|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Supreme Court of Victoria |
Nationwide Towing 
& Transport Pty Ltd v Commissioner of State Revenue (No 2) [2018] VSC 609 (26 October 2018)
Last Updated: 26 October 2018
AT MELBOURNE
COMMERCIAL COURT
TAXATION LIST
S CI 2017 02966
S CI 2017 02967
S CI 2017 02968
|
v
|
|
---
|
JUDGE:
|
|
|
WHERE HELD:
|
Melbourne
|
|
DATE OF HEARING:
|
|
|
CASE MAY BE CITED AS:
|
|
|
MEDIUM NEUTRAL CITATION:
|
TAXATION AND REVENUE – Exceptions to deemed employment relationship for payroll tax purposes – Whether services are performed by a person who ordinarily performs services of that kind to the public generally – Relevance of whether the putative deemed employee conducts a “genuine independent business” – Accident Compensation Commission v Odco Pty Ltd [1990] HCA 43; (1990) 64 ALJR 606 – Re Behmer & Wright Pty Ltd and the Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 – Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 – Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215 – Payroll Tax Act 2007 s 32(2)(b)(iv) – Revenue Ruling PTA021 (1 July 2007).
---
|
APPEARANCES:
|
Counsel
|
Solicitors
|
|
For the Appellants
|
Mr R Merkel QC
Mr E M Nekvapil |
JRT Partnership Pty Ltd
|
|
For the Respondents
|
Mr C J Horan QC
Ms C M Pierce |
Solicitor for the Commissioner of State Revenue
|
Introduction
1 These proceedings are a series of appeals under s 106 of the Taxation Administration Act 1997 (“the TAA”) which arise from the Appellants’ objections to assessments under the Payroll Tax Act 2007 (“the Payroll Tax Act”).[1]
2 On 8 December 2017, this Court ordered a question to be tried as a separate and preliminary question in relation to the nature of an appeal under s 106 of the TAA against a determination of the Commissioner of the kind the subject of the present proceedings. The Court, in a judgment delivered 23 May 2018 (“the previous judgment”),[2] determined the question in favour of the Appellants in answering the question as follows:[3]
The nature of an appeal of that kind is such that, to succeed, the Appellants must establish that the Respondent’s failure to be satisfied of the matter in section 32(2)(b)(iv) of the Payroll Tax Act 2007 was affected by a legal error of the kind identified by Dixon J in Avon Downs Proprietary Ltd v FCT [1949] HCA 26; (1949) 78 CLR 353 at 360.
3 The substantive matters the subject of this appeal were heard on 9 October 2018 and are now determined on the basis of the reasons set out in the previous judgment. Terminology, abbreviations and the like used in the previous judgment are also used in these reasons. For the convenience of the reader, there is some repetition of material which appears in the previous judgment, such as statutory material and some other matters, including some procedural history and factual matters.
Factual and procedural background
4 On 24 March 2015, the Commissioner of State Revenue (“the Commissioner”) notified the Appellants of assessments under the Payroll Tax Act of tax they were liable to pay for the financial years ending 2010, 2011, 2012, 2013 and 2014 (“the Assessments”).[4]
5 The Appellants were dissatisfied with the Assessments and, on 19 May 2015, lodged a written objection with the Commissioner (“the Objection”),[5] as they were entitled to do under the provisions of Division 1 of Part 10 of the TAA.
6 The primary substantive ground of objection is set out in paragraphs 14(a) and (b)(ii) of the Objection (“the Primary Ground”).[6] The Primary Ground related to payments by the Second Appellant (“EVS”) to its contractors, and impugned a significant portion of the total amount of the Assessments.
7 In essence, the Primary Ground asserted was that the Assessments should not have included payments by EVS to its contractors, because:[7]
(1) the Commissioner should have been satisfied that the services performed by the contractors were services performed by persons who ordinarily performed services of that kind to the public generally in that financial year, within the meaning of s 32(2)(b)(iv) of the [Payroll Tax Act]; and therefore(2) the payments to the contractors were not made for or in relation to the performance of work relating to a “relevant contract” as defined in ss 31 and 32 of the Payroll Tax Act; and therefore
(3) those payments could not be taken to be “wages” by operation of s 35(1) of the Payroll Tax Act.
8 On 12 November 2015, a delegate of the Commissioner gave notice of the determination of the Objection, in accordance with s 103(1) of the TAA, having considered the Objection and, among other things, disallowed the Primary Ground under s 101(1) of the TAA.[8]
9 The Commissioner, in the notice of determination of the Objection, gave reasons for disallowing the Primary Ground, which, among other things, included that the Commissioner was not satisfied that the services performed by the contractors were services performed by persons who ordinarily performed services of that kind to the public generally in the relevant financial year, within the meaning of s 32(2)(b)(iv) of the Payroll Tax Act.[9] More particularly, the grounds upon which the Objection was disallowed were summarised by the Commissioner in earlier submissions, as set out in the previous judgment.[10]
10 Between 2009 and 2014, EVS was contracted by RACV Road Services Pty Ltd (“RACV”) to provide emergency roadside assistance services to eligible RACV members. EVS contracted with and paid contractors (“the Contractors”) to provide the emergency roadside assistance services, which EVS had contracted to provide to eligible RACV members. In oral submissions, the Appellants pointed to four contractual relationships flowing from those arrangements.[11] For the reasons which follow, it is not, however, necessary to examine these relationships in particular detail.
11 The question for the delegate of the Commissioner (“the Delegate”) under s 32(2)(b)(iv) of the Payroll Tax Act was whether the Delegate was satisfied that the services supplied by the Contractors to EVS during each financial year were performed by persons “who ordinarily perform[ed] services of that kind to the public generally” in the relevant financial year. As indicated in the previous judgment, the Delegate was not satisfied of that matter, for reasons given in writing in accordance with her obligation under s 103(2) of the TAA on 12 November 2015 (“the Reasons”).
12 It follows, on the basis of the previous judgment and the matters to which reference has been made, that the issue on this appeal is whether that failure of the Delegate to be satisfied was affected by a legal error of the kind identified by Dixon J in Avon Downs Pty Ltd v Federal Commissioner of Taxation (“Avon Downs”).[12]
13 On this basis, it is necessary to consider the reasons given by the Delegate for disallowing the Objection in order to determine whether there has been legal error of the Avon Downs kind. EVS contends that the Reasons disclose that the Delegate misdirected herself as to the relevant question in applying s 32(2)(b)(iv) of the Payroll Tax Act and that her conclusion was affected by a mistake of law as to the proper construction of the sub-section, which constitutes legal error of the kind identified in Avon Downs.
