Qantas Airways Limited v Chief Commissioner of State Revenue [2015] NSWSC 826

Date of judgement 30 June 2015 Proceeding No. 2013/233532
Judge(s) White J
Court or Tribunal Supreme Court of New South Wales, Equity Division
Legislation cited Income Tax Assessment Act 1936 (Cth)

Pay-roll Tax Act 1971

Payroll Tax Act 2007

State Revenue Legislation (Further Amendment) Act 1992

State Revenue Legislation Further Amendment Act 1996

State Revenue Legislation (Miscellaneous Amendments) Act 1996

Superannuation Industry (Supervision) Act 1993 (Cth)

Taxation Administration Act 1996
Catchwords TAXES AND DUTIES – payroll tax – exemption from payroll tax of employer superannuation contributions paid “in respect of services performed by an employee before 1July 1996” under the Payroll Tax Act 2007 (NSW) Schedule 6, clause 4(1) and the Pay-Roll Tax Act 1971 (NSW) s 3AA(6A) – apportionment of contributions to a defined benefits scheme by reference to pre and post 1 July 1996 services – taxpayer paid contributions while the fund was in surplus – surplus was not used to reduce size of contributions – contributions paid at a higher “normal cost” level rather than an “adjusted normal cost“ level – whether contributions could be apportioned – whether CSR Ltd v Chief Commissioner of State Revenue [2006] NSWSC 1380; (2006) 68 NSWLR 440 was correctly decided that top-up contributions could be apportioned notwithstanding the fund was not in deficit as at 30 June1996 – whether record-keeping requirements were met by the taxpayer where calculations of payments were not recorded contemporaneously with payments – held, allowing the appeal in part and remitting the matter to the Chief Commissioner: (1) CSR Ltd v Chief Commissioner of State Revenue was correctly decided; (2) the taxpayer was entitled to refunds in respect of top-up contributions and in respect of amounts paid in excess of the adjusted normal cost level; (3) the taxpayer did not prove that any part of the adjusted normal cost level contributions could be apportioned because a simple ratio of pre and post 1 July 1996 services could not be applied to these contributions.
Cases cited CSR Ltd v Chief Commissioner of State Revenue [2006] NSWSC 1380; (2006) 68 NSWLR 440

Metricon Qld Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 982; (2013) 92 ATR 169

State Government Insurance Office v Rees (1979) 144 CLR 549

Tasty Chicks Pty Limited v Chief Commissioner of State Revenue [2011] HCA 41; (2011) 245 CLR 446

Workers’ Compensation Board of Queensland v Technical Products Pty Limited (1988) 165 CLR 642


The issue in the case was whether certain “top-up” contributions to the defined benefit superannuation fund were liable to pay-roll tax under the Pay-Roll Tax Act 1971 (“the 1971 Act”) and the Payroll Tax Act 2007 (“the 2007 Act”) for the financial years ending 30 June 2006 to 30 June 2010.

Under both Acts in the years in question, superannuation contributions made by an employer in respect of an employee were included within the definition of “wages”, and therefore liable to payroll tax, except for superannuation contributions made “in respect of services rendered by an employee before 1 July 1996”.

The Chief Commissioner contended that in its application to a defined benefit superannuation scheme, this exclusion applies only to contributions made after 1 July 1996 to make a deficiency in the assets of the scheme to meet benefits payable in respect of services rendered by the employees up to that date. That submission was made and rejected in an earlier case of CSR Ltd v Chief Commissioner of State Revenue [2006] NSWSC 1380 (“CSR”); one of the Chief Commissioner’s contentions was that this case was wrongly decided.

The Qantas Superannuation Plan (“the Plan”) is a superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth).

The trustee of the Plan was required to appoint an actuary to value the asset and liabilities of the Plan at least once in every three years. The Plan provided for the quantum of superannuation to be determined by applying a multiplier to the member’s final average salary where the multiplier depended upon the total years of service. Qantas contended that to the extent that those superannuation contributions relate to members’ service before 1 July 1996, they are exempt from payroll tax.

Over time, the actuary made recommendations about appropriate contributions to be made to the Plan and the detailed history was set out in the Plaintiff’s evidence.

The Plan was substantially in surplus as at 1 July 1996. Following the global financial crisis in 2008 the actuary to the Plan advised that the surplus had diminished from $227 million in July 2008 to $6 million in October 2008. By 30 June 2009 there was a deficit of assets to vested benefits. During this period, in addition to the “normal cost contributions”, Qantas made “top-up” contributions in 2009 and 2010.

