Grouping Rules & the Designated Group Employer

What is grouping?

Under payroll tax grouping provisions, entities connected by common ownership, control, or financial interdependence are treated as a single employer for threshold purposes. Australia-wide group wages drive every threshold, taper, rate band, and surcharge trigger. Grouping prevents related entities from each claiming the tax-free threshold independently.

When entities are grouped

Entities are typically grouped where:

• Common ownership: the same person or persons hold a controlling interest (generally >50%) in two or more entities.
• Common control: one entity controls the affairs of another, even without majority ownership.
• Financial interdependence: entities are financially integrated through inter-entity dealings.
• Employee sharing: an employee of one entity performs duties for another grouped entity.

The Designated Group Employer (DGE)

Only one entity in the group — the DGE — may claim the tax-free threshold. All other group members pay payroll tax from the first dollar of wages. DGE status is nominated annually and must be notified to the relevant Revenue Office.

Why the DGE choice matters

Choosing the wrong DGE is the single most under-utilised optimisation lever. The DGE should typically be the entity with the largest wage base in the highest-rate state, because the threshold is apportioned by the state-to-national wage ratio. Nominating an entity with a small wage base wastes the threshold allocation.

Non-DGE members

Non-DGE group members receive a $0 threshold allocation — they are taxable from the first dollar of wages. This is modelled in our calculator by toggling the DGE switch off. The calculator shows the liability difference between DGE and non-DGE positions.

Verify your structure

Use our multi-state calculator to model both DGE and non-DGE scenarios. If your practice is part of a group (service entity plus practice entities), use the medical practice worksheet.