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Date of judgement | 18 May 2018 |
Proceeding number | 2017/00178463 |
Judge(s) | RL Hamilton SC, Senior Member |
Court or Tribunal | New South Wales Civil and Administrative Tribunal |
TAXES AND DUTIES – Payroll Tax – payments of company directors remuneration to another person-onus of proof of taxpayer’s case
These proceedings concern a review of the Chief Commissioner’s decision to assess B & B Stevenson Pty Ltd (the “Company Company”) for payments made to Bryan and Belinda Stevenson in the 2007-08 to 2011-12 financial years (“the Relevant Period”) as wages under the third party payment provisions of the Payroll Tax Act 2007 (“the Act”).
By way of summary of the key facts:
The key issue in dispute was whether payments made by the Company to the Partnership during the Relevant Period constituted “wages” for the purposes of assessment under:
The Company’s key submission was that the payments made to the Partnership were, in effect, sub-licence fees for the right to manage and operate the “Quest” business in Newcastle.
The Chief Commissioner submitted that the payments were to be taken as “wages” pursuant to s. 46(2)(b) of the Act, or alternatively, as wages under s. 13(1)(c) of the Act, on the basis that they were payments for the appointment or services of the Stevensons to the Company, despite being paid to the Partnership, throughout the Relevant Period.
The Tribunal determined that the Company had failed to discharge its onus of proving that the payments made by the Company to the Partnership were in the nature of “sub-licence fees”.
In reaching this decision, the Tribunal had regard to a number of factors, including:
The Tribunal considered at [23] that the characterisation of the payment by the taxpayer company to the partnership as a ‘sub-licence fee’ was conceived as a line of argument when the Chief Commissioner’s officers were investigating.
Accordingly, the Tribunal determined that the most likely explanation for the payments made by the Company to the Partnership was that they were directors’ fees ([31]).
The Tribunal also upheld the market and premium rates of interest imposed on the Company as the Company had not submitted any particular reasons as to why they should be remitted ([34]-[36]).
The Tribunal determined that the Chief Commissioner was correct to rely on s. 46(2)(b) of the Act for the assessment of the Company. Notably, at [32], it agreed that for the purposes of s. 46(2)(b) of the Act, the meaning of “person” included a partnership.
The Chief Commissioner’s assessments were confirmed.
B & B Stevenson Pty Ltd v Chief Commissioner of State Revenue [2018] NSWCATAD 103