Integrated Construction Equipment Pty Limited v Chief Commissioner of State Revenue  NSWCATAD 131
The Chief Commissioner issued payroll tax assessments to the applicant in respect of the 2014 and 2015 financial years. The assessments were issued on the basis that the applicant was a member of a group of commonly controlled businesses, within the meaning of s. 72 of the Payroll Tax Act 2007 (“the PTA”). The assessments were also based on the operation of s. 81 of the PTA and s. 45 of the Taxation Administration Act 1996 (“the TAA”), which had the effect of imposing joint and several liability on each member of the group of commonly controlled businesses for unpaid liabilities of all other members of the group.
The Chief Commissioner grouped five companies: the applicant, Hows Ya Bin Pty Ltd (“HYB”), Australian Demolition and Scrap Recovery Pty Ltd (“ADSRPL”), Comlix Pty Ltd (“Comlix”) and Recycling Yard Pty Ltd (“RY”). The various groupings occurred during three separate periods: 1 July 2013 to 17 September 2014, 18 September 2014 to 24 September 2014 and 25 September 2014 to 30 June 2015. The Chief Commissioner relied on a combination of s. 72(2)(c)(i) (control by directors), s. 72(2)(d) (control of Board of Management) and s. 72(2)(e) (control of voting shares) of the PTA, to group together various configurations of the five companies at various time periods.
The applicant’s six main arguments, and the Chief Commissioner’s submissions in response, are summarised as follows:
- The assessments against the applicant were issued following an investigation into RY, not the applicant. Additionally, the applicant did not receive any notice of investigation. The Chief Commissioner submitted that the Tribunal’s jurisdiction was limited to reviewing the decision in respect of the assessments and not the investigative process. Further, it is immaterial to which entity the investigative process was directed, as the applicant’s liability as a member of a group existed at the relevant time.
- The assessments were issued after ADSRPL went into liquidation and that “…it seems unjust that a company can be retrospectively included for grouping purposes after the date it had been placed in liquidation”.The Chief Commissioner submitted that it is the time at which the liability arose which is material to the proceedings. Although the assessments were made after ADSRPL went into liquidation, they reflect liabilities incurred before it went into liquidation.
- The applicant and ADSRPL were, at all material times, single director companies. Therefore, Mr Fenwick, as the sole director of each company, could not exercise more than 50% of the voting power at meetings of the directors of the corporation (s. 72(2)(c)(i)) because a single director cannot meet with themselves. The Chief Commissioner submitted that the word “meeting” in s. 72(2)(c)(i) has a meaning other than its ordinary meaning such that s. 72(2)(c)(i) applies to the circumstances of single director companies. Firstly, it was submitted that the Supreme Court decision of Conrad Linings Pty Ltd v Chief Commissioner of State Revenue  NSWSC 1020 (“Conrad Linings”) was binding on the Tribunal. This was on the basis that, while it was not expressly stated, White J took no issue with the application of s. 72(2)(c)(i) to a sole director company, in that matter. Secondly, textual statutory interpretation of the provision creates doubt that the meaning to be given to “meeting” is its ordinary meaning. Thirdly, contextual statutory interpretation of the PTA supports the proposition that the meaning of “meeting” is other than its ordinary meaning. The Chief Commissioner also drew the Tribunal’s attention to a long line of Australian corporations law authorities which considered the “meeting of one” problem and the Corporations Act 2001 (Cth). Lastly, it was submitted that a purposive interpretation of the provision would result in the broader interpretation. In the alternative, it was submitted that s. 72(2)(e) provided an additional way to group the applicant and ADSRPL, based on common shareholders.
- The applicant and ADSRPL were, at all material times, corporations not “body corporate or unincorporate[d]”. Therefore, s. 72(2)(d) could not apply. The Chief Commissioner submitted that it was unnecessary to consider the application of s. 72(2)(d) by reason of the submissions related to Argument 3, but the ordinary meaning of “body corporate” would apply to both the applicant and ADSRPL. Further, the distinction drawn between “corporation” and “body corporate” was in error, as the PTA and the Corporations Act 2001 (Cth) define “corporation” to include “any body corporate”.
- The assessments were unjust as they preference the Chief Commissioner over other unsecured creditors of ADSRPL. The Chief Commissioner submitted that this was not a matter upon which the Tribunal had jurisdiction to consider.
- The assessments were unfair in circumstances where ADSRPL’s liquidation was, allegedly, the result of non-payment to ADSPRL as a sub-contractor on a NSW government construction project and the NSW government’s inadequate protection of sub-contractors generally. The Chief Commissioner submitted that the applicant did not dispute the calculation of taxable wages, penalty tax or interest; .and the Chief Commissioner is obliged to administer the PTA in accordance with its provisions; arguments that the assessments were unjust or unfair are not relevant.
SM Boxall rejected the applicant’s first, fifth and sixth arguments as they were not matters within the Tribunal’s jurisdiction on administrative review.
The applicant’s second argument, relating to ADSRPL’s liquidation and grouping, was rejected because:
- the Chief Commissioner enjoys wide investigative powers;
- grouping under s. 72 of the PTA is automatic and non-discretionary;
- joint and several liability under s. 81 arises without any intervention of the Chief Commissioner; and
- payroll tax liability arises within 7 days after the end of the relevant month in which taxable wages were paid, under s. 9. Therefore, the characterisation of the assessments as involving retrospective grouping was in error. The applicant’s third argument, relating to sole directors and meetings, was also rejected by SM Boxall because:
- although “meeting” in its ordinary sense refers to “… an assembly of a number of people for...discussion...”, a long line of authorities in the corporations law context recognises that the expression can be used in an artificial sense to apply to a single individual. In particular, applying the reasoning in East v Bennett Brothers  1 Ch D 163, the Tribunal held that the legislature can be taken to have been fully aware of the reality of single director companies when enacting s. 72 and the PTA in 2007. This is because the Corporations Act 2001 (Cth) was in force at that time and had, since its enactment, allowed for the possibility of a single director company;
- applying accepted principles of statutory interpretation and considering context would lead to the conclusion that the word “meeting” in s. 72 encompasses the circumstances of single director companies; SM Boxall noted contextual factors such as the mischief the provision seeks to address (payroll tax evasion or minimisation), the wider grouping provisions and single director companies as a known feature of Australian corporations law;
- a strict interpretation would result in the provision failing to address the mischief it was intended to address, and inconsistency in the application of the provision to single and multiple director companies;
- a number of cases had considered the meaning of the expression “meeting”; In the matter of Climbform Australia Pty Limited  NSWSC 1977 at  provided the clearest statement in support of the proposition that the sole director of a company is a person who, for purposes of s. 72(2)(c)(i) of the PTA, is entitled to exercise more than 50% of the voting power at meetings of the directors of the company. The applicant’s fourth argument, relating to bodies corporate, was dismissed because s. 119 of the Corporations Act 2001 (Cth) provides that companies incorporated by registration, such as the applicant and ADSRPL, are bodies corporate.
The Chief Commissioner’s decision was affirmed.
Link to decision
Integrated Construction Equipment Pty Limited v Chief Commissioner of State Revenue