In November 2010 Qantas requested a refund of overpaid payroll tax in the amount of $6,260,527.00. An actuarial report by Russell Campbell that dealt with apportionment was provided with that application. The Chief Commissioner allowed a refund of the additional “top-up” contributions made in the financial years ended 30 June 2009 and 2010 that were in respect of services performed by an employee before 1 July 1996. The Chief Commissioner rejected that application in respect of the normal cost contributions.


  1. Whether CSR was correctly decided:

    The Court held that CSR was correctly decided, but noted that the Chief Commissioner was correct in that CSR was not determinative of the issues in this proceeding. The Court also agreed with the Defendant that the methodology applied by Mr Campbell was not a recognised method for apportioning superannuation contributions. The Court noted that CSR concerned top-up contributions which could be apportioned; normal cost contribution could not be apportioned.

    The Court agreed with Justice Gzell’s view that the exclusion in s.3AA(6A) of the 1971 Act is not limited to a situation of a fund’s being in deficit as at 30 June 1996; further clause 3(2) of Schedule 3 of the 2010 Act does not provide that there is a requirement for a deficiency as at 30 June 1996, on its terms or by implication because of the terms of the 1971 Act.

  2. Whether the methodology for apportioning applied in CSR can be applied in Qantas to payments of “normal cost” contributions

    The experts for both parties agreed that the methodology applied in CSR was not appropriate, as the present proceeding concerned “normal cost” contributions; that is, contributions that were made to fund the ongoing accrual of benefits to members for the ensuing year. [85]

    The Court held that the issue is to be determined by principles of statutory interpretation, not actuarial practice, however, actuarial practice is not irrelevant. The Court held that the construction of the 2010 Act is assisted by consideration of the 1971 Act, noting that the 1996 amendments did not have retrospective effect. [90]

    None of the actuaries were able to proffer a methodology or calculation to guide the Court. Ultimately, the Court held:

    “In the absence of any demonstrable way of properly apportioning normal cost contributions so that some proportion could be said to have been paid in respect of services rendered by employees before 1 July 1996, the taxpayer cannot satisfy the onus that lies on it (Taxation Administration Act, s 100(3)) to show that payroll tax was not payable on the contribution.”[94]
  3. Whether contributions paid by Qantas to the extent that they exceeded adjusted “normal costs” contribution can be apportioned in the manner claimed:

    The Court accepted the evidence and calculations of the Plaintiff’s expert, Mr McRae. The calculations were not disputed by the Defendant although the basis of the calculation was disputed. Mr McRae’s view was that there is no real difference in principle between the making of top-up contributions to rectify a deficiency and the making of voluntary contributions to a surplus. [95]

    The Court held that the contributions could be apportioned on the basis of the following reasoning:

    “The payment of the normal cost contribution cannot sensibly be segregated from the other moneys and investments of the Qantas Superannuation Plan. That is to say, there is no difference between applying any part of the existing investments of the plan (including those which are surplus to the calculated accrued benefits) towards payment of members’ benefits, and applying the amounts contributed by Qantas as normal cost contribution in the years in question towards payment of those liabilities. In the case of the “adjusted normal cost differential” it is possible to make a logical and evidence-based apportionment between employees’ pre and post 1 July 1996 service. In my view to the extent contributions were made by Qantas in excess of adjusted normal cost, it is possible to say how much of the contributions were made in respect of services rendered or performed by employees before 1 July 1996 and to that extent they should not be included in Qantas’ taxable wages.” [98]
  4. Whether the Court should be satisfied that the superannuation contributions were sufficiently recognised in Qantas’s records for payroll tax purposes:

    The Court noted that the Defendant could not point to any particular deficiency in the records kept by Qantas. The Court held that the records to allow the relevant calculations to be made, were adequately kept even though the calculations to apportion the contributions between exempt and non-exempt components were not actually made at the time the records were created. [83]


The Court ordered as follows:

  1. The decision of the Chief Commissioner dated 29 July 2011, in so far as it refused the refund sought by the Plaintiff dated 17 November 2010, should be revoked.

  2. Qantas’ application for an order that the refund sought by it by PricewaterhouseCoopers’ letter of 17 November 2010 be allowed in full should be dismissed.

  3. Qantas is entitled to a refund of $2.3 million in addition to the refund allowed by the Chief Commissioner by his letter of 29 July 2011, and interest calculated in accordance with s. 105 of the Taxation Administration Act.

  4. The matter is remitted to the Chief Commissioner to be determined in accordance with these reasons.

Link to decision

Qantas Airways Limited v Chief Commissioner of State Revenue [2015] NSWSC 826

Last updated: 28 August 2018