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Employment agencies

Payroll tax

What is an employment agency contract?

An employment agency contract is a contract under which an employment agency or labour hire firm obtains the services of an individual worker for a client. The worker can provide these services individually, through a corporation or a trust.

An employment agency contract is not a relevant contract under the contractor provisions. This means that none of the contractor exemptions apply.

Who is liable for payroll tax?

Under an employment agency contract, the amounts paid by the agency in connection with the work performed by the service provider are wages and the employment agency is liable. Wages are liable when paid to a service provider through a corporation.

The amounts paid to the employment agency by the end user client are not wages.


An end user client pays $12,000 to an agency and the agency pays $10,000 to David Hunt, the service provider. The liable employer is the agency and the $10,000 is a liable wage.

A business pays $1,000,000 to an agency for the services of John Green. The agency pays $800,000 to Green Pty Ltd. Green Pty Ltd then pays $700,000 to John Green. The liable wages are the $800,000 paid by the agency to Green Pty Ltd.

What payments are liable?

Any monies, benefits and superannuation contributions paid to or on behalf of the contract worker are liable wages.

What is not liable?

An employment agency contract is not liable:

Note: The Crown is a company for payroll tax purposes. As such, a government department or other government body can be a client of an employment agent.

Any monies paid by an employment agent for a worker’s services obtained for a government department or other government body must be included in the agent’s taxable wages.

For more information, view Revenue ruling PTA 028 – Workers on-hired to Government.

What if several employment agencies supply a service provider?

If two or more employment agencies are involved in providing a worker to a client, the liable employment agency is the one paid by the client. In most cases, the amounts paid by the employment agency to secure the worker from another employment agency will be liable wages.


A business seeking labour pays $120,000 to Agency A, which pays $110,000 to Agency B which pays $100,000 to the service provider.

Only Agency A is liable and the liable wages are the $110,000 paid to Agency B.

For more information, view Revenue ruling PTA 027 – Employment Agency Contracts Chain of on-hire.

Anti-avoidance provisions

If the Chief Commissioner determines that the effect of an employment agency contract is to reduce or avoid the liability of any party to the contract to payroll tax he may determine that any party to the contract is the liable employer.

Last updated: 7 July 2016