Impala Kitchens and Bathrooms v Commissioner of State Revenue [2025] NSWCATAD 162

Introduction

These proceedings arise out of a dispute between Impala Kitchens and Bathrooms Pty Ltd ("Applicant") and the Chief Commissioner of State Revenue ("Respondent") over assessments of penalty tax and interest. The penalty tax and interest were assessed due to payroll tax not being paid on time.

The Respondent asserts that the Applicant failed to exercise reasonable care in meeting its payroll tax obligations and that the circumstances leading to the late payment were not beyond the Applicant’s control. Accordingly, the imposition of penalty tax and interest is warranted in the absence of any evidence to the contrary.

The issue for determination by the Tribunal was whether the assessed penalty tax and interest should be remitted.

Background

The Applicant was incorporated as a company on 21 July 2022.

On 16 April 2023, the Respondent issued a letter to the Applicant confirming its registration for payroll tax. In subsequent correspondence, the Applicant was advised that payroll tax payments were required to be made monthly, by the 7th day of each month. The Applicant failed to comply with these requirements, having intentionally disregarded the correspondence instructing monthly payment.

On 28 April 2023, the Respondent issued a payroll tax assessment to the Applicant for the period 21 July 2022 to 31 January 2023, which included interest and penalty tax.

On 6 February 2025, the Applicant lodged an application with the Civil and Administrative Tribunal ("the Tribunal") seeking review of the Respondent’s decision disallowing the objection.

The Applicant did not oppose the primary tax, only penalty and interest.

The Statutory Framework

Payroll Tax Act 2007 ("PTA")

9 When must payroll tax be paid

1. A person who is liable to pay payroll tax on taxable wages must pay the tax:
   1. within 7 days after the end of the month in which those wages were paid or payable, other than the month of June, and
   2. within 28 days after the end of the month of June in relation to taxable wages paid or payable in the month of June".

Taxation Administration Act 1996 (NSW) ("TA Act")

27 Amount of Penalty Tax

Where reasonable care has been taken, s 27(3)(a) of the TA Act may allow for a determination that penalty tax is not payable. It provides as follows:

1. The amount of penalty payable for a tax default is, subject to this Division:
   1. 25% of the amount of tax unpaid, or
   2. if the taxpayer is a significant global entity within the meaning of the Income Tax Assessment Act 1997 of the Commonwealth - 50% of the amount of tax unpaid.
2. The Chief Commissioner may increase the amount of penalty tax payable in respect of a tax default to 75% of the amount of tax unpaid if the Chief Commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a taxation law.
3. The Chief Commissioner may determine that no penalty tax is payable in respect of a tax default if the Chief Commissioner is satisfied that:
   1. the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law, or
   2. the tax default occurred solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.

33 Remission of penalty tax

1. The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount.
2. The imposition or remission of interest is not relevant to the imposition or remission of penalty tax.

Submissions

The Respondent made submissions to the effect that the Applicant failed to take reasonable care and in the absence of any evidence to the contrary is liable to pay penalty and interest arising from the tax default.

The taking of reasonable care at a minimum requires some steps to have been taken by the Applicant to understand and comply with their obligations as a taxpayer. There was no evidence of any such steps having been taken.

At the hearing, the Applicant said that they did not know that monthly return of payroll tax was required until the Respondent informed the Applicant on 16 April 2022 of the requirement. The evidence presented demonstrated that late payment occurred for certain periods after that date.

The Applicant acknowledged that, from the date of the Respondent’s correspondence, they were aware that their payroll tax obligations were to be met on a monthly basis. However, the Applicant deliberately disregarded this requirement, relying instead on their prior experience in other businesses where annual payments had been permitted. The Applicant operated under the mistaken belief that payroll tax payments could be made at their own discretion.

Conclusion

The Tribunal determined that they were unable to find that the Applicant took reasonable care to comply with their obligations to pay payroll tax in accordance with the PTA. There are no special circumstances or other circumstances to warrant a remission of penalty tax under s 33 of the TA Act.

The absence of reasonable care on the part of the Applicant, though not determinative, was found to be a relevant matter going against the exercise of discretion under s 33. Further, remission of penalty tax would not be consistent with the general legislative purpose. That purpose is to allow for the remission of penalty tax where reasonable care has been taken or where a tax default occurred because of circumstances outside the control of the taxpayer.

The onus is on the Applicant to show, on the balance of probabilities, that the evidence establishes the findings of fact necessary to enable the Tribunal to remit penalty tax and interest. They have not done so. the Respondent’s assessments under review are confirmed.

Orders

The assessments under review are confirmed.

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