Delegate’s reasoning
14 The Delegate’s reasoning for not being satisfied that the services supplied by the Contractors to EVS during each financial year were performed by persons “who ordinarily perform[ed] services of that kind to the public generally” in that financial year is set out in the following passages in the Reasons:
[Section 32(2)(b)(iv)], according to Revenue Ruling PTA021, requires the Commissioner to be satisfied that the contractor provides the services in the course of conducting a genuinely independent business, which stands in the market place and ordinarily renders like services to the public generally. ... The Commissioner, in making his determination, will conduct a broad review of the contractor’s business and, in so doing, will consider many issues....
It is commonplace for a worker to provide services to a third party as part of their role with their principal/employer. In Accident Compensation Commission v Odco [1990] HCA 43; (1990) 95 ALR 641, the High Court held that by the tradesmen attending and doing work for the builder, the tradesmen supplied services to Odco (a temp agency) for the purposes of its business, notwithstanding at the same time they supplied services to the builder for the purposes of its business...
...
Relevant law relating to [s 32(2)(b)(iv)] is set out above.
...
As set out above, it is commonplace for a worker to provide services to a third party as part of their role with their principal/employer.
The available information indicates that any services provided to the ‘public’ (i.e. RACV Members) by the [Contractors] were not provided in the course of conducting a genuinely independent business. Rather, the services were provided to RACV Members in the course of providing services to EVS. Further, there is no evidence that the [Contractors] ordinarily render services of the same type rendered to EVS to the public outside of their agreements with EVS. In particular, the available information indicates that (whatever the position in prior years) for the 2009-2010 to 2013-2014 financial years, the [Contractors] did not operate their own garages and/or mobile automotive repair businesses in addition to providing services to RACV Members under their agreements with EVS.”
[Appellants’ emphasis]
15 As the Delegate observed in the Reasons, EVS contended, in its written objection, that the Contractors “provide[d] their services to the public generally (‘albeit, in part through referrals by EVS and in part directly to the public’)”.[13]
16 In relation to the services provided by Contractors “directly to the public”, the Appellants noted the acknowledgement in the Reasons that:[14]
8.1 the Appellants had provided statements by Contractors, which showed that:[15](a) while attending RACV members, those Contractors regularly provided to the members “additional services ... such as additional automotive repair or the sale of parts/consumables (such as fuel, headlight globes and battery terminals), which [were] outside the scope of their agreement with EVS”;
(b) in such cases, the RACV members paid the Contractor directly for these additional services; and
(c) to enable those additional services to be provided the Contractors purchased and stocked the spare parts and consumables at their own cost.
8.2 the Appellants submitted (by their notice of objection) that the Contractors sold “spare parts to the public and install[ed] them, ‘which services were of the same kind to those provided by the [Contractors] to EVS under their respective contractual arrangement”.[16]
17 The Appellants also claimed that the services provided to RACV members (including those signing up at the roadside) were services of the relevant kind because those services were available to the public generally, within the meaning of s 32(2)(b)(iv) of the Payroll Tax Act.
18 The grounds relied upon by the Appellants in this appeal are those contained in paragraphs 14 and 17 of the Objection. The primary substantive ground was set out in paragraphs 14(a) and (b)(ii) of the Objection. Paragraph 14 of the Objection stated:
(a) The payments (purported taxable wages) made by EVS to each of the Contractors in the years of assessment were not made for or in relation to the performance of work relating to a “relevant contract” within Division 7 of the Payroll Tax Act 2007. It follows that (i) EVS could not be taken to be an “employer” within section 33, (ii) the Contractors could not be taken to be “employees” within section 34, and (iii) the amounts paid by EVS to the Contractors in the years of assessment could not be taken to be “wages” within section 35.(b) Without limiting the generality of ground (a), the payments (purported taxable wages) are excluded from the scope of Division 7 because they were made by EVS in the course of its business to each of the Contractors who supplied EVS with services for or in relation to the performance of work where the Commissioner was satisfied or should now be satisfied that those services were performed by the Contractors who ordinarily perform services of that kind to the public generally in each of the years of assessment within section 32(2)(b)(iv) of the Payroll Tax Act 2007.
Particulars
(i) To the extent that this ground asserts that the Commissioner was relevantly satisfied, it relies upon the earlier determinations.
(ii) If and to the extent that the earlier determinations are not sufficient to sustain the present claim for exemption under section 32(2)(b)(iv), the Taxpayer relies on the facts in attachment B to sustain its contention that the Commissioner should now be relevantly satisfied. To that end, the contractual arrangement between EVS and the Contractor is an arrangement where the Contractors provided services to the public generally, albeit, in part through referrals by EVS and in part directly to the public. To that end, the Contractors provided services to the public generally by way of sale and installation of spare parts, which services were of the same kind to those provided by the Contractors to EVS under their respective contractual arrangement.
...
19 The Delegate summarised the contention, in particular that in (ii), both in the introductory part of the Reasons[17] and again in the part explaining why that contention was rejected.[18] However, the Reasons do not refer to Attachment B, which stated the facts on which EVS relied. Attachment B stated:
ATTACHMENT B
(a) Members must pay for all spare parts unless they are provided as part of the emergency roadside assistance package (page 22); and(b) spare parts do not include consumables such as oil, fluids, coolant and batteries, which the Members must pay for themselves.
...(e) The Contractors were not required to provide services exclusively to EVS and nothing in the arrangements prevented the Contractors from engaging or being concerned in any other business or provide services to the public. However, EVS vehicles could not be used to provide services to any other business unless authorised by EVS.
(f) In consideration of the provision of services, EVS agreed to pay to the Contractor an agreed job rate for each completed job. Payment was made to depend on the Contractors providing to EVS a properly completed invoice that specified the services provided during the invoicing period. ... At all times in the years of assessment, EVS paid a per-job rate and not an hourly rate.
...
(h) The Contractors were required, at their own cost, to provide and maintain the necessary equipment, spare parts and consumables to mobilise the Members/public.
(i) The tools that the Contractors were required to hold in their vehicles included:
(ii) The spare parts that the Contractors were required to hold in their vehicles included:
(iii) The consumables that the Contractors were required to hold in their vehicles included:
(i) The Contractors provided services/goods and received payments from the Members/public in four situations:(i) For the sale and installation of spare parts to Members that were not entitled to the spare part allowance. The Contractor charged the Members for the supply and installation of the spare parts, fuel or other consumables and kept the monies received. That is such monies were not passed on to EVS or deducted from the Contractor’s invoiced fees because they were sales made by the Contractor directly to Members/public.
