Farmhouse cafe owners Amanda and John Scott slugged with $350k payroll tax debt by state government

The owners of an award-winning cafe in Brisbane’s north have fallen victim to an “outdated” state government rule and hit with a monster tax bill, triggering calls from industry experts for it to be scrapped entirely.

Owner Amanda Scott and training co-ordinator Heather Edwards at Farmhouse cafe in Kedron, which has been slugged with a massive payroll tax debt of $350,000. Picture: Richard Walker

The owners of one of Queensland’s best and busiest cafes have been slugged with a shock $344,000 payroll tax debt, and given just 14 days to pay 70 per cent of it after they fell victim to what is being described as a “confusing” and “outdated” state government rule.

The incident has led to calls by industry experts to scrap the controversial tax entirely, which sees businesses pay at least 4.75 per cent tax on their wages once they reach in excess of $1.3m.

Amanda and John Scott, owners of Brisbane’s award-winning Farmhouse cafe in Kedron and sister venue Oh Boy Bok Choy in Stafford, were hit with a surprise payroll tax bill after they accidentally breached a grouping rule.

Owner Amanda Scott and training co-ordinator Heather Edwards at Farmhouse cafe in Kedron. Picture: Richard Walker

Payroll tax law in Queensland states that “if your business is related or connected to another business (you own), you will be treated as one unit for payroll tax purposes” or essentially “grouped”. That means that as soon as one business hits the $1.3m threshold on taxable wages, payroll tax then applies to all related businesses – no matter if their wages bills are substantially lower.

The couple, which relied on an accountant for their books, had no idea the grouping rule applied to their cafe, restaurant and now-sold gelateria, until they received a shock phone call in May from the Queensland Revenue Office claiming they were breaching compliance.

They then received a bill for $344,000, which was backdated five years to when they opened their second business, including five years of interest charged at 11.9 per cent.

The couple was told they had just two weeks to pay $243,229 of the taxes or face legal charges, despite them claiming they received no correspondence from QRO in five years alerting them to the issue.

The remainder of the bill would be due at the end of July.

Mrs Scott said she and her husband took full responsibility for the incident as they should not have simply trusted their accountants, but said she was devastated by the way it was handled.

After multiple attempts to contact the QRO after the initial phone call, the husband and wife allege they were told there was no one that could help them and they needed to wait for a letter in the mail that would determine the fate of their businesses, which employ 70 staff.

“It’s people’s lives you’re dealing with here. It’s hundreds of thousands of dollars. It might just be a number to you in the revenue office, but for us it’s, ‘Will we be able to keep people in jobs? Will we be able to keep the businesses?’ It’s a big thing and it wasn’t handled very well,” Mrs Scott said.

The massive tax bill has forced the couple, who are in their late 50s and 60s, to take out a mortgage to help pay it off, and also have a loan with the Queensland Government for $160,000 at 11.9 per cent over 18 months.

“We were really shocked that it was retrospective, we were really shocked that it was 11.9 per cent interest and then we were really shocked we got a letter in the mailbox saying we had to pay it in 14 days,” Mrs Scott said, revealing they were now being charged an extra $1000 per business per week in payroll taxes under the grouped system.

“It’s just outrageous for a small business that had no idea about this.”

The award-winning Farmhouse Cafe in Kedron. Picture: Richard Walker

A spokesman for the QRO said he could not comment on individual cases and did not identify why it took five years for the Scott family to be told of the issue. However, it’s understood that the QRO compliance actions rely on data matching with the Australian Taxation Office, which has an 18-month lag.

Wes Lambert, CEO of the Australian Restaurant and Cafes Association, said the grouping clause was incredibly confusing for many operators, and called for it and payroll tax as a whole to be abolished, insisting it would help save the country’s struggling hospitality industry.

“It will always be a punishment tax on employment and the state government needs to get its act together and find a different way to replace that revenue other than continuing to pummel small business,” he said.

Mr Lambert said the $1.3m threshold was too low for small businesses, particularly those in hospitality where 40-plus per cent of costs were wages.

“You just don’t have to have much revenue to run afoul of payroll tax,” he said.

Accountant Mark Herron from Brisbane’s Herron Accountants described payroll tax as “so wrong” and said it was hurting businesses - particularly those in hospitality.

“Just because you have a $2m wage bill across numerous entities doesn’t mean you can charge more for a cup of coffee. There is a cap on what people can afford to pay,” he said.

Mrs Scott said the incident had forced her to ditch plans to open another cafe and was a disincentive to ever launch another business.

“It just makes you wonder why you’re bothering anymore,” she said.

“This tax is punitive and ill-conceived and out of date and is a disincentive.”