Unexpected $344K Payroll Tax Debt Strikes Popular Kedron Cafe

Payroll tax
Photo credit: Kenneth Chow/Google Maps

The owners of the popular Farmhouse Cafe in Kedron are facing a significant financial challenge after being hit with an unexpected payroll tax debt.

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Amanda and John Scott, owners of the cafe, were reportedly given just two weeks to pay 70 percent of the $344,000 debt. This sudden financial burden has emerged due to an “outdated” state government rule that led to their inadvertent breach of payroll tax regulations.

Located at the former site of Farmer Joe’s, the Farmhouse Cafe is recognised as one of Queensland’s top cafes, renowned for its healthy dishes made from locally sourced ingredients. The cafe, alongside the Scotts’ other business, Oh Boy Bok Choy in Stafford, fell afoul of a grouping rule in Queensland’s payroll tax law. 

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Payroll tax
Photo credit: Noni Creasey/Google Maps 

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According to this rule, if a business is related to another, they are treated as a single entity for payroll tax purposes. This means once the combined wages of the businesses exceed $1.3 million, a 4.75 percent payroll tax applies to all related entities, regardless of individual wage bills.

Payroll tax
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The Scotts, who also previously owned a gelateria, were unaware of this rule until a phone call from the Queensland Revenue Office (QRO) in May. This was followed by a $344,000 bill, backdated five years to the opening of their second business, including interest charges. 

Mrs Scott expressed frustration at the handling of the situation, noting their reliance on their accountant and the lack of prior communication from the QRO over the past five years. 

Despite acknowledging their responsibility, she criticised the process, highlighting the severe impact on their businesses, which employ around 70 people. The substantial tax bill has forced the owners to take out a mortgage to manage the payment. 

Photo credit: Lesley Greenhalgh/Google Maps

A spokesman for the QRO refrained from commenting on individual cases and did not explain the five-year delay in notifying the Scotts. It is understood that QRO’s compliance actions depend on data matching with the Australian Taxation Office.

The incident has spurred calls from industry experts, including the Australian Restaurant and Cafes Association (ARCA), to abolish the controversial payroll tax entirely. ARCA, a newly formed body representing approximately 50,000 hospitality businesses, argues that eliminating the tax would support the struggling industry.

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The tax issue has also impacted the Scotts’ future business plans, causing them to abandon the idea of opening another cafe, citing it as a disincentive for business expansion.

Published 11-June-2024