Employment agent exemption from payroll tax
Find out how to claim an exemption on wages paid to workers of a client who is exempt from payroll tax.
As an employment agent, the wages you pay workers of a client who is exempt from payroll tax are also exempt if the:
- wages would be exempt if the client paid the workers directly
- client provides a declaration to that effect in the approved form to the employment agent.
Your client must be exempt under Part 2, Division 2 of the Payroll Tax Act 1971 for this exemption to apply; for example, certain charitable institutions and local governments are exempt. Find out more about exempt employees.
However an employment agency contract is not considered a ‘relevant contract’ for payroll tax purposes, meaning exemptions on payments to contractors do not apply.
Client Ltd runs a hospital, which is an exempt institution. This means Client Ltd does not pay payroll tax on their employees at the hospital.
Healthy Ltd is an employment agency that provides additional nurses for Client Ltd’s hospital. Since Client Ltd is exempt from payroll tax, Healthy Ltd also does not have to pay tax on those nurses’ wages.
Claiming an exemption
To claim this exemption, you must:
- be an employment agent
- have your client complete a declaration by exempt client form (Form P9)
- keep this declaration for 5 years—we may ask for this in the future (you do not need to send this to us unless we request it).
Employment agency contracts made for the purpose or effect of reducing or avoiding payroll tax may not be considered when applying this exemption.
Read the public ruling on employment agency contracts and declaration by exempt clients (PTA026) for more information.
Number of declarations required
You need 1 declaration per financial year from the exempt client, as long as the services provided by all the on-hired workers are similar. You will need a separate declaration for any workers on-hired to provide different services.
If the workers are on-hired for more than 1 financial year, only 1 declaration overall is required.
Agent XYZ on-hired 6 workers to Client D (a public hospital) for 5 consecutive financial years. All 6 workers performed accounts payable work for Client D for the whole period.
Agent XYZ is entitled to the exemption because Client D and the services provided by the 6 workers are exempt from payroll tax. To claim this exemption, Agent XYZ needs only 1 declaration from Client D for the 6 workers for the whole period.
In the 2025 calendar year, Agent XYZ on-hired 3 engineers to Client D in addition to the 6 accounts payable workers. The 3 engineers were engaged to conduct maintenance work on Client D’s ventilation system.
The services provided by the 3 engineers are also exempt from payroll tax, but because the services provided are different, Agent XYZ must obtain a separate declaration from Client D to claim the exemption for them.
Also consider…
- Read about other payroll tax exemptions.
- Find out about labour-hire arrangements.