(ii) For the sale and installation of spare parts or fuel in excess of the spare part or fuel allowance. The Contractor charged the Members for the supply and installation of the spare parts or for additional fuel in excess of the allowance and kept the monies received. That is such monies were not passed on to EVS or deducted from the Contractor’s invoiced fees because they were sales made by the Contractor directly to Members.
(iii) For the sale and supply of consumables. The Contractor charged the Members for the supply of the consumables and kept all the monies received. That is such monies were not passed on to EVS or deducted from the Contractor’s invoiced fees because they were sales made by the Contractor directly to Members.
(iv) For new RACV membership fees. Money received by Contractors for new RACV membership fees were previously deducted from the Contractor’s remuneration, but since mid-2014 were sent directly to the RACV by the Contractor.
(j) The Contractors were entitled to be reimbursed by EVS for any spare parts or fuel sales which the Members received free of charge pursuant to the spare part or fuel allowance.
(k) Major mechanical repairs (repairs in excess of the allowance or that were not the subject of an allowance) were carried out by direct arrangement between the Contractor and the Members.
(l) Member complaints referable to services (including spare parts) provided by the Contractor were referred to the Contractor who bore the cost of any further services and parts necessary to resolve the complaint.
[Appellants’ emphasis]
20 The Reasons referred to a previous determination in favour of EVS on the equivalent question, on 21 September 2006.[19] During that process the Commissioner:
(1) initially considered that “the evidence provided does not support the claim that the Contractors are exempt under [the provision antecedent to s 32(2)(b)(iv)] because the information does not show that each of the Contractors ordinarily renders services of that kind, being ‘emergency roadside services under contract to RACV’ to the public generally in each of the relevant financial years”;[20] but
(2) later, following receipt of legal advice, wrote: “[b]ased on the legal opinion, I advise that the sale of spare parts and the services provided by some of the contractors via their own automotive repair shop or mobile repair services are considered to be the services of the same kind to that provided by the contractors to EVS under the Service Van Contractor Agreement”.[21]
21 During the process of the consideration of the Objection in 2015, EVS provided four statements from Contractors, in response to the Commissioner’s invitation. It is the position, as the Delegate observed, that the statements were “largely identical”, although they did have some differences. As contended by the Appellants, it is, consequently, sufficient to set out one by way of example:
I, Marek Lamaskewski, make the following statement:
...
(a) Consumables: fuel, oil, coolant and power steering fluid;(b) Spare Parts: headlight globes, fan belts, fuses and hoses.
(a) approximately half of my call-outs would involve the sale and supply of spare parts by me to the Customer, commonly headlight globes which I may buy from an automotive supplier for say $10 and sell to Customer for say $15;(b) approximately half of my call-outs would involve the sale and supply of fuel and/or oil by me to the Customer;
(c) if the spare part is minor such as fuses, then I do not usually charge the Customer for these parts because individually they are of little value (e.g. $0.50 to $1.00). I bear this cost.
(a) the majority of spare parts I sell and install to my Customers are paid for by the Customer to me at the time of installation; and(b) all oil and coolant that I sell and supply to my Customers are paid for by the Customer to me at the time of supply.
[Appellants’ emphasis]
22 On 12 November 2015, the Delegate:
(1) having considered the Objection, disallowed (among other things) the objection particularised in paragraph 14(b)(ii) under s 101(1) of the TAA;
(2) gave notice of the determination of the Objection, in accordance with s 103(1) of the TAA; and
(3) in that notice, provided the Reasons.
23 On 17 December 2015, the Appellants, being dissatisfied with the determination of the Objection, requested in writing, in accordance with s 106(1) of the TAA, that the Commissioner treat their objection as an appeal and cause it to be set down for hearing at the next sittings of this Court.
24 The contention by EVS that the Contractors provided services of the relevant kind direct to the public relied on evidence of the Contractors providing additional services to drivers, outside of their contract with EVS; as set out above.
25 The Appellants contend that the Delegate rejected that contention by reference to an erroneous dichotomy—erected on the basis of Revenue Ruling PTA021 and, perhaps, the decision of the High Court in Accident Compensation Commission v Odco Pty Ltd (“Odco”)[23]—between services provided “in the course of conducting a genuinely independent business” and services provided “in the course of providing services to EVS”. The dichotomy was erroneous because the services of the same kind that are to be provided to the public for the exemption in sub-section (iv) to apply, might, but do not need to be, provided in the course of conducting a genuinely independent business of providing those services to the public.
26 It is also said by the Appellants that it is a mistake to construe the provisions of s 32(2)(b)(iv) as anti-avoidance provisions—first because there are specific anti-avoidance provisions in this legislation and, secondly, because there is no suggestion that the arrangements the subject of these proceedings are a sham of any kind.[24] In my view, the first proposition does follow from the provisions and structure of the Payroll Tax Act and the second is not suggested by the Commissioner. Consequently, in this context, I am of the view that these provisions do not call for or imply the import of the word “genuine” as though they were anti-avoidance provisions.
27 Thus the Appellants contend that the question arising is whether, in approaching the matter in that way, the Delegate misdirected herself as to the questions required to be addressed by s 32(2)(b)(iv) of the Payroll Tax Act or otherwise made a mistake of law. More particularly, the Appellants contend that the error of the Delegate was to impermissibly read into s 32(2)(b)(iv) additional words, as indicated below:[25]
(iv) those services are supplied under a contract to which subparagraphs (i) to (iii) do not apply and the Commissioner is satisfied that those services are performed by a person who ordinarily performs services of that kind in the course of conducting a genuinely independent business of providing those services to the public generally in that financial year.[26]
Thus it is said that the Delegate’s error is to employ an example of a kind of case that can fall within the exemption set out in s 32(2)(b)(iv) as a mandatory criterion for falling within those provisions.
Statutory provisions
28 As its name implies, the Payroll Tax Act makes “employers” liable to pay “payroll tax” on all “wages” paid by the employer.[27] “Wages” means “wages, remuneration, salary, commission, bonuses or allowances paid or payable to an employee” and includes “an amount that is included as or taken to be wages by any other provision of [the Payroll Tax Act]”.[28] Section 35(1) of the Payroll Tax Act is one such provision, and a provision which is critical in the present context. It provides:
For the purposes of [the Payroll Tax Act], amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract or the re-supply of goods by an employee under a relevant contract are taken to be wages paid or payable during that financial year.
The italicised terms are the subject of the provisions of ss 32, 33 and 34 of the Payroll Tax Act.
