Payroll tax guide – Contractor exemptions
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  1. Payroll tax guide – Contractor exemptions
  2. Services ancillary to the supply
    of goods
  3. Services not ordinarily required
    by your business
  4. Services required for 180 days or
    less in a financial year
  5. Services provided for 90 days or
    less in a financial year
  6. Services provided by a contractor
    to the public during the financial year
  7. Services performed by 2 or
    more people
  8. Services for the conveyance of goods provided by an owner driver

7. Services performed by 2 or
more people

This exemption applies when a contractor engages two or more workers to provide the contracted services.

If the contractor operates under a partnership or is a sole trader, additional requirements are outlined in the table below:

Type of contracting entity Persons performing the work under the contract
Company Two or more
Partnership of natural persons Partner(s) and at least one other person, or two or more people none of whom is a partner
Sole trader The sole trader and at least one other person(s), or two or more people none of whom is the sole trader

The work performed by each individual worker must:

  • be directly related to the work required under the contract, and
  • constitute a significant proportion of the total amount of work required by the contract.

The exemption does not apply if the contribution of one of the individuals providing the services is an insignificant proportion of the total work performed under the contract.

See section 32(2)(c) of the Payroll Tax Act 2007 (PTA).

For more details:

Examples

Exemption applies

A company that sells window furnishings engages another business to install window shutters.

The contracted business only has 1 full-time employee to undertake the installation work, but it usually engages casual workers to assist its employee with the installations.

The contract is exempt because 2 or more workers engaged by contracted business perform the work.

Exemption does not apply

A building company engages a painting business to provide painting services.

The painting business provides the paint and equipment and employs Trish as a painter.

The painting business also employs a part-time employee to undertake various administrative tasks which are not connected to the provision of painting services, such as maintaining business records.

This exemption does not apply because the services provided by the part time employee are not services of the same kind as the services performed by Trish.