Department of Treasury and Finance logo

Department of Treasury and Finance

.
.

Revenue Ruling
Public Ruling

Ruling Number:PUB-PT-2004-3
Title:Municipal Council - Allowances Paid To Elected Members
Tax Line:Pay-roll Tax
Legislative Reference:Pay-roll Tax Act 1971
Previous Ruling:
Date of Ruling:11/08/2004
Attachments:
Preamble

Subsection 10(e) of the Pay-roll Tax Act 1971 (“the Act”) granted an exemption from payroll tax on wage type payments made by municipal corporations (“councils”). Subsection 10(e), and the exemption that it contained, was repealed as a result of the introduction of the State and Local Government Financial Reform Act 2003 (“SLGFRA”).

As a result of the introduction of the SLGFRA and the subsequent removal of subsection 10(e) from the Act, councils became liable to payroll tax from 1 July 2004 onwards on all “wages” as defined in the Act.

The State Revenue Office has received a number of queries from municipal councils regarding the status, for payroll tax purposes, of allowances paid to Councillors from 1 July 2004.

Ruling

Allowances paid to elected councillors/members are subject to payroll tax.

Section 2 of the Act, sets out the definition of wages to be used when determining a payroll tax liability. That section provides that wages are (emphasis added) –
      “…any wages, salary, commission, bonuses, fringe benefits or allowances paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to or in relation to an employee as such and, without limiting the generality of the foregoing, includes”–
      …
          “(c) any amount paid or payable by a company by way of remuneration to a director or member of the governing body of that company;”
      …
      “but does not include a reference to allowances for travelling or accommodation paid or payable at a rate in a particular case or class of cases that does not exceed such rate as is prescribed in respect of that case or class of cases.”
“Company” is defined in Section 2 of the Act as including all bodies and associations (corporate and unincorporate) and partnerships.

The Local Government Act 1993 ("the LGAct"), at Section 19, provides that “[a] council is a body corporate with perpetual succession and a common seal.” Accordingly, a council is a company for the purposes of the Act and amounts paid or payable by the Council by way or remuneration to a director or member of the governing body will fit the definition of wages as set out in the Act.

Sections 25 – 28 of the LGAct provide (variously) that:

1. A council consists of persons elected in accordance with Part 4 of LGAct;
2. A person elected to a city council is a councillor;
3. The functions of the mayors are –
      • to act as a leader of the community of the municipal area;
      • to act as chairperson of the council;
      • to act as the principal spokesperson of the council; and
      • to oversee the councillors in the performance of their functions and the exercise of their powers.
4. The functions of the councillors of a municipal area are –
      • to represent and promote the interests of the community;
      • to facilitate communication between the council and the community; and
      • to review the performance of the council.
The elected members (councillors) are therefore, in the opinion of the Commissioner of State Revenue, the governing body of the council body corporate. The council body corporate is a company (as above). It follows from the above that allowances paid to elected council members attract payroll tax pursuant to the Act.

All rulings must be read subject to Revenue Ruling PUB-GEN-2001-1.

Enquiries in relation to this Revenue Ruling should be directed to the Revenue Advice and Audit Section on telephone (03) 6233 5438 or e-mail at audithelp@treasury.tas.gov.au. Copies of this ruling may be obtained from our Web site at www.sro.tas.gov.au and follow the "Revenue Rulings" link.

Peter Coe
COMMISSIONER OF STATE REVENUE

Sections