29 Other critical provisions of the Payroll Tax Act are those contained in s 32(2)(b)(iv) which, together with some legislative context, are as follows:
Division 7 — Contractor provisions...
32. What is a relevant contract?
(1) In this Division, a relevant contract in relation to a financial year is a contract under which a person (the designated person) during that financial year, in the course of a business carried on by the designated person—
(a) supplies to another person services for or in relation to the performance of work; or
(b) has supplied to the designated person the services of persons for or in relation to the performance of work; or
(c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for re-supply of the goods to the designated person or, where the designated person is a member of a group, to another member of that group.
(2) However, a relevant contract does not include a contract of service or a contract under which a person (the designated person) during a financial year in the course of a business carried on by the designated person—
(a) is supplied with services for or in relation to the performance of work that are ancillary to the supply of goods under the contract by the person by whom the services are supplied or to the use of goods which are the property of that person; or
(b) is supplied with services for or in relation to the performance of work where—
(i) those services are of a kind not ordinarily required by the designated person and are performed by a person who ordinarily performs services of that kind to the public generally; or
(ii) those services are of a kind ordinarily required by the designated person for less than 180 days in a financial year; or
(iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services—
(A) provided by a person by whom similar services are provided to the designated person; or
(B) for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person—
for periods that, in the aggregate, exceed 90 days in that financial year; or
(iv) those services are supplied under a contract to which subparagraphs (i) to (iii) do not apply and the Commissioner is satisfied that those services are performed by a person who ordinarily performs services of that kind to the public generally in that financial year; or
...
...
30 Also important are the provisions of s 33(1)(a) and (b) and (2) of the Payroll Tax Act, which provide:
(1) For the purposes of [the Payroll Tax Act], a person—(a) who during a financial year, under a relevant contract, supplies services to another person; or
(b) to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work...
...
is taken to be an employer in respect of that financial year.
(2) If a contract is a relevant contract under both section 32(1)(a) and (b)—
(a) the person to whom, under the contract, the services of persons are supplied for or in relation to the performance of work is taken to be an employer; and
(b) despite subsection (1)(a), the person who under the contract supplies the services is taken not to be an employer.
Also important are the provisions of s 34(a) of this legislation, which provides, “[f]or the purposes of [the Payroll Tax Act], a person who during a financial year... performs work for or in relation to which services are supplied to another person under a relevant contract... is taken to be an employee in respect of that financial year”.
Interpretation of statutory provisions
31 Division 7 of Part 3 of the Payroll Tax Act had its genesis in s 7 of the Pay-roll Tax (Amendment) Act 1983 (“the Amending Act”), which inserted a new s 3C into the Pay-roll Tax Act 1971. The legislative purpose of the provisions of the Amending Act is illuminated in the second reading speech on the 1983 bill by the then Treasurer, Mr Jolly:[29]
It has been drawn to the attention of the Government that the pay-roll tax base has been eroded considerably during recent years because an increasing number of employees have become or purported to become independent contractors and their employers or former employers no longer pay pay-roll tax on the remuneration paid to these contractors, notwithstanding that for all intents and purposes the relationship between the parties is almost identical. This trend has accelerated in recent years and is continuing to accelerate....
The other provision deals with all other contracts involving the supply of labour where it is considered that the pay-roll tax legislation should apply. In essence, the legislation is intended to catch those relationships where the sub-contractor works exclusively or primarily for the one person and where the object of the contract between the parties is to obtain the labour of the sub-contractor. Therefore, an exclusion is provided where the provision of the sub-contractor’s labour is only incidental to the supply of goods under the contract.
Further exclusions are provided where the sub-contractor does not work exclusively or principally for the one person. These exclusions are expressed in a somewhat complicated form. This is a matter of regret, but it is a fact of life that complicated legislation is needed to close loopholes in tax legislation, otherwise the fertile minds engaged by the tax avoidance industry will find weaknesses in any simplified amending provisions and exploit those weaknesses to the disadvantage of the revenue.
As a final protection, however, there is provision for the Commissioner of Pay-roll Tax to exclude a contract from the operation of these provisions where he is satisfied that the services provided under the contract are rendered by a person who ordinarily renders services of the kind provided under the contract to the public generally.
In addition to highlighting the then concern of the declining revenue base of payroll tax under existing legislative provisions, the Treasurer’s speech also indicates that specific attention was given to the formulation of the provisions “... to exclude a contract from the operation of these provisions ...”. Indeed, the words of the Treasurer mirror the words of the exempting provisions the subject of these proceedings. Moreover, it is clear that these provisions were seen as exemption, rather than anti-avoidance, provisions.
32 Section 3C(1)(e)(v) of the Amending Act, which commenced on 1 January 1984, was the first direct progenitor of s 32(2)(b)(iv), and is equivalent to the present form of paragraph (iv) of that sub-section. The differences between these provisions are minimal, as indicated by the following mark-up:
those services are supplied under a contract to which subparagraphs (i) to(iv)(iii) do not apply and the Commissioner is satisfied that those services arerenderedperformed by a person who ordinarilyrendersperforms services of that kind to the public generally in that financial year ...
Consequently, decisions in relation to the operation of these provisions can be taken as informing the position with respect to the current provisions of s 32(2)(b)(iv) of the Payroll Tax Act. Moreover, the indications of the legislative purpose of the provisions of the Amending Act are also of current relevance.
33 Section 3C(1)(e)(v) was considered by Presiding Member Pagone (as his Honour then was), sitting as the Administrative Appeals Tribunal, in Re Behmer & Wright Pty Ltd and the Commissioner of State Revenue (Vic) (“Behmer”):[30]
Para (v) seems to be concerned to exempt from the net of liability services provided by a contractor who is genuinely independent from the person whose liability would be affected by the broadening of the ambit of the Act. The test the legislature has chosen to determine that independence is one which requires a factual inquiry into the rendering of services by the contractor to others. That the rendering be “to the public generally” means no more than that the Commissioner (and on review the tribunal) is able to exercise the power if the contractor renders services to other members of the public apart from the person otherwise liable to tax. The words do not confine the exercise of the power to those cases where there is a large class of the public to whom the services are either provided or offered. The requirement that the services to the public generally be “ordinarily rendered” does no more than require the Commissioner or tribunal to look at the contractor’s business and to be satisfied that the ordinary course of that business is to render services to whoever will contract on like terms. The composite phrase conditioning the exercise of the power in para (v) thus requires the Commissioner or tribunal to be satisfied that the contractor is engaged in an independent business and that in that business the contractor will, as an ordinary incident, deal with persons other than the one whose liability will otherwise be increased.[Appellants’ emphasis]
34 Those observations of Presiding Member Pagone were cited with approval by Balmford J in Drake Personnel Ltd v Commissioner of State Revenue (Vic) (“Drake”).[31] Drake Personnel Ltd had agreements with individual “temporaries”, and with clients to whom it could provide the services of those temporaries. As in Odco,[32] the temporary worked for the client under an agreement with Drake, the client paid Drake, and Drake paid the temporary. The question was, consequently, whether those payments were “wages” because the temporaries were common law employees or, alternatively, taken to be “employees” by reason of the operation of s 3C of the payroll tax legislation.
