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Date of judgement | 26 May 2016 |
Proceeding number | 1510274 |
Judge(s) | Senior Member Verick |
Court or Tribunal | New South Wales Civil and Administrative Tribunal |
STATE REVENUE - Payroll Tax – grouping of taxpayers - Exclusion of member from group – s 79 - Payroll Tax Act 2007
Chief Commissioner of State Revenue v Seovic Civil Engineering Pty Ltd [2014] NSWCATAP 94
Commissioner of Stamps v Garrett F Hunter Pty Ltd (1997) 69 SASR 275
Commissioner of State Taxation (WA) v Scotford Cameron & Middleton Pty Ltd (1981) 12 ATR 406
Conrad Linings Pty Ltd v Chief Commissioner of State Revenue [2014] NSWSC 1020
Lombard Farms Pty v Chief Commissioner of State Revenue [2013] NSWADTAP 42
Port Augusta Medical Centre Pty Ltd v Commissioner of State Taxation [2012] SASCFC 7
The Chief Commissioner grouped the Taxpayer with Rose Bay Veterinary Hospital Pty Ltd (‘Rose Bay’) and ANHM Investment Pty Ltd as trustee for the Eastside Property Unit Trust (‘the ANHM Trust’), under s. 72 of the Payroll Tax Act (“the Act”) for the period from 19 December 2011 to 31 August 2014 (‘Relevant Period’). The grouping was due to the majority controlling and beneficial interests held by Dr Howard Smyth and Dr Michael Linton with respect to the Taxpayer’s practice, Rose Bay and the ANHM Trust.
The Taxpayer accepted that it had been properly grouped by the Chief Commissioner. However the Taxpayer submitted that the Chief Commissioner should de-group the Taxpayer pursuant to the discretion under section 79 of the PTA, which empowers the Chief Commissioner to “determine that a person who would, but for the determination, be a member of a group is not a member of the group”.
Section 79(2) of the Act stipulates that the Chief Commissioner may only make a determination under s. 79(1) “if satisfied, having regard to the nature and degree of ownership and control of the business, the nature of the businesses and any other matters the Chief Commissioner considers relevant, that a business carried on by the person, is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group”.
The Taxpayer submitted that the paramount consideration in determining whether to exercise the discretion is the way that the grouped businesses were carried on, rather than any common shareholdings or directorships. The Taxpayer relied on the following facts to support its de-grouping application:
The Chief Commissioner submitted that:
Senior Member Verick preferred the Chief Commissioner’s interpretation of the s. 79 discretion and held that the onus was on the Taxpayer to establish the independence of their business and the absence of any connection between their practice and the other grouped entities during the Relevant Period.
Senior Member Verick found that:
Senior Member Verick stated that “it is sufficient if a member of the group has the ability to dictate the way the other member is managed. It is not necessary that there is evidence to establish that that power was, in fact, exercised”. Accordingly, Senior Member Verick found that the practice of the Taxpayer was closely associated with and complimentary to the business carried on by Rose Bay during the Relevant Period and affirmed the decision of the Chief Commissioner not to de-group the Taxpayer under section 79 of the PTA.