Prescribed Payments System

PPS Bulletin 8

How it affects the road transport industry

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Date of Issue: 9 January 1997

Valid from 9 January 1997

If you are carrying on a business in an industry covered by the Prescribed Payments System and you pay another person for work in that same industry, then you may be obliged to deduct tax from any payments you make to that person.

This bulletin explains what Prescribed Payments are and how they affect the road transport industry. The other 8 industries covered by PPS are:

Similar bulletins are also available for each of these other industries.

What is a prescribed payment?

A prescribed payment must satisfy all of the following conditions:

• • It must be a payment made under a contract which involves the performance of work.

• • The work performed must consist of an activity within an industry covered by PPS.

• • The activity must be carried out for a prescribed person. (See the section titled Who must the work be carried out for?)

Note also that PPS doesn't only apply to payments to individuals. It can also apply to payments to companies, partnerships, trusts, trustees of trust estates, body corporates, etc.

Once you have determined that a payment is prescribed, please refer to the relevant booklet titled "PPS Payers", "PPS Payees", or "PPS Tax exempt organisations & businesses in non-prescribed industries". These publications explain what you must do when making or receiving a prescribed payment and are available from your local Tax Office.

Which payments are not covered by PPS ?

The following payments are not covered by PPS:

• • a payment made under contract only for the sale of goods or materials

• • a payment of salary or wages made to a common law employee.

Which road transport industry activities are included in PPS?

Activities within the road transport industry that are affected by PPS include the transporting by road of:

For whom must the work be carried out?

To be a prescribed payment the work must be carried out for any person who is carrying on a business that consists:

• • wholly or principally of carrying out any of the above road transport activities* for other people; or

• • in whole or in part of furnishing or arranging the services of another person to carry out any of the road transport industry activities*, (i.e. people who are not directly involved in performing any of the activities described above but carry on a business [agency] that provides the services of others to perform these activities).

In these cases the prescribed payments are those made by the agency to sub-contractors which the agency has separately contracted to perform these activities.

• • any person who, in the course of carrying on any business (or otherwise providing service), engages another person to transport goods or materials by road on a regular daily basis. The arrangement must involve the exclusive use of a motor vehicle or vehicles.

* However not where the goods or materials are, or were, the property of the person carrying on that business. For example, casual deliveries of goods from retailers to customers.

A person who satisfies any of these conditions will be a prescribed person for the road transport industry.

Is there anything else I need to know?

Tied Owner Driver

For example, a car spare parts firm contracts with a single driver to transport goods by road on a regular, daily and exclusive basis. The driver has the name of the spare parts firm painted on the side of their vehicle and as such the spare parts firm would not want the driver to be carrying other peoples' goods hence the driver is 'tied'. PPS applies to such tied owner drivers.

Captive Fleet Arrangements

For example, a brewing company contracts with a transport company to hire a fleet of trucks on a regular daily and exclusive basis. These trucks wear the brewing company's name painted on them and thus the brewery would not want those trucks carrying other goods, hence the fleet is under a 'captive fleet' arrangement. PPS applies to such captive fleet arrangements.

Exclusive

The use of the vehicle/fleet must be exclusive for PPS to apply. If the use of the vehicle is not exclusive, for example someone else's goods are being transported at the same time, then PPS will not apply.

Regular

On an ongoing basis, for a continuing period.

Daily

Day in day out - the greater part of a person's working week.

Road Transport industry decision chart

The diagram set out below is designed to help you determine if a payment is a prescribed payment in the road transport industry.

Examples

• • A fruit grower needs to get his goods to market. He contracts with a transport company to take the fruit and vegetables to market. There is a contract for work and the activity falls within the road transport industry. However, the grower is not in the business of providing or arranging road transport for other people, (the goods being carried are his own) therefore the payment is not prescribed. For the payment to be prescribed the grower would need to have his goods transported by the carrier on a regular, daily and exclusive basis (i.e. every day, on an on-going basis, transporting only his goods).

• • A carrier is unable to fulfil a contract so he sub-contracts the work to another carrier. This contract involves the performance of work within the road transport industry and both carriers are in the business of providing road transport services for other persons so the payment from one carrier to the other for the transport of goods will be prescribed.

• • A company needs to deliver their product to various retailers every day. They contract a carrier to transport the goods. The trucks used by the carriers are modified so that the goods can be carried safely, the drivers wear a uniform and may only carry the principal's goods. The contract involves the performance of work within the road transport industry and because the transport is being done on a regular, daily and exclusive basis, the payment will be prescribed. It need not be the same goods transported every day for the regular, daily and exclusive rule to apply, nor does it need to be the same vehicle doing the transporting. The carrier may have several different sized vehicles to choose from, depending on what is being transported.

Do you need more information?

If you have any questions or need more information about how PPS applies to you, please contact your local Tax Office:

by phone on 13 28 66 from anywhere in Australia for the cost of a local call; or

in person by visiting the enquiries counter at your local Tax Office. Addresses are listed in TaxPack and in the White Pages telephone directory.

This bulletin is a guide to the law only. It has been produced to help you understand the Prescribed Payments System. It is current as at 09/01/97.

ATO references:
NO NAT 2400.01.97

Related Rulings/Determinations:
PPS Bulletin 8 - Notice of Withdrawal