|Date of judgement||19 October 2015|
|Proceeding number||1410335, 1410336, 1510188, 1510189|
|Court or Tribunal||Civil and Administrative Tribunal|
PAYROLL TAX - grouping; discretion to exclude a member from a group
In these proceedings, Regis Mutual Management Pty Ltd (“the Applicant”), sought review of the Respondent’s (“the Chief Commissioner”) decisions regarding:
The Applicant was established in April 2008 as a special purpose vehicle for a joint venture between Regis Mutual Management Ltd (“Regis Ltd”) and CSL. Trading by the joint venture commenced around 1 June 2008 and ended on 31 December 2011. Under this arrangement, services pursuant to a Service Agreement were performed by CSL employees for and on behalf of the Applicant.
The Applicant submitted that their business provided development and management services to mutuals, which in turn provided to their members the service of transferring the risk of losses and that CSL’s business provided collective buying services.
In June 2012, the Applicant applied for exclusion from grouping with respect to CSL and Regis Ltd for the relevant period. By letter dated 8 January 2013, the Chief Commissioner disallowed the Applicant’s de-grouping application on the basis that the businesses constituted a group under s.71 of the Act.
On 6 and 8 February 2013, the Chief Commissioner issued the Assessments in respect of the relevant period and 1 January 2012 to 30 June 2012.
By several written communications to the Chief Commissioner, the Applicant objected to both the Assessments and the grouping decision. By letter dated 30 April 2014, the Chief Commissioner disallowed both objections.
Section 71 of the Act outlines the relevant law with respect to payroll tax grouping. Section 71(3) of the Act provides that:
“If one or more employees of an employer perform duties for or in connection with one or more businesses carried on by one or more other persons, being duties performed in connection with, or in fulfilment of the employer’s obligation under, an agreement, arrangement or undertaking for the provision of services to any one or more of those other persons in connection with that business or those businesses, the employer and each of those other persons constitute a group.”
Notwithstanding the preceding paragraph, s.79(1) of the Act empowers the Chief Commissioner to exclude persons from a payroll tax group under certain circumstances. In exercising this discretion, s.79(2) states that the Chief Commissioner must have regard to “the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Chief Commissioner considers relevant.”
With respect to the two issues in which the Applicant sought review, the onus rested on the Applicant to prove its case on the balance of probabilities (s.100(3) of the Taxation Administration Act 1996; B & L Linings Pty Ltd & anor v Chief Commissioner of State Revenue  NSWCA 187).
The first issue for the Tribunal to consider was whether the Applicant was a member of the payroll tax group which included CSL in respect of the relevant period.
Relying on the decisions in Commissioner of State Revenue v Liquid Rock Constructions Pty Ltd  VSC 329 (“Liquid Rock”) and Bank of Queensland Limited v Commissioner of State Revenue  VCAT 1966 (“Bank of Queensland”), the Applicant submitted that the use of the different phrases “performance of duties” and “provision of services” in s.71(3) was significant and that, under the terms of the Service Agreement, CSL employees were not performing duties in connection with the business of the Applicant; rather, they were performing duties in connection with CSL’s business and providing services to the Applicant. 1
The Tribunal considered that the key question was whether or not the duties being performed by CSL employees were for or in connection with the Applicant’s business.2 Having regard to the terms of the Service Agreement, the Tribunal accepted the Applicant’s submission that CSL employees were performing duties for or in connection with CSL’s business and that services were being provided to the Applicant However, it did not accept the Applicant’s submission that the duties being performed by CSL’s employees were not also for or in connection with the Applicant’s business. The carrying out of duties in connection with one business did not preclude those duties also being carried out in connection with another business.3 Accordingly, the Tribunal concluded that it was not satisfied on the balance of probabilities that the Applicant and CSL were not grouped for the purpose of s.71(3) of the Act.
The second issue for the Tribunal to consider was whether the Tribunal, standing in the shoes of the Chief Commissioner, should exercise the discretion contained in s.79 of the Act to exclude the Applicant as a member of the group. Pursuant to s.79 of the Act, the Tribunal had regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Tribunal considered relevant.
Citing the decision of the Appeal Panel in Lombard Farms Pty Ltd v Chief Commissioner of State Revenue  NSWCATAD 132, the Tribunal found that the requisite nature and degree of ownership and control were satisfied on the basis that CSL, through a subsidiary company, effectively held a veto power in respect of decisions at both board meetings and shareholder meetings of the Applicant.4 Further, the Tribunal considered that the Applicant had not sufficiently satisfied on the balance of probabilities that its business was carried on independently of and was not connected with the carrying on of CSL’s business.5
With respect to the nature of the businesses, the Applicant submitted that the services provided by the Applicant’s and CSL’s businesses were “fundamentally different”6. However, the Tribunal considered that the Applicant’s submission was untenable, as it found that there was active competition between CSL and the Applicant with respect to mutual management business throughout the relevant period.7
Moreover, citing Toveety Maintenance Services Pty Ltd v Chief Commissioner of State Revenue  NSWCATAD 137, the Tribunal held that the difference in the nature of the businesses was not decisive to exclusion from grouping.8
Other matters which the Tribunal had regard to included:
In conclusion, the Tribunal was not satisfied on the balance of probabilities that the business of the Applicant was carried on independently of, and was not connected with the carrying on of one or more businesses carried on by CSL, in each payroll tax year during the relevant period.
The decisions of the Chief Commissioner under review were affirmed.