35 Balmford J, in Drake, first determined that the temporaries were not common law employees. Then, following Odco, her Honour held that there was a “relevant contract”, subject to the exemptions in s 3C(1)(e).[33] Thus, her Honour observed:[34]
In conclusion on that point, her Honour said:
36 The Court of Appeal in Drake did not accept the construction of s 3C(1)(e)(v) of the payroll tax legislation as adopted by Balmford J and allowed a cross-appeal, holding both that Drake’s relationship with the temporaries was in the nature of an employment relationship and that s 3C applied and, further, that it was not possible on the evidence for Drake to establish that the exemption in s 3C(1)(e)(v) was enlivened.[35]
37 Phillips JA explained that position as follows:[36]
[Appellants’ emphasis]
The submissions of the appellant in Drake identified three classes of case for consideration:[37]
First, there was the temporary who worked only for Drake and who, [counsel] submitted, could be seen to satisfy the necessary description simply because Drake itself was servicing members of the public, to wit its clients. (This was [counsel’s] primary submission.) Secondly, there was the temporary who, though on the books of Drake, was also on the books of other like employment agencies, working for one or the other as chance or choice would have it. ([Counsel] was disposed to accept, I think, that if in the first case the temporary did not answer the necessary description of one who “ordinarily renders services of that kind to the public generally” because he or she only worked for Drake, working for more than one employment agency did not advance the case much, if at all.) Thirdly, there was the temporary who, although on the books of Drake (and whether or not on the books of some other employment agency), also worked from time to time otherwise for members of the public without the intervention of an employment agency. It is not difficult to see how these temporaries might be characterised as rendering services of a kind ordinarily rendered by them to the public generally.[Appellants’ emphasis]
Justice Phillips held that the first class did not fall within the exemption in s 3C(1)(e)(v):[38]
[additional emphasis added]
As the Appellants observe, in response to the decision of Balmford J in Drake, but well before the appeal was heard or determined, Parliament introduced “employment agency contract” provisions,[39] which are now in Div 8 of Pt 3 of the Payroll Tax Act—thus overcoming some of the complexities discussed by Phillips JA in the appeal in Drake (though complexities not relevant in the present context or dealt with in the passages from his Honour’s judgment set out above).
38 The operation of the provisions of s 32(1) and s 33 was also explained, specifically, by Phillips JA in Drake in respect of the antecedent provisions:[40]
It will be apparent from this that if A makes a contract with B under which A “supplies” to B “services for or in relation to the performance of work”, then the contract is a “relevant contract” by reason of both paras (a) and (b) of [s 32(1)] (assuming that the exceptions do not apply) and under [s 33(1)(a) and (b)], both the person supplying the services and the person to whom the services are being supplied under the contract are, prima facie, “deemed to be an employer”. This apparent duplication is denied by [s 33(2)] which provides as follows:
Where a contract is a relevant contract pursuant to both sub-sections [32](1)(a) and (1)(b) —
(a) the person to whom, under the contract, the services of persons are supplied for or in relation to the performance of work shall be deemed to be an employer; and
(b) notwithstanding [s 33(1)(a)] the person who under the contract supplies the services shall not be deemed to be an employer.Accordingly, it will be B (the person to whom the services are supplied) who is deemed to be an employer, not A (the person supplying the services); and by virtue of subs (2)(b), the person who performs the work for or in relation to which the services are supplied is deemed to be an employee.
39 In Odco, the High Court was called upon to determine whether a “labour agency”, Troubleshooters Available (“TSA”), was a deemed “employer” under the provisions of the Accident Compensation Act 1985, legislation cast in terms similar to s 32(2) of the Payroll Tax Act. In Odco, a builder, in need of a tradesperson, would place an order with TSA, which would contact an appropriate tradesperson, who would then work for the builder and the builder would pay TSA for the work, and TSA would pay the tradesperson. TSA submitted that the deeming provision applied “only to contracts under or by which a tradesman agrees to perform work for the other party to the contract”.[41] The High Court disagreed, observing:[42]
Once it is accepted that there was (1) an agreement between TSA and the builder for the supply of a tradesman to the builder to do certain work on terms that the builder was to remunerate TSA for supplying the tradesman and for the work which he did, and (2) an agreement between TSA and the tradesman whereby the tradesman agreed to perform work at the site at the builder’s direction for remuneration to be paid by TSA, it follows as a matter of plain language that the tradesman supplies services to TSA by attending at the site and doing work there. By attending there and doing work, he supplies services to TSA for the purposes of its business, notwithstanding he also at the same time supplies the same services to the builder for the purposes of its business.[Appellants’ emphasis]
40 The Commissioner sought to argue in favour of the position adopted by Presiding Member Pagone and Balmford J in Drake from a more purposive position. Thus, it was submitted that the contractor provisions in Div 7 of Part 3 of the Payroll Tax Act are intended “to catch those relationships where the sub-contractor works exclusively or primarily for the one person and where the object of the contract between the parties is to obtain the labour of the sub-contractor”.[43] In other words, it is said, the provisions are “directed to capture several means of disguising the employer-employee relationship by contractual arrangements which have been increasingly resorted to in recent years by persons seeking to defeat the objects of the Principal Act”.[44] Moreover, it is contended that the exemptions or exclusions are, on the other hand, designed to ensure that “bona fide independent contractors” are not caught by the provisions,[45] and that “the parties to genuine service contracts will not be prejudiced”.[46] In particular, it is submitted that the exemption in s 32(2)(b)(iv) confers a power on the Commissioner “to exempt from the net of liability services provided by a contractor who is genuinely independent from the person whose liability would be affected by the broadening of the ambit of the Act”.[47]
41 On this basis, the Commissioner contends that the exercise of the power conferred by s 32(2)(b)(iv) of the Payroll Tax Act requires a “factual inquiry into the rendering of services by the contractor to others”.[48] The Commissioner is required “to look at the contractor’s business and to be satisfied that the ordinary course of that business is to render services to whoever will contract on like terms”, and “to be satisfied that the contractor is engaged in an independent business and that in that business the contractor will, as an ordinary incident, deal with persons other than the one whose liability will otherwise be increased”.[49] Further, there must, it is said, be evidence that the services provided by the contractor are both available to and used by other persons (i.e. not merely advertised or offered).[50]
42 On this basis, the Commissioner says that s 32(2)(b)(iv) involves a consideration of whether the contractor ordinarily performs services of the relevant kind to other members of the public apart from the services provided in the course of their work for the designated person. In this context, it is submitted that it is not sufficient that the contractor performs services for members of the public as clients or customers of the designated person—that is, the contractor cannot be regarded as ordinarily performing services to the public generally solely because the designated person, under its contracts with its clients, was ordinarily supplying services to the public generally.[51] Accordingly, it is said that in the present case, the fact that EVS was itself servicing members of the public (assuming for present purposes that RACV members meet that description or characterization) does not mean that the Contractors were therefore also ordinarily performing services to the public generally. As indicated in the preceding reasons, I accept that this latter proposition is clear from the judgment in Drake on appeal.
