JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391

Date of judgement 12 October 2017 Proceeding No. 2015/311379
Judge(s) Kunc J
Court or Tribunal Supreme Court of NSW
Legislation cited Australia and New Zealand Food Standards Code

Civil Procedure Act 2005

Evidence Act 1995

Food Act 2003

Payroll Tax Act 2007

Taxation Administration Act 1996
Catchwords TAXES AND DUTIES — payroll tax — liability to taxation — out of hours cleaning services provided to supermarkets and other businesses — “employment agency contracts” — whether services procured “for a client” of the employment agent — Payroll Tax Act 2007 (NSW), s 37(1)
Cases cited Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127

Harris v Woolworths Ltd [2010] NSWSC 25

Harris v Woolworths Ltd [2010] NSWCA 312

Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue of the State of NSW (2011) 245 CLR 446; [2011] HCA 41

UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; (2016) 104 ATR 577

World Book (Australia) Pty Ltd v Commission of Taxation (1992) 27 NSWLR 377

Background

JP Property Services Pty Ltd (“the Taxpayer”) provided cleaning and property maintenance services to commercial and industrial clients, including supermarkets operated by Franklins. To provide these services, the Taxpayer used either its own employees or contractors. The key issue in the case was whether the Taxpayer’s contract with Franklins was an employment agency contract pursuant to s. 37 of the Payroll Tax Act 2007 (NSW) (“the Act”).

Following the hearing on 6 December 2016, White J delivered his judgment in UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852, which changed the previous approach White J had expressed in Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127. The parties were granted an opportunity to file further submissions.

Legislation

The case entirely turned on whether the Taxpayer’s contracts with Franklins (and other businesses) were employment agency contracts pursuant to the definition in s. 37 of the Act.

Section 37 provides:

“(1) For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express of implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent”.

Decision

The Court adopted Justice White's analysis in UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852.

The Court agreed that in order to determine whether the Taxpayer had procured the services of its contractors for its client (i.e. Franklins) the focus was on whether the cleaning services were procured by the Taxpayer “in and for the conduct of the business” of the Taxpayer’s client. His Honour agreed with White J that the key question was whether the services provided helped the client conduct its business in the same way, or much the same way, as it would through an employee.

The Court held that whether the services that were provided satisfy the new formulation set down by White J in UNSW Global is a factual determination. That is, it is a question of fact in each and every case whether the services provided help a client conduct its business in the same way, or much the same way, as it would through an employee.

Applying the test to the circumstances in this case, the Court held that the cleaning services were not provided by the cleaners in and for the conduct of the business of Franklins because they were provided outside of business hours. On the other hand, the Court held that cleaners working during business hours would satisfy the test because of Franklins' duty of care to shoppers, which necessitated an effective system for cleaning spills during shopping hours. His Honour observed at [80]:

"such a cleaner is working in the supermarket's business because the cleaner is doing so during the hours the supermarket is open to sell goods to the public and discharges a function integral to the safe and lawful operation of the supermarket during that time."

The Court rejected the Chief Commissioner’s submission that requirements to keep supermarket premises (as a “food business”) clean under the Food Act 2003 (NSW) meant that the out-of-hours cleaners were working in and for the conduct of Franklin’s business because they were providing a service which enabled Franklins to meet its legislative requirements.  This finding contrasts with his Honour’s reliance on Franklins’ duty of care as a basis for concluding that cleaners who worked during business hours would be working in and for the conduct of the business of Franklins.

Other key decisions

The Court rejected the submissions made by the Taxpayer that:

  1. the Taxpayer procured “results” and not “services” for its clients – see [66]-[68]
  2. the Taxpayer procured “results” for itself rather than its clients – see [69].

The Court accepted the Chief Commissioner’s arguments that:

  1. the Act is to be construed in accordance with its terms and not by reference to historical analysis of preceding legislation – see [65];
  2. the employment agency contract provisions may apply to either employees or independent contractors procured by the agent – see [73].

Orders

The Court made the following orders:

  1. Allow the Taxpayer to make the application for review constituted by these proceedings by filing the summons on 23 October 2015.
  2. Pursuant to s. 101(1)(a) of the Taxation Administration Act 1996 (NSW), payroll tax assessments all dated 10 April 2015 and addressed to JP Property Services Pty Ltd are revoked.

Link to decision

JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391

Last updated: 2 November 2017