking further information and/or
  explanation), and extend to audits and field
  investigations, where required.
• Pay-roll tax is payable on wages paid or payable
  by an employer.
• The imposition of pay-roll tax is therefore
  generally dependent on establishing the existence
  of a master/servant relationship (also called an
  employer/employee relationship).

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Compliance activity in relation to PRTH

• The Pay-roll Tax (Harmonisation) Amendment Act
  2008 amended the PRT Act in relation to workers
  who do not fall within the definition of
  employees. From 1 July 2008 pay-roll tax will
  also apply to payments in relation to relevant
  contracts.
• OSR will adopt an educational audit focus for the
  first half of the financial year to assist
  employers with the relevant contractor
  provisions of the PRT Act.

34
Compliance activity in relation to PRTH

• For the period 1 July 2008 to 31 December 2008,
  where the employer can demonstrate to the
  Commissioner in writing that they had difficulty
  in complying with the relevant contractor
  provisions and satisfy the Commissioner of the
  reasons for that difficulty, the Commissioner
  will fully remit penalties and UTI (see Practice
  Direction Pay-roll Tax - 9.1).
• From 1 January 2009, the usual penalty and UTI
  provisions will be applied to relevant contractor
  arrangements in the manner outlined in Revenue
  Ruling - TA1.2 Remission of Unpaid Tax Interest
  (UTI) and Revenue Ruling - TA2.2 Penalty Tax.

35
Amnesty offered

• An amnesty has been offered to employers on
  pay-roll tax and penalties for payments
  incorrectly treated as payments to independent
  contractors (contractor payments) made prior to 1
  July 2008 that were not included as taxable wages
  in pay-roll tax returns.
• The aim of the amnesty is to encourage liable
  parties to voluntarily declare contractor
  payments made between 1 July 2005 and 30 June
  2008, where the relationship is properly regarded
  as an employer/employee relationship.
• The amnesty will run from the 12 October 2008 to
  31 March 2009.

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The amnesty

• Voluntary disclosures made to OSR on the
  applicable form within the amnesty period will
  receive
• concession of reviewing the previous 3 years
  instead of the usual 5 years
• all penalties waived
• 50 unpaid tax interest remitted
• offer of educational audits.
• After amnesty
• from 1 April 2009, the Commissioners usual
  practice of raising assessments for the current
  financial year and the past five financial years
  will apply. In addition, penalties will be
  applied to contractor payments that have been
  omitted from pay-roll tax declarations.

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Ongoing compliance

• Educational audits and normal audit processes
  will educate clients on the new relevant
  contractor provisions.
• Continue to work closely with relevant industry
  bodies to educate their members on the new
  provisions and the implications for contractors
  who are incorporated.