Revenue NSW has released new guidance to help NSW businesses understand when payments under employment agency contracts may be exempt from payroll tax, including important declaration and record-keeping requirements.
Published on 18 September 2026, the new guidance is particularly relevant to employment agencies, labour-hire businesses and other organisations that provide workers to clients that may themselves be exempt from payroll tax.
Importantly, this is guidance on an existing exemption rather than the introduction of a new payroll tax concession. Revenue NSW has provided more detailed information about how the exemption operates and the evidence employment agents need to retain when treating payments as exempt.
An employment agency contract can arise where an employment agent obtains a worker to provide services to a client for a fee and the worker does not become an employee of that client. Under NSW payroll tax rules, payments to service providers under these arrangements are generally treated as wages of the employment agent for payroll tax purposes.
Key highlights for NSW businesses
While payroll tax treatment depends on the circumstances of each arrangement, the updated Revenue NSW guidance highlights several important areas for employment agencies to check:
- Some employment agency payments may be exempt – An exemption may be available where the client is an employer whose wages would ordinarily be exempt from payroll tax and the payments relate to work covered by that exemption. Relevant organisations can include eligible charities, public benevolent institutions, religious institutions, certain non-profit schools, qualifying healthcare organisations and councils in particular circumstances.
- A Relevant Declaration is required – An employment agent claiming the exemption must obtain a written and signed declaration from its client confirming that the payments would have been exempt if the workers had been employed and paid directly by the client. Revenue NSW provides a declaration form, although businesses may use their own document if it contains the required information.
- A separate declaration is generally needed for each contract – Revenue NSW states that a Relevant Declaration should be obtained for each employment agency contract entered into with an exempt client. The employment agent is responsible for providing the declaration to the client for completion.
- Long-term contracts need ongoing attention – For a contract spanning multiple financial years, one declaration may remain valid for the duration of the contract where it was obtained when the contract was entered into, the nature of the work has not changed and the client continues to pay exempt wages. Changes to the work or the client’s circumstances may mean a new declaration is required.
- Records must be kept for five years – Relevant Declarations must be retained by the employment agent for five years and be capable of being produced if requested by Revenue NSW. Where only part of an arrangement qualifies for an exemption, clear records separating taxable and exempt payments are particularly important.
- An incorrect declaration can create risk – Receiving a declaration does not automatically remove the employment agent’s exposure if the information later proves to be incorrect. Revenue NSW states that the agent may remain liable for payroll tax on affected payments, while false or misleading information may also result in additional interest or penalties.
What this means for your business
If your business supplies workers to other organisations in NSW, it is worth reviewing whether any of your arrangements fall within the employment agency provisions and whether an exemption is being claimed correctly.
Do not assume that working with a charity, hospital, school, healthcare organisation or other potentially exempt entity automatically makes payments to supplied workers payroll-tax-free. The particular client, contract, work being performed and supporting declaration all matter.
A practical review should include:
- Identifying contracts that could be classified as employment agency contracts.
- Checking whether the client qualifies for a payroll tax exemption.
- Confirming the workers are performing services connected with the client’s exempt activities.
- Obtaining a separate signed Relevant Declaration where required.
- Keeping the declaration, contract and supporting records together for at least five years.
- Separating taxable and exempt payments where only part of an arrangement qualifies.
- Reviewing the arrangement whenever the work, client or contract changes.
Accurate payroll and bookkeeping support can also make it easier to maintain the records needed to support payroll tax calculations and exemptions.
Businesses that discover a possible error in a previous payroll tax annual return should consider reviewing their position before making changes. Revenue NSW allows businesses to make voluntary disclosures where an annual return contains an error, including situations that may have resulted in an underpayment or overpayment.
For employment agencies and labour-hire businesses in Newcastle, Maitland and across NSW, this new guidance is a useful reminder that payroll tax exemptions depend on both eligibility and documentation. Regular tax compliance reviews can help identify gaps before they become larger issues.
Need advice on your payroll tax obligations?
Bottrell Accounting can assist businesses with payroll tax compliance, payroll and bookkeeping records, and broader business advisory requirements. Consider discussing your arrangements with your accountant if you are unsure how the employment agency rules apply to your business.
This article provides general information only. Payroll tax treatment depends on the facts and circumstances of each arrangement, and professional advice should be obtained for your specific situation.
