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Toveety Maintenance Services Pty Limited v Chief Commissioner of State Revenue [2015] NSWCATAD 137

Date of judgement 03 June  2015 Proceeding No. 1410466
Judge(s) Senior Member R Deutsch
Court or Tribunal NSW Civil and Administrative Tribunal
Legislation cited Corporations Act 2001 (Cth)

Payroll Tax Act 2007
Catchwords Payroll tax, exclusion under section 79, dependence, connectedness
Cases cited Boston Sales and Marketing Pty Limited v Chief Commissioner of State Revenue 2014 NSWCATAD 139

Conrad Linings Pty Limited v Chief Commissioner of State Revenue 2014 NSWSC 1020

Denham Constructions Pty Ltd v Chief Commissioner of State Revenue (1998) 40 ATR 416

Lombard Farms Pty Ltd v The Chief Commissioner of State Revenue 2013 NSWADT 17

Mead Packaging (Aust) Pty Limited v Commissioner of Payroll Tax (NSW) 78 ATC 4164

Starr Partners Pty Limited v Chief Commissioner of State Revenue (2014) NSWCATAD 51 at 24

Background

Toveety Maintenance Services Pty Ltd (“the taxpayer”) sought review of the Chief Commissioner’s decision to not exercise the discretion under s.79 of the Payroll Tax Act (2007) (“the Act”) to exclude the taxpayer and Howard Heavy Haulage Pty Limited (“Haulage”) from membership of a payroll tax group for the period 1 July 2010 to 30 June 2013 (“the relevant period”).

The Assessments were issued on the basis that the taxpayer formed a payroll tax group with the following three companies during the relevant period: Howard Heavy Haulage Pty Ltd (‘Haulage’), Haulage Assets Pty Limited (‘Assets’), and Howard Machinery Hire Pty Limited (‘Machinery’) (“the Group”).

Issues

The onus was on the taxpayer to establish that it carried on its business independently and not connected with the carrying on of a business carried on by Haulage pursuant to s.79 of the Act.

The Tribunal was required to make a determination under s.79 having regard to the nature and degree of ownership and control of the businesses; the nature of the businesses; and any other matters the Tribunal considers relevant: s.79(2) of the Act.

The taxpayer contended that each company in the Group operated independently from one another, each having separate customers and suppliers. They did not have shared resources or equipment, and they did not trade together apart from the loans made out to each other. John Howard runs Haulage independently, and Jodie Howard runs the taxpayer company independently.

The Chief Commissioner contended that due to the significant financial interconnectedness between the companies, their business dealings and rent arrangements, the decision under review should be affirmed.

Decision

The Tribunal concluded that the companies were not carried on independently and without connection for seven reasons.

First, both businesses carried on by the taxpayer and by Haulage included the hire of machinery as a part of both businesses.

Secondly, there was a significant level of common shareholding and directorship.

Thirdly, there was no hard evidence to support the suggestion that day to day control is exercised by different persons so that a conclusion could be reached that the companies operated independently.

Fourthly, there were significant inter-company loans between the members of the Group, made in circumstances where commercial lenders would not have lent. Thus, the Tribunal determined that there was a significant degree of dependence by one company on the other for financial support. In relation to bank guarantees made between members of the Group, the Tribunal concluded that the fact the guarantees were made so readily without charge demonstrated that the companies were not unconnected nor independent.

Fifthly, the lease arrangement that existed over the property in Morrisset is one where the taxpayer paid rent to John and Jodie Howard (the owners) and the property is occupied as commercial premises by Haulage, Assets and Machinery.

Sixthly, the level and extent of trade within the group had relevance in the context of the independence and connectedness between the parties per the authority in Boston Sales and Marketing Pty Limited v Chief Commissioner of State Revenue 2014 NSWCATAD 139.

Finally, Mr Warwick Ison provided services to both the taxpayer and Haulage.

Orders

The decision under review was affirmed.

Link to decision

Toveety Maintenance Services Pty Limited v Chief Commissioner of State Revenue [2015] NSWCATAD 137

Last updated: 18 May 2016