|Date of judgement||23 November 2016|
|Judge(s)||Senior Member NS Isenberg|
|Court or Tribunal||New South Wales Civil and Administrative Tribunal|
REVENUE LAW - Payroll Tax Act 2007 – Division 7 contractor provisions - relevant contract - Division 8 Employment agents - employment agency contract - onus of taxpayer
This case concerned an application for review of the Chief Commissioner of State Revenue’s (“Chief Commissioner”) decision to assess Winday International Pty Ltd (“Winday”) for payroll tax, interest and penalty tax for the financial years ending 30 June 2008 to 30 June 2013 (“the Relevant Period”).
The issue in these proceedings was whether payments made by Winday to certain radiologists were subject to payroll tax under either the contractor provisions in Division 7 of the Payroll Tax Act 2007 (“the Act”) or the employment agency provisions in Division 8 of the Act.
Winday, trading as Essential Medical Imaging, supplies fully operational and accredited radiology facilities to radiologists. The facility provides practising radiologists with a place of business, specialist plant and equipment, medical supplies semi-professional staff and competent non-professional managerial and administrative staff.
Winday advertises the facility as a bulk billing facility and processes the payment for services on behalf of the radiologists. The patients are referred to the radiologist and the facility by the GP, and the Medicare system pays the radiologist a prescribed fee.
A standard form of agreement is entered into between the radiologist (or its nominated service entity) and Winday (“Service Agreement”). This Service Agreement sets out express obligations of the radiologists, including the requirement to immediately deliver to Winday, without deduction, all monies received by the radiologist, in payment for radiology services rendered from Winday’s facility. All money received from Medicare was paid into Winday’s bank account. Winday would then retain an agreed percentage of the amount billed by radiologists for the use of its facility.
The employment agency provisions are set out in ss 37 to 42 of the Act.
The Chief Commissioner submitted, and the Tribunal agreed, that the operation of Divisions 7 and 8 of the Act were mutually exclusive, and so the Tribunal could affirm the submission under one of these Divisions, but not both divisions.
Winday initially submitted that the patients who attended the radiology facility were clients of the relevant radiologists rather than of Winday itself. However, Winday later conceded that it marketed to doctors providing referrals, and to a lesser extent directly to patients. Therefore doctors and patients could both potentially be clients. No GP referrals were produced into evidence by Winday.
Further, Winday submitted that Division 8 was introduced by Parliament as an anti-avoidance rule, and was not intended to apply in circumstances where the client was the patient, but rather was aimed at labour hire firms. The Chief Commissioner submitted that such a restrictive interpretation should not be applied, citing White J in Freelance Global Ltd v Chief Commissioner of State Revenue  NSWSC 127 at  where his Honour stated that while Parliament intended for the provisions to apply only to employment agents or labour hire firms, “it does not follow that that was the only intended application of the provisions”.
S.37(1) of the Act defines an employment agency contract as a contract, whether formal or informal and whether express or implied, under which a person (employment agent) procures services for another person (service provider) for a client of the employment agent.
The Chief Commissioner submitted that there were two separate contracts in operation; one between Winday and the radiologist and another between Winday and the client. Also, the Chief Commissioner relied on Justice White’s interpretation of “procure” advanced in Freelance where His Honour states at  that procure means “more than facilitate or enable and requires that the employment agent cause the services of the contract worker (or service provider) to be provided to the employment agent’s client, with the expenditure of care or 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.”
Senior Member Isenberg first considered the application of Division 8 of the Act “Employment agents”). Having regard to the terms of the Service Agreement and the obligations therein, the Tribunal determined that professional radiology services were provided by the radiologists and that those services were provided in the course of a business carried on by Winday. Notwithstanding that Winday provided oral evidence that no contract existed between the radiologists and Winday, the Tribunal found, on the balance of the evidence that a contract existed. Once the Service Agreement had been made, there was a contractual obligation for the radiologist to use the resources to provide radiology services for patients at the Winday facility.
On the issue of whether Winday procured the services of the radiologists, the Tribunal had regard to the fact that a term of the Service Agreement ensured that Winday would pay a net minimum amount to the radiologist for any day their services are provided. As such, the Tribunal was satisfied that Winday procured the professional services of the radiologists to be supplied to patients at the facility.
The Tribunal then had regard to Winday’s advertising on its website which set out the names of “our staff”. The Tribunal determined that through its advertising, Winday had made an offer to provide services to the public with the implied undertaking that it would procure the services of qualified radiologists to provide the medical services. This offer was then accepted by patients who attended the facility and were provided with medical services using Winday’s resources. Accordingly, the patients receiving these services were clients of Winday.
The Tribunal concluded at  that the contracts under which Winday procured the services of the radiologists for clients of Winday were employment agency contracts. Therefore there were no contracts to which Division 7 (“Contractor provisions”) could be applied.
The decision of the Chief Commissioner under review is affirmed.