Grouping Rules & the Designated Group Employer

Payroll tax grouping treats two or more related businesses as a single employer, so they share one tax-free threshold instead of claiming one each. The consequence is not academic: a practice with $1.3 million of NSW wages pays $5,450 if it holds the threshold and $70,850 if it does not. Which of those two figures applies is usually decided by the group structure rather than by anything clinical.

What grouping does

Grouping is assessed on the relationships between entities, not by election, and it applies whether or not the entities intended to be associated. Its effects are mechanical once a group exists:

• Wages are aggregated. The group's total Australian wages drive every threshold, taper, rate band and surcharge trigger. A small practice grouped with a larger related entity is assessed on the combined figure.
• Only one threshold per group. A single member, the Designated Group Employer, claims the deduction on behalf of the whole group. Every other member pays from the first dollar.
• Every member registers. Each member of the group must be registered individually and as part of the group, in each jurisdiction the group has wages in.

The five ways a business is grouped

The grouping provisions are harmonised, so the same categories appear in each jurisdiction's payroll tax legislation. A group exists if any one of the following applies. Only one is needed:

• Related bodies corporate. Corporations in a holding or subsidiary relationship, including those with a common holding company.
• Employees used in more than one business. Employees of one business perform duties for another.
• A controlling interest in two or more businesses. The same person, or set of persons, holds a controlling interest in each. It is the entities carrying on the businesses that are grouped, not the individuals who control them.
• A tracing interest in corporations. An entity is grouped with a corporation in which it holds a controlling interest, counted directly, indirectly or in aggregate.
• A person is part of two or more groups. Those groups are amalgamated and treated as one, subject to the Commissioner's discretion.

For a medical practice the practical exposure is the first and third of these. A service entity owned by the same practitioners as the practice is commonly controlled, and a corporate structure adds the related-bodies-corporate test on top. Neither requires any clinical work to be arranged differently.

What grouping costs: a worked example

Take a practice in New South Wales with $1,300,000 of taxable wages. The NSW threshold is $1,200,000 and the rate is 5.45%.

• Holding the threshold: only the $100,000 above the threshold is taxed, so the liability is $5,450.
• Losing the threshold as a non-DGE member: the whole $1,300,000 is taxed, so the liability is $70,850.

The $65,400 difference is decided entirely by the group structure. No bulk-billing percentage, contractor arrangement or service agreement changes it, because the threshold is a group entitlement rather than a practice one. The same arithmetic runs in every jurisdiction, at that jurisdiction's own threshold and rate.

The Designated Group Employer (DGE)

The DGE is the single group member nominated to claim the threshold on behalf of the group in a jurisdiction. Without a valid nomination the group can lose the threshold entirely, so the nomination is a substantive compliance step rather than a formality. It is made annually and must be notified to the relevant revenue office.

Why the DGE choice matters

Choosing the wrong DGE is the most under-used optimisation lever in this area. Because the threshold is apportioned by the state-to-national wage ratio, the DGE should generally be the entity with the largest wage base in the highest-rate jurisdiction. Nominating an entity with a small wage base wastes the threshold allocation.

Non-DGE members

Non-DGE group members receive a $0 threshold allocation and are taxable from the first dollar of wages. Our calculator models this directly: switch the DGE toggle off on any state card to see the difference between the DGE and non-DGE positions for the same wages.

Applying to be excluded from a group

The grouping provisions give the Commissioner a discretion to exclude a member from a group. The test is whether the business carried on by that member is independent of, and not connected with, the business carried on by the other members. In practice the discretion is exercised where the relationship between the businesses is not continuous, active and significant, and the connections between them are merely casual or irregular.

One limit matters more than the rest: the discretion is not available where the grouping arises from related bodies corporate. A corporate group cannot apply its way out on the basis that the businesses are independent of one another. The discretion is available for groups formed through common employees, commonly controlled businesses, tracing, and the amalgamation of groups with common membership.

An application is decided on the facts of the arrangement, including the degree of shared ownership and control, whether the businesses trade with each other and on what terms, whether they share premises, staff or management, and whether there are common financial arrangements. Where the outcome is uncertain, a private ruling can be requested before relying on the position.

Verify your structure

Use our multi-state calculator to model both DGE and non-DGE scenarios. If your practice is part of a group (a service entity plus practice entities), work through the medical practice worksheet, and check the position for your jurisdiction on its own state page.

The grouping categories above restate the harmonised provisions published by the revenue offices. The exclusion discretion, including the limit for related bodies corporate, follows the position published by the state revenue offices; each jurisdiction's own legislation governs. Verified 29 August 2026.