Background
The Applicant operated three medical centres. In each, doctors were engaged through written agreements to treat patients at those centres. The agreements provided for the respective doctors to use the centres as private practitioners and for the Applicant to provide the doctors with rooms, as well as shared administrative and support services. Pursuant to the written agreements, 30% of the Medicare benefits payable to each doctor in respect of the patients seen at the medical centres was to be paid to the Applicant.
The Applicant and all except three doctors had an arrangement outside of the agreements, where each doctor opted to direct Medicare to pay all benefits paid in respect of the doctor’s patients into a bank account held in the name of the Applicant. Administrative staff employed by the Applicant recorded and reconciled all Medicare benefits received for the doctor and would then pay 70% of those amounts to the doctor. The remaining 30% was retained by the Applicant, representing the payment to be made to it by the doctor under the agreement.
The Chief Commissioner assessed payroll tax under the Payroll Tax Act 2007 (NSW) (“PT Act”) on these payments to the doctors on the basis that the agreements were “relevant contracts” and that the payments were made “for or in relation to the performance of work relating to a relevant contract”.
The Statutory Framework
The PT Act imposes payroll tax on wages, including payments deemed to be wages. Division 7 of Part 3 of the PT Act expands the scope of “employer”, “employee” and “wages” so as to extend to cases where there is a “relevant contract”.
Decision of NCAT at first instance
The Tribunal confirmed the Assessments. The Tribunal found that the agreements between the Applicant and the doctors were “relevant contracts” as the agreements secured the provision of the services of the doctors to the patients of the Applicant’s medical centres, those services were work-related and none of the exemptions to the relevant contract provisions applied.
The Tribunal also found that the payments made to the doctors should be deemed wages by s. 35 of the PT Act, as the payments were made for or in relation to the performance of work relating to a relevant contract. The Tribunal determined that there was a clear relationship between the services and the relevant contract, because the services involved the performance of work and were the very subject of the agreements. The Tribunal also decided that there was a clear, indirect relationship between the performance of work and the payments made to the doctors, in accordance with s.35.
Decision of NCAT Appeal Panel
The NCAT Appeal Panel dismissed the Applicant’s appeal and refused leave to raise a new argument on appeal. The Applicant had raised seven (7) grounds of appeal during the appeal. In substance, these grounds contended that the Tribunal at first instance had erred in construing ss. 32 and 35 of the PT Act in determining whether the amounts that were paid to the doctors were deemed wages. The NCAT Appeal Panel held that the Applicant had impermissibly asserted that the Tribunal erred in its construction and application of certain provisions of the PT Act without also identifying how those errors purportedly occurred.
Submissions
Submissions to Court of Appeal
The Applicant submitted 4 grounds of appeal, as follows:
- The Appeal Panel erred in concluding that grounds 1-3 of the Amended Notice of Appeal were nothing more than challenges to the Tribunal's findings of fact and had failed to exercise its jurisdiction.
- The Appeal Panel erred by failing to consider the questions of law raised in Grounds 1-3 of the Amended Notice of Appeal and in failing to find that the Tribunal at first instance had erred in concluding that the services were supplied to the Applicant, and that there was a relevant contract.
- Further or in the alternative to 2, the Appeal Panel erred in failing to consider and in failing to find that, on the facts as found by or open to the Tribunal at first instance, the definition of "relevant contract' in s. 32(1) of the PT Act was incapable of being satisfied.
- In the event that there is a relevant contract as defined in s. 32 of the PT Act, then with respect to s. 35 of the PT Act, the Appeal Panel erred in failing to consider questions of law raised by grounds 5 and 6 of the Amended Notice of Appeal and in failing to find that the Tribunal at first instance, in concluding that amounts were paid by the Applicant to doctors "for or in relation to the performance of work', erred by:
- misconstruing the ambit of the expression "for or in relation to the performance of work';
- misdirecting itself by applying distinguishable authorities and ignoring relevant context including the objects of the amendments to the Act; and
- failing to find on the facts as found or open to be found by the Tribunal at first instance, that the statutory test in s. 35 was not capable of being satisfied.
Decision
The Court of Appeal firstly considered its jurisdiction in hearing the matter and noted that it is conferred by s. 83 of the Civil and Administrative Tribunal Act 2013 (NSW). Since there is no appeal as of right, the Applicant must make out a case for leave [31]. Further, the appeal is confined to “[an] appeal on a question of law” and those constraints are elements of the limited grant of jurisdiction conferred by the statutes.
The principal issue on appeal was that the Applicant advanced submissions of a seemingly factual nature and “fell short of squarely identifying a question of law” [34]. When the Applicant was pressed on the seemingly factual nature of the submission, it argued that a question of law arose on the basis that statutory construction was required in interpreting the meaning of a “relevant contract” under s. 32 of the PT Act. The Court of Appeal disagreed with this proposition, stating that grounds 1-3 raised a question of applying the statute to the facts, rather than a question of statutory construction.
The Court of Appeal, in considering whether ground 4 raised a question of law, reviewed several arguments including the Applicant’s argument that a payment of wages under s.35 had to include a “quid pro quo”; a mere payment was not sufficient to constitute “wages”. The Court of Appeal disagreed, endorsing the reasoning of the Victorian Court of Appeal in The Optical Superstore case that “payable” or “paid” in s.35 of the PT Act does not exclude payments to which the payee (the deemed employee) is contractually or beneficially entitled. The Court of Appeal found that ground 4 raised no question of law and refused leave to appeal.
It was further submitted by the Applicant that the fact that payments related to the 3 medical practitioners who processed their own claims for Medicare benefits were not assessed showed that the construction adopted by the Chief Commissioner was “absurd or capricious”. The Court of Appeal disagreed, stating that the definitions of “employer”, “employee” and “wages” were intended to expand the basis upon which payroll tax was assessed.
Justice Leeming made two further points:
- This application for leave to appeal illustrates the importance of those contemplating bringing an appeal which is confined to a question of law, identifying the question of law. That obligation is not satisfied by allegations asserting error of law, or specifying grounds which merely allege “error”.
- Persons operating other medical practices may have adopted similar administrative arrangements whereby Medicare benefits which have been assigned by patients to the practitioners are collected by the operators of the centre and distributed to the practitioner. This runs the risk of the deeming provisions in Division 7 of Part 2 of the Act being engaged. As is clear from the position of the 3 practitioners who processed their own claims for Medicare benefits, there is a ready mechanism to avoid that result which is available. That tends against the conclusion that an important question of general application is thrown up by this litigation.
Order
The summons seeking leave to appeal is dismissed with costs.
Link to the decision
