|Date of judgement||26 May 2014|
|Judge(s)||A Verick, Senior Member|
|Court or Tribunal||NSW Civil and Administrative Tribunal - Administrative and Equal Opportunity Division|
TAXES AND DUTIES - Payroll tax - Employment agency contracts - Whether taxpayer procured the services of workers for clients - Whether contracts were employment agency contracts when worker in a common law employer/employee relationship - Whether Division 8 in Part 3 of Payroll Tax Act 2007 constitutes an exclusive regime to determine liability under an employment agency contract
Refrigerated Express Lines (A/Asia) Pty. Ltd. v. Australian Meat And Live-Stock Corporation And Others (No. 2) 44 FLR 455
The Taxpayer, Health Service Pty Ltd (“Health Service”), sought a review of payroll tax assessments issued by the Chief Commissioner of State Revenue (“the Chief Commissioner”) for the tax years ending 30 June 2010 to 30 June 2012 and for the period 1 July 2012 to 30 March 2013.
The Tribunal set aside the assessments on the basis that an exemption under the employment agency provisions applied. The Tribunal held that Health Services procured service providers under employment agency contracts, for clients that were exempt from payroll tax, and the clients had provided declarations to that effect. The Tribunal held that the employment agency provisions in Part 3, Division 8 were an exclusive code, and the exemption applied whether the service providers were engaged by Health Services under contracts of employment or relevant contracts.
The parties filed a Statement of Agreed Facts in the matter, the material facts being:
The key issues for determination by the Tribunal were:
The Tribunal held that Division 8 deals exhaustively with the payroll tax consequences in relation to an employment agency contract: . Further, it was held that there is nothing in the provisions to suggest that its application is confined to persons other than an employer in a common law relationship with the worker: .
SM Verick was not persuaded that the decision of the Victorian Court of Appeal in Drake Personnel Ltd v Commissioner of State Revenue  VSCA 122 (“Drake”) was authority for the proposition that there was no need to resort to the extended meaning of “employer” where liability to payroll tax already exists based on the employer-employee relationship between the agent and the worker. He noted that the parties in Drake did not raise any issue before the Court of Appeal as to the exclusive operation of the employment agency contract provisions; and that lack of serious discussion on the issue meant that the decision of the Court of Appeal does not offer a conclusive view:  - .
The Chief Commissioner argued that comments by Santow JA in Moore Park Gardens Management Ltd v Chief Commissioner of State Revenue  NSWCA 115 to the effect that the (former) employment agency contract provisions were a self-contained regime exhaustively governing the liability to payroll tax of employment agents, were obiter. However, SM Verick considered that his Honour’s comments at  –  were “strong dictum although said by way of obiter”: .
The Tribunal also relied on the following reasoning:
The Chief Commissioner submitted that Health Service does not procure the services of another person because it directs its own employees to do the work that it has contracted with the Relevant Clients to do.
Having considered the analysis by the his Honour Justice White in Freelance Global as to whether the plaintiff had “procured the services” of the contractors for its clients, the Tribunal formed the view that the agreements between Health Service and the Relevant Clients fall within the definition of “employment agency contract” in s.37. SM Verick stated at :
“I think the wide definition of “procures” extends to a person procuring workers as employees to perform the contracted work...They [the employees] performed no services for the Taxpayer but were available to perform services as and when required as contract personnel under an employment agency contract entered into by the Taxpayer with a client. I accept that the agreements between the Taxpayer and individual worker were clearly arrangements to procure contract workers for the client.”
The Chief Commissioner submitted that even if s.37 is engaged by the present facts, this would lead to the same conclusion that the employment agent is liable to pay payroll tax based on the employer-employee relationship with the worker. The reasoning was that if s.40(2) operates so as to preclude the deeming of wages by s.40(1) (on the assumption that the payment would have been exempt if paid by the client to the worker as its employee), there is no amount that is taken to be wages. One must then return to the situation of there being an employer-employee relationship which of itself will render Health Service liable for payroll tax on the payments made to its employees.
However, the Tribunal determined that Division 8 is an exhaustive regime for employment agency contracts, and did not address this issue. Rather, it concluded that since there was an “employment agency contract” then Health Service “is entitled to the exemption under s.40(2)”: .
The Tribunal ordered that the assessments under review be set aside.