Part 3 of 6 - Bury it all in Complexity - The Plutus Payroll Way

Who could forget Plutus Payroll, the largest corporate tax fraud in Australian history? Apparently lots of people.

Let's now look at a more complex arrangement.

You've put a few candidates forward to your client, and they have selected the successful candidate. You negotiate the contract rate with the candidate and at the same time sign the contract to supply labour to the client.

So you would operate like the diagram below, where you employ the casual labour hire employee, who represents your company at the client site and you invoice directly to the client and get paid by the client.

BUT!

Then you start thinking, employment contract, casual employment information statement, casual employee conversion, payroll tax etc. It's a bit risky. "Anyone but me", so let's put a red cross through your obligations and contract them away to a payroll company.

How to find a Payroll Company that can Assist You?

Find a payroll company that has been set up similar to the steps below.

Step 1. Let's call this No Care and No Responsibility Payroll, or NCANR Payroll for short. Company Director A runs the whole show.

Step 2.  Set up about 50 or so small companies that have someone else as the company director. Let's call these "non-related companies" because Director A is not the company director.

Step 3. Although they are "non-related companies" you don't worry about the Company Secretary being Director A because the Grouping Provisions of the Corporations Act 2001 are too complex for most people to comprehend, and we already know that the ACT Government will not allocate legal advisers to assist their public servants, so the risk is minimal. 

Step 4.  Do this for everyday business:

• Set up the entry point to all these companies as NCANR Payroll, and have all calls and emails performed by NCANC Payroll's employees on their telephony and email system.  
• Accept the contract given to you by labour hire companies because they are on a "take it or leave it basis, and allocate that worker to one of the "non-related companies". Have the Director of that non-related company agree to be the employer of the labour hire company's employee even though he/she has no control over the worker. Again, that’s OK because it does most peoples' heads in trying to understand Grouping Provisions, and really, no care and no responsibility is so good!
• Then let the whole thing operate:
• The Labour Hire Company hives off its employer obligations to the Director of the non-related company that is controlled by NCANR Payroll. Your former employee is now the employee of someone else and they have the responsibility to do everything you should on paper, and out of their 2.5% fee that must get workers compensation and PI/PL insurance for your employee, pay 6.85% payroll tax and keep the worker's workplace safe even though they have no relationship with the client and cannot perform PCBU duties.

• This is easy, NCANR Payroll looks after the worker, the worker thinks he is employed by Director D, or maybe NCANR Payroll? The labour hire company gets paid by the client and NCANR Payroll arranges for Director D to invoice you, through NCANR Payroll and the funds come back that way to Director D.

By now you have a loyal following from those labour hire companies that know you should not be operating this way, but since their contracts make you totally responsible, they know they can minimise their costs. Be sure to advertise that you will be the employer and say something stupid on your website like "You become an employee of X Pty Ltd and X Pty Ltd contracts with your agent to provide your services to an end client that includes workers comp, PI and PL Insurances.

Once again, ignore that recent ACT Magistrate’s Court Determination that emphasised that the fee charged by the payroll company indicated that its services were solely payroll services, and not employment services.

No one will find out that most of these companies should be grouped with yours for payroll tax, and lets say if you have been doing this since 2015, then this will have saved you around $5.2m* per year in payroll tax costs. Both the ACT Revenue Office and the Chief Minister know about it and have taken no action. Bonus!

Note: *Payroll Tax Calculations: Given that the average casual labour hire employee is on $100/hr, that means their annual salary is $208,000 and that attracts $14,248 in payroll tax a year. To keep under the payroll taxa threshold for each of your 50 companies that you have not grouped, you need to have under $2m in salary in each company. That's nine workers in each company, each with a $14,248 payroll tax liability that you can hide. Do this well you will save $6,4m a year at the maximum and with a little rounding down, let's make it $5.2m to be conservative.

Conclusion

Dodgy! The next part will discuss Section 50 of the Corporations Act:

50 Related bodies corporate

          Where a body corporate is:

           (a) a holding company of another body corporate; or

           (b) a subsidiary of another body corporate; or

           (c) a subsidiary of a holding company of another body corporate;

the first?mentioned body and the other body are related to each other.

Index of Six Articles

Part 1 -  The end is NOT in sight for Dodgy Labour Hire Organisations in the ACT

Part 2 - Cast off your Employer Obligations and Limit your PAYG and Payroll Tax Costs

Part 3 - Bury it all in Complexity - The Plutus Payroll Way

Part 4 - Grouping Provisions - Yet to be published

Part 5 - Get Industry Advice to Confirm Things

Part 6 - Yet to be published