43 The Commissioner then takes a further step which, as indicated in the preceding reasons, is not supported either by the language of s 32(2)(b)(iv) or the judgment in Drake on appeal. Thus, the Commissioner continues, contending that it is relevant to consider whether the contractor conducts a “genuine independent business”, in the sense of a business that is not ‘tied’ to the designated person.[52] Reference is also made to Behmer,[53] where the Tribunal also referred to the exemption of services provided by a contractor who is “genuinely independent” from the designated person. The problems with this decision have already been discussed.[54] As indicated in these reasons, I reject these contentions.
44 Continuing, the Commissioner submits that in conducting the factual inquiry into the contractor’s business, it is also relevant to take into account the amount or percentage of any work performed by the contractor for other persons. While it is said that the exemption is not limited to instances where such services are quantitatively significant or substantial, there is plainly “a point below which the quantum of work does not suffice to attract the exception”.[55] Whilst it is true that in some circumstances de minimis issues may arise, this is not a relevant issue in the present circumstances, given the nature of this appeal and the position I have reached with respect to remitter. On remit, the Commissioner may well have further factual material to consider, and in light of the proper construction of s 32(2)(b)(iv) as indicated in these reasons. So it is only then that any considerations of this nature may arise.
Revenue Ruling PTA021
45 The Commissioner helpfully provides a series of Revenue Rulings with respect to a variety of State taxation legislation, including the Payroll Tax Act. Revenue Ruling PTA021 (“the Ruling”) is intended to provide guidance with respect to the exercise by the Commissioner of the discretion under s 32(2)(b)(iv) of the Payroll Tax Act. In view of the significance of the Ruling in the present circumstances, it is helpful to set out its substantive provisions in full:
PreambleThe Payroll Tax Act 2007 (the Act), which commenced on 1 July 2007, rewrites the Pay-roll Tax Act 1971 and harmonises the payroll tax legislation in Victoria and NSW.
Parties to a ‘relevant contract’ are deemed to be employers and employees (sections 33 and 34 of the Act) and payments made under a contract are deemed to be wages (section 35 of the Act). Deemed wages are subject to payroll tax under section 36 of the Act.
While most contracts for the provision of services come within the meaning of ‘relevant contract’ under section 32 of the Act, there are certain types of contracts that are specifically excluded from the definition of ‘relevant contract’. A contract is not a ‘relevant contract’ if the Commissioner of State Revenue (the Commissioner) is satisfied that the person who performed the services under the contract ordinarily performs services of that kind to the general public in that financial year.
This Revenue Ruling provides a non-exhaustive list of factors that the Commissioner takes into consideration in exercising his discretion under section 32(2)(b)(iv) of the Act.
Ruling
In exercising his discretion under section 32(2)(b)(iv) of the Act, the Commissioner needs to be satisfied that the contractor:
The mere fact that a contractor works on a succession of jobs for different principals does not mean that these criteria are satisfied. It is necessary to consider the steps undertaken by the contractor to create an independent business (i.e. to obtain work from clients other than the principal in question).To seek an exemption under section 32(2)(b)(iv) of the Act, a principal is required to apply to the Commissioner for a private ruling. Details on how to apply for a private ruling are set out in Revenue Ruling GEN.009.
In making his determination, the Commissioner will review the contractor’s business and consider factors including (but not limited to):
None of the above factors is conclusive on its own. The above is not an exhaustive list of factors that the Commissioner will take into account in exercising his discretion under section 32(2)(b)(iv) of the Act, he will also consider any other matters that are relevant to his decision.However, the Commissioner will accept that a contractor ordinarily renders services to the public generally where, in the financial year in which services were provided under the contract in question, the contractor provided services of that type to:
Revenue Ruling PTA014 explains what constitutes a day’s work.If a contractor who has supplied services under a contract to a principal in a particular financial year, meets the above two criteria, the exemption in section 32(2)(b)(iv) of the Act applies. Under these circumstances, there is no need for the principal to obtain a private ruling from the Commissioner.
Example 1
Michael is a computer programmer. During the financial year, he provided services to Principal A and Principal B. Under his contract for service with Principal A, he provided his services as follows during the financial year:
Month Number of days worked for Principal A
July 5
August 3
September 7
October 5
November 16
December 9
January 13
February 4
March 8
April 5
May 14
June 11
____
100
____
In that financial year, Michael worked for a total of 100 days for Principal A which is an average of 8.3 (100 days divided by 12 months) days per month. As a result, payments made by Principal A to Michael for the financial year are exempt from payroll tax.
Example 2
Shelly is also a computer programmer. During the financial year, she provided services to Principal C and Principal D. Under her contract for service with Principal C, she provided her services as follows during the financial year:
Month Number of days worked for Principal C
July 11
August 16
September —
October —
November —
December 22
January 21
February 20
March —
April —
May 18
June —
_____
108
_____
In that financial year, Shelly worked for a total of 108 days for Principal C. This worked out to be 18 (108 days divided by 6 months) days per month. Consequently, payments made by Principal C to Shelly are subject to payroll tax.
This Revenue Ruling is effective from 1 July 2007.
Please note that rulings do not have the force of law. Each decision made by the State Revenue Office is made on the merits of each individual case having regard to any relevant ruling. All rulings must be read subject to Revenue Ruling GEN.001.
