|Date of judgement||16 February 2018|
|Judge(s)||Ward CJ in Eq|
|Court or Tribunal||New South Wales Supreme Court|
Interpretation Act 1987, ss 33, 34
Pay-roll Tax Act 1971, s 3C
Payroll Tax Act 2007, ss 3(1), 6, 7, 9(1), 13(1)(e), 31, 32, 35, 37, 38, 39, 40, 41, 46, 71, 81, 87
Pay-roll Tax Act 1971 (Vic), s 37
Supreme Court Act 1970, s 19(2)
Taxation Administration Act 1996, ss 26, 27, 29, 45, 97, 100(3), 101(1)(d)
TAXES AND DUTIES – pay-roll tax – employment agency contracts – interpretation of s 37(1) of the Payroll Tax Act 2007 (NSW) – meaning of “under which” – meaning of “procures the services of another person” – meaning of “for a client”
TAXES AND DUTIES – pay-roll tax – employment agency contracts – amounts taken to be wages – interpretation of s 40(1)(a) of the Payroll Tax Act 2007 (NSW)
TAXES AND DUTIES – pay-roll tax – penalty tax – whether taxpayer took “reasonable care to comply with the taxation law” within the meaning of s 27(3)(a) of the Taxation Administration Act 1996 (NSW)
The Plaintiffs, H R C Hotels Pty Ltd (HRC) and Hotel Operations Solutions (HOS) supplied housekeeping staff, who were either their own employees or contractors, to several client hotels of the Platinum group of companies (Platinum) and Student Work Centre Australia Pty Ltd (SWCA). Subject to demand, additional housekeeping staff were sourced from sub-contractors.
The Chief Commissioner determined that HRC was liable for payroll tax on payments to Platinum and SWCA for the additional housekeeping staff under the employment agents provisions of the Payroll Tax Act 2007. Penalty tax of 25% was also assessed. HOS was deemed to be jointly and severally liable for any payroll tax owed by HRC under the grouping provisions of the Act (ss 45 and 81).
HRC went into liquidation in August 2016. The Chief Commissioner then issued payroll tax assessments to the second plaintiff, HOS (which was not itself a party to the arrangements with any of the hotels in question), on the basis that HOS was jointly and severally liable for the payroll tax liability of HRC under the grouping provisions in s 81 of the Payroll Tax Act and s 45 of the Taxation Administration Act 1996 (NSW). HOS did not challenge this grouping determination or its joint and several liability for any primary liability of HRC, but it did challenge the assessments issued to HRC.
The Court held that the arrangements were employment agency contracts within the meaning of s 37(1) of the PTA [152 – 153]. Ward CJ concluded that:
The Court concluded that the amounts paid by the Plaintiffs to Platinum/SWCA are the amounts in respect of which payroll tax is payable. The Court rejected the Plaintiffs’ submission that only amounts payable to the additional housekeeping staff, which were the amounts paid “in respect of the provision of services”, were deemed wages. Ward CJ held that the words “in relation to” in s 40(1)(a) of the Act expand the reach of deemed wages beyond the actual amounts paid to the additional housekeeping staff .
The Plaintiffs sought remission of the imposed penalty tax on the basis that the managing director had turned her mind to the alleged liability during the relevant period but had reasonably assumed payroll tax was not payable. This assumption was based upon a 2010 audit determination concluding that payments from HOS to a sub-contractor, Platinum Group, were not liable for payroll tax on payments to sub-contractors, which led the Plaintiffs to a conclusion that similar arrangements would also not be liable.
However the Court determined that HRC did not establish that it took reasonable care to comply with its tax obligations because it did not form the assumptions based upon sufficient enquiries or professional guidance [188 – 189].