|Date of judgement||22 December 2014|
|Court or Tribunal||NSW Civil and Administrative Tribunal - Administrative and Equal Opportunity Division|
Employment agency contracts – payroll tax – procure – wages – penalties – reasonable care
Taneja v Commissioner of Taxation (2009) AATA 87
Qualweld Australia Pty Ltd (“the Taxpayer”) sought a review in the NSW Civil and Administrative Tribunal (“the Tribunal”) of an assessment of payroll tax for the years ended 30 June 2009 to 30 June 2012 inclusive (“the relevant period”).
The proceedings consider whether amounts paid by the Taxpayer to welders are payments made pursuant to “employment agency contracts” as set out in s.37 of the Payroll Tax Act 2007 (“the Act”).
The Chief Commissioner’s decision that the payments were made pursuant to employment agency contracts was affirmed by the Tribunal, and the assessments were confirmed.
The Taxpayer has filed a Notice of Appeal to the Appeal Panel.
The Taxpayer in these proceedings is a company involved in the welding industry The Taxpayer paid welding contractors at hourly rates for work done on certain complex welding projects for its clients.
The Chief Commissioner assessed the taxpayer for the four years 2008-09 to 2011-12, asserting that the payments by the Taxpayer to the welders were paid pursuant to employment agency contracts as defined under section 37 of the Act.
These proceedings raised three issues:
“The two issues that lie at the heart of this case are the second and third elements, which together call for conclusions to be reached as to whether the (Taxpayer) has procured the services of the Worker for the Client by entering into the contract with the Interposed Entity.”
"I think the better view is that "procure" when used in s3C (Payroll Tax Act 1971) and 37 (Payroll Tax Act 2007) means more than facilitate or enable and requires that the employment agent cause the services of a contract worker (or service provider) to be provided to the employment agent's clients, with the expenditure of care and effort by the employment agent. I do not accept that this can only be done if the employment agent recruits the contract worker or service provider for the client."
"...the existence of a prior relationship between the independent contractors (ie the Interposed Entity) and the head company (the Client) may make it easier in some senses to prove that there has been a procuring of services.
However it does not follow that the absence of such a prior relationship would rule out the procuring of those services for the Clients in this case.”
"...having regard to (several cases specified in para 60) ...and the general proposition that what matters here is the work that is being done and not the manner by which it is being remunerated, I discount the relevance of the fact that the payment was often made on an hourly charge out basis.”
"...not to suggest that the (Taxpayer) could not carry on a business of the kind it contends for (delivering complex welding project work) with only one actively involved employee. It is however another factor which assists the argument contended for by the (Chief Commissioner).”
"...in objectively assessing the nature of the business, even though there are elements which went beyond the provision of the welders for the Clients, the central and predominant aspect of the (Taxpayer's) business was precisely (the supply of welders and nothing else). Anything beyond the provision of such welders for the Clients was largely incidental to that core business.”
“This (email) would seem to suggest that the Client was paying for the supply of welders that were secured to it by the (Taxpayer) and for nothing else. In this case it paid an additional amount but only as a goodwill gesture and not because it was obligated to do so. Again, this suggests a procurement of services by the (Taxpayer) for the Client in the very sense referred to in the Payroll Tax Act.”
“These numbers would suggest that the (Taxpayer's) assertion that the provision of the services of tradespeople (especially welders) is merely incidental to its broader business activities, is a difficult argument to sustain. The reality based on these numbers is that the provision of the services of welders is a fundamental and critical aspect of the business carried on by the (Taxpayer).”
“The point here is that the taxpayer has provided precious little in the way of hard evidence to demonstrate that it took the sort of steps one would expect a reasonable person to take in such circumstances. The application of the employment agency provisions do not appear to have been considered by the (Taxpayer) in any detail until it became apparent that there were concerns raised by the (Chief Commissioner). Certainly no evidence was provided that legal advice had been sought or obtained at any relevant time.”