[Emphasis added]
46 It will be seen that in the Preamble to the Ruling, the Commissioner substantially echoes the actual words of s 32 of the Payroll Tax Act and then moves to provide what are described as “a non-exhaustive list of factors that the Commissioner takes into consideration in exercising his discretion under s 32(2)(b)(iv) of the [Payroll Tax] Act”. The critical aspects of the Ruling—from which various examples and other commentary follow—are the first two paragraphs of its substantive contents (paragraphs which are set out in italics in the Ruling which is set out above). In my view, it is clear that, as the Appellants contend, the observations of Presiding Member Pagone in Behmer, which were adopted and applied by Balmford J in Drake (and in spite of the treatment of that decision at first instance in the Court of Appeal, particularly by Phillips JA, as set out previously[56]), influenced the contents of the Ruling significantly and, indeed, its fundamental basis.
47 The effect of the Commissioner’s reliance for the purpose of the Ruling on the decisions in Behmer and at first instance in Drake is, in my view, to introduce a new element into the test or basis upon which the discretion is to be exercised under s 32(2)(b)(iv) of the Payroll Tax Act. The further element is the stated requirement in the Ruling that the Commissioner must be satisfied that the contractor “provides the services in the course of conducting a genuine independent business”. There is nothing in the provisions of s 32(2)(b)(iv) which makes any reference to conduct of “a genuine independent business” and nor, in my view, is there any reference in these provisions to such a concept by necessary implication. Moreover, the distinct and additional element in this respect which the Ruling introduces is made even clearer —in the sense of being a distinct and additional element—by the reference to the contractor being required to satisfy the Commissioner that he, she or it “ordinarily renders those services to the general public”. This requirement does have echoes in the actual words of s 32(2)(b)(iv) where, with reference to the relevant services, the legislative requirement is that they be “... performed by a person who ordinarily performs services of that kind to the public generally ...”.
48 The Commissioner sought to defend the Ruling on the basis that the requirement of “a genuine independent business” does follow from the provisions of s 32(2)(b)(iv) and that all the Ruling seeks to do is to “translate” the words of this statutory provision into concepts readily understandable and applicable in practical terms. For the reasons which follow, I do, however, reject this contention. In my view, the words of s 32(2)(b)(iv) are quite clear and are not cast in language which is difficult to understand, either in abstract or more practical terms. The requirements for this exemption as enacted by Parliament are that the relevant services are performed by a person “who ordinarily performs services of that kind to the public generally ...”. It is a factual question whether or not the services to which these provisions apply are relevant to the application of its provisions and whether the provider of those services provides them to the public and “ordinarily” does so. The basis upon which the “ordinary” requirement is satisfied depends on the facts in the particular instance and not on whether or not the person providing those services to the public generally conducts some business. It may be, speaking generally, that the fact that such a person does conduct a business suggests that such services are “ordinarily” provided. There may, however, be other circumstances in which this requirement is satisfied. Moreover, this approach is also, in my view, to mistake the inquiry which the provisions of s 32(2)(b)(iv) of the Payroll Tax Act requires, as explained by Phillips JA in Drake.[57] Thus, as set out previously, Phillips JA said:[58]
Paragraph (e)(v) inquires of the services supplied by the temporary to Drake under the contract between them (which is a ‘relevant contract’ unless the exception applies), asking whether those services are of a kind which the temporary ordinarily renders to members of the public—thereby distinguishing between the public and Drake and asking, it seems, after the rendering of services otherwise than under the contract between the temporary and Drake.[emphasis in original]
Delegate erred in law
49 The opening words of s 32(2)(b)(iv) of the Payroll Tax Act are important to its proper construction. They make it clear that these exemption provisions only arise for consideration if paragraphs (i) to (iii) do not apply:[59] that is, it can apply only where the services are of a kind ordinarily required by the “designated person”[60] for more than 180 days in a financial year,[61] and are provided for more than 90 days in the financial year.[62] It therefore contemplates an ongoing and regular supply of services required by the other, which can involve, but not require, the Contractor carrying on a business of supplying those services.
50 Behmer concerned a building contractor which had engaged, by tender, the services of an independent contractor to carry out carpentry work. The contractor’s business was focused on provision of carpentry services to large projects, which would necessarily involve working for one entity for protracted periods (as it did for the building contractor). That context gave rise to an analogy, during argument, with a barrister who accepts a brief requiring exclusive commitment to one matter, perhaps for several years.[63]
51 It was that context that gave rise to Presiding Member Pagone’s concern with whether the contractor was conducting a “genuine independent business”. He was concerned in that case to explain the application of the exemption in circumstances where a person provides services predominantly to one entity, but remains, in fact, a person “who ordinarily performs services of that kind to the public generally”. Behmer is a good example of the third class of case identified in argument in Drake:[64] the contractor “worked from time to time otherwise for members of the public”.[65]
52 Drake (like Odco) concerned a situation where the taxpayer contracts, and pays, the contractor to do work for the client, for which the client pays the taxpayer. That context gave rise to Phillips JA’s observation that the provision “inquires of the services supplied by the [contractor to the taxpayer] under the contract between them ..., asking whether those services are of a kind which [the contractor] ordinarily renders to members of the public—thereby distinguishing between the public and [the taxpayer] and asking, it seems, after the rendering of services otherwise than under the contract between [the contractor and the taxpayer]”.[66] Drake was an example of the first (or second) class of case identified in argument in Drake:[67] the contractors worked for members of the public only under their contract with an intermediary, or multiple intermediaries. It is to be noted that Phillips JA’s analysis of the exemption in sub-section (iv) does not employ as a criterion the carrying on by the contractor of a genuinely independent business of providing the same kind of services to the public.
53 The circumstances of this case—clearly raised by the facts stated in Attachment B and the statements provided to the Commissioner by various contractors—are different from:
(1) Behmer, because the Contractors (on the Delegate’s factual findings) did not have a business entirely unrelated to the work they did for EVS (such as provision of mechanical repair services from their own garage); and
(2) Drake and also Odco, because the Contractors regularly provided services to RACV members other than under their contract with EVS and did so on their own behalf and at their own expense as an independent entity.
