|Date of judgement||30 June 2015|
|Court or Tribunal||Supreme Court of New South Wales, Equity Division|
State Revenue Legislation (Further Amendment) Act 1992
State Revenue Legislation Further Amendment Act 1996
State Revenue Legislation (Miscellaneous Amendments) Act 1996
TAXES AND DUTIES – payroll tax – exemption from payroll tax of employer superannuation contributions paid “in respect of services performed by an employee before 1July 1996” under the Payroll Tax Act 2007 (NSW) Schedule 6, clause 4(1) and the Pay-Roll Tax Act 1971 (NSW) s 3AA(6A) – apportionment of contributions to a defined benefits scheme by reference to pre and post 1 July 1996 services – taxpayer paid contributions while the fund was in surplus – surplus was not used to reduce size of contributions – contributions paid at a higher “normal cost” level rather than an “adjusted normal cost“ level – whether contributions could be apportioned – whether CSR Ltd v Chief Commissioner of State Revenue  NSWSC 1380; (2006) 68 NSWLR 440 was correctly decided that top-up contributions could be apportioned notwithstanding the fund was not in deficit as at 30 June1996 – whether record-keeping requirements were met by the taxpayer where calculations of payments were not recorded contemporaneously with payments – held, allowing the appeal in part and remitting the matter to the Chief Commissioner: (1) CSR Ltd v Chief Commissioner of State Revenue was correctly decided; (2) the taxpayer was entitled to refunds in respect of top-up contributions and in respect of amounts paid in excess of the adjusted normal cost level; (3) the taxpayer did not prove that any part of the adjusted normal cost level contributions could be apportioned because a simple ratio of pre and post 1 July 1996 services could not be applied to these contributions.
The issue in the case was whether certain “top-up” contributions to the defined benefit superannuation fund were liable to pay-roll tax under the Pay-Roll Tax Act 1971 (“the 1971 Act”) and the Payroll Tax Act 2007 (“the 2007 Act”) for the financial years ending 30 June 2006 to 30 June 2010.
Under both Acts in the years in question, superannuation contributions made by an employer in respect of an employee were included within the definition of “wages”, and therefore liable to payroll tax, except for superannuation contributions made “in respect of services rendered by an employee before 1 July 1996”.
The Chief Commissioner contended that in its application to a defined benefit superannuation scheme, this exclusion applies only to contributions made after 1 July 1996 to make a deficiency in the assets of the scheme to meet benefits payable in respect of services rendered by the employees up to that date. That submission was made and rejected in an earlier case of CSR Ltd v Chief Commissioner of State Revenue  NSWSC 1380 (“CSR”); one of the Chief Commissioner’s contentions was that this case was wrongly decided.
The Qantas Superannuation Plan (“the Plan”) is a superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth).
The trustee of the Plan was required to appoint an actuary to value the asset and liabilities of the Plan at least once in every three years. The Plan provided for the quantum of superannuation to be determined by applying a multiplier to the member’s final average salary where the multiplier depended upon the total years of service. Qantas contended that to the extent that those superannuation contributions relate to members’ service before 1 July 1996, they are exempt from payroll tax.
Over time, the actuary made recommendations about appropriate contributions to be made to the Plan and the detailed history was set out in the Plaintiff’s evidence.
The Plan was substantially in surplus as at 1 July 1996. Following the global financial crisis in 2008 the actuary to the Plan advised that the surplus had diminished from $227 million in July 2008 to $6 million in October 2008. By 30 June 2009 there was a deficit of assets to vested benefits. During this period, in addition to the “normal cost contributions”, Qantas made “top-up” contributions in 2009 and 2010.
In November 2010 Qantas requested a refund of overpaid payroll tax in the amount of $6,260,527.00. An actuarial report by Russell Campbell that dealt with apportionment was provided with that application. The Chief Commissioner allowed a refund of the additional “top-up” contributions made in the financial years ended 30 June 2009 and 2010 that were in respect of services performed by an employee before 1 July 1996. The Chief Commissioner rejected that application in respect of the normal cost contributions.
The Court ordered as follows: