Winlina Pty Ltd v Chief Commissioner of State Revenue  NSWSC 1080
These proceedings concerned a review of the Chief Commissioner’s decision to group Winlina Pty Ltd (“Winlina”) with Panlirn Pty Ltd (“Panlirn”) via common control (s.70 of the Payroll Tax Act (PTA)). Panlirn carried on its business in NSW and went into liquidation without paying its payroll tax. Winlina therefore became jointly and severally liable for Panlirn’s tax debt.
Winlina challenged the grouping on the basis that it carried on its business in Queensland and did not carry on business in NSW. The issues to be determined were:
- whether Winlina is not a group member with Panlirn, as the grouping provisions of the PTA do not apply to corporations who do not carry on business in NSW; and
- if the PTA applies to corporations that do not carry on business in NSW, whether the PTA is invalid to the extent that it purports to apply to the extraterritorial activities of Winlina, because it exceeds the power of the State Government to make laws “for the peace, welfare and good government of New South Wales”.
The plaintiff submitted that:
- Pt 5 of the Payroll Tax Act (“PTA”) does not apply to Winlina because Winlina is a business wholly based in Queensland and did not “carry on a business” in NSW as it did not employ any person to perform work in NSW or pay wages for work performed in NSW; and
- for the purposes of s. 72 (in Pt 5 of the PTA), the “businesses” referred to are necessarily businesses “carried on” in NSW. Section 12(1)(b) of the Interpretation Act 1987 required the words of a statute to be read as if the words “in and of New South Wales” are incorporated within that statute unless the contrary intention appears. (1) The words “of New South Wales” indicated that there must be a territorial connection between the law and NSW. (2)
The Chief Commissioner submitted that:
- the proper construction of the text of Pt 5 of the PTA, considered in the light of its context and purpose, requires the conclusion that no geographical limit be placed on its application; and
- Part 5 of the PTA was within the constitutional competence of NSW.
The Court held:
- A company may be found to be carrying on a business “in” a particular geographic area even though the bulk of its business is conducted elsewhere.(3)
- For the purposes of Pt 5 of the PTA (if it were assumed that it refers only to a business carried on in NSW), a corporation will carry on business “in” NSW in circumstances where, at least:
- the corporation has a place of business located within NSW;
- and members of the corporation’s management engaged in activity on behalf of the business are resident in NSW and performing tasks on behalf of the business in NSW.(4)
- Winlina carried on business in NSW throughout the relevant period; its registered office and principal place of business were located in NSW; its sole director, who was responsible for the day-to-say management of the company was resident in NSW; its operative trading bank accounts were held with bank branches in NSW; it engaged in a systematic and continuous course of dealings with companies, for a fee, which were registered and trading in NSW; and it loaned monies to companies which were registered and trading in NSW (paras. 80-81).
- Even if Winlina did not carry on business in NSW, no geographical limit is to be placed on Pt 5 of the PTA’s application i.e. there is no requirement that group members must “carry on” a business “in” NSW.
- Division 2 of Pt 2 of the PTA contains its own comprehensive geographic limitation. Section 10 of the PTA provides that “taxable wages are wages that are taxable in this jurisdiction”. Thus, no employer or group member may be liable for payroll tax in more than one State or Territory in respect of the same wages.
- Additionally, s. 79 in Pt 5 of the PTA contains a further relevant limitation. A company which carries on its business independently of, and in a manner unconnected with, the carrying on of businesses by the other group members can apply to be excluded from the payroll tax group under s. 79 of the PTA.
- The suggested additional geographical limitations Winlina advanced were inconsistent with the anti-tax avoidance purpose of Pt 5 of the PTA of ensuring the collection of payroll tax from members of the group is not negated simply because a group member is based in another State.(5)
- The only modern justification of the principle that legislation enacted by a State and operating outside its territory must be connected in some relevant way with the State, is that it may avoid conflicts with other rules of law applicable to the area in which the legislation is intended to operate.(6)
- It was undesirable to address the constitutional validity of a law when the facts necessary to address such an argument (i.e. that Winlina did not conduct business in NSW) have not been proven.
- Winlina bore the onus of demonstrating that during the relevant period Winlina did not carry on business in NSW (7) and did not discharge it.
(1) Summons dismissed.
(2) Plaintiffs to pay the costs of the defendant as agreed or assessed.
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