Consequently, the circumstances of this case do not fall into any of the three classes identified in argument in Drake. Moreover, the circumstances of this case distinguish it from, particularly, the first and second class of case identified in argument in Drake.[68]
54 The different question of construction raised by the circumstances of this case is whether s 32(2)(b)(iv) of the Payroll Tax Act is available where a contractor regularly provides independent services to members of the public—under a contract between the member of the public and the contractor—in addition to the services provided to those members of the public under the contractor’s contract with the taxpayer. This is a question which the Delegate failed to address. Rather, she addressed the question of whether the Contractor provided the same kind of services it supplied to EVS to the public in the course of carrying on a genuinely independent business of providing those services to the public. Thus the Delegate imported, apparently through the application of Revenue Ruling PTA021, a criterion that was not required or justified by the statutory text; as discussed previously in these Reasons.[69] This is not a process whereby, in determining whether or not the Delegate made a legal error of the kind identified in Avon Downs, the statement of reasons is being “construed minutely and finely with an eye keenly attuned to the perception of error”, nor “... scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed”.[70] The error on the part of the Delegate is, as I have indicated, very clear.
55 Moreover, the Delegate did not refer to Drake or to Behmer, but appeared to consider that the “[r]elevant law relating to” s 32(2)(b)(iv) was to be found in Revenue Ruling PTA021 and Odco, which she considered stood for the proposition that “[i]t is commonplace for a worker to provide services to a third party as part of their role with their principal/employer”.[71] It is unclear why the Delegate thought Odco stood for that proposition when it came to considering the exemption. The High Court in Odco was concerned with the deeming provisions, but expressly did not consider the exemptions. In Drake, Phillips JA considered the reliance which Balmford J had placed on Odco misplaced, saying “[i]t is true that in Odco the High Court said that ‘there is no necessary separation between the supply of services and the performance of the work’, but that was in a different context”.[72]
56 In the present circumstances, the questions required to be addressed in respect of the sub-section 32(2)(b)(iv) exemption were whether the additional services provided by the Contractors—that is, the services provided under the direct contract between the Contractors and the RACV members, were services provided to the public generally and, if so, were they services of the same kind as the services provided by the Contractors to EVS.
57 As submitted by the Appellants, it appears that, having regard to, among other things, the Commissioner’s position following legal advice in 2005, on the material and evidence before the Delegate, the answer to that question should be “yes”. The services provided by the Contractors to the public directly, and the services provided under the contract with EVS, are both mechanical repair services. On the material and evidence before the Commissioner, it would be very difficult to draw a line between the two kinds of service. However, as the error was plainly material to the decision, it is not necessary for the Court to arrive at a conclusion on this issue, as that will be a matter for the Commissioner on a remittal.
58 The erroneous approach of the Delegate would appear to be—or may possibly explain—the mistaken observation that “there is no evidence that the [Contractors] ordinarily render services of the same type rendered to EVS to the public outside of their agreements with EVS”. In my view, that observation cannot stand with the Delegate’s acknowledgement in the Reasons that the Appellants had provided material establishing that the Contractors did provide mechanical repair services otherwise than under their contracts with EVS. The Delegate’s reasoning was clearly influenced by the “genuinely independent business” criterion which she employed when she stated “[i]n particular, the available information indicates that (whatever the position in prior years) for the 2009-2010 to 2013-2014 financial years, the [Contractors] did not operate their own garages and/or mobile automotive repair businesses in addition to providing services to RACV Members under their agreements with EVS”.[73] In pursuing that erroneous approach, the Delegate failed to deal with the class of case presented by the Objection based on the material and evidence relied upon by EVS, and therefore failed to address the question raised by the exemption in sub-s 32(2)(b)(iv) of the Payroll Tax Act. In the present circumstances, the Contractors provided mechanical services not just to clients of EVS, but to any drivers needing RACV assistance. Additionally, the Appellants say that the services are truly provided to the public generally, as most drivers are RACV members, with the remainder able to sign up instantly to receive mechanical repair services.
Conclusions
59 For the preceding reasons, the Appellants have, in my view, established that the failure of the Delegate to be satisfied as sought by the Appellants was affected by a legal error of the kind identified by Dixon J in Avon Downs. It follows that, for the reasons set out in the previous judgment, it is not appropriate for the Court in proceedings such as this to substitute its own view as to matters relevant to the forming or not forming of any such satisfaction on the part of the Commissioner.[74] In these circumstances, the Commissioner’s assessments should be set aside and the matter remitted to the Commissioner for determination according to law on the basis of these reasons as to the proper interpretation of s 32(2)(b)(iv) of the Payroll Tax Act.
60 Additionally, this is not a circumstance where the Court might form the view that, being seized of relevant facts and circumstances, there is no point in a remitter because there is no prospect of a different decision being reached by the Commissioner for the purposes of s 32(2)(b)(iv) of the Payroll Tax Act. This follows because, on a remitting of the matter to the Commissioner for decision according to law, the facts and circumstances before the Commissioner will not necessarily be the same as the facts and circumstances as they presently stand as the basis for the Delegate’s decision; a critical factor which distinguishes the present situation from that considered by the High Court in Kolotex Hosiery (Australia) Pty Ltd v Federal Commissioner of Taxation.[75]
61 There is also an issue in the present proceedings in relation to penalty tax which has been levied. However, having regard to the position I have reached on substantive matters, that issue is no longer relevant in these proceedings, as the Commissioner’s Assessments upon which that penalty was based are to be set aside.
Orders
62 The parties are to bring in orders to give effect to these reasons. I reserve the question of costs and will hear the parties further in relation to this issue.
---
[1] Notice of Objection (19 May 2015).
[2] Nationwide Towing &
Transport Pty Ltd v Commissioner of State Revenue [2018] VSC 262.
[3] Order of Croft J (23 May 2018), [2].
[4] Result of Tax Investigation of
Nationwide Towing & Transport Pty Ltd, Eastern Van Services Pty Ltd and
Re’s Roadside
Recovery Pty Ltd (24 March 2015).
[5] Notice of Objection (19 May 2015).
[6] Appellants’ Submissions (17 August 2018), [18].
[7] Appellants’ Submissions on Separate Question (9 February 2018), [4].
[8] Notice of Determination on Objection to Payroll Tax Assessments 91598826, 91598834, 91598842, 91598850 and 91598868 (Assessments 1 to 5) (12 November 2015) (“Notice of Determination”).
[9] Notice of Determination (12 November 2015), 15–16.
[10] Nationwide Towing &
Transport Pty Ltd v Commissioner of State Revenue [2018] VSC 262, [9].
[11] Transcript, 1–3.
[12] [1949] HCA 26; (1949) 78 CLR 353 at 360;
and see Order of Croft J (23 May 2018), [2] and Nationwide Towing &
Transport Pty Ltd v Commissioner of State Revenue [2018] VSC 262.
[13] Reasons, 4, 20.
[14] Appellants’ Submissions (17 August 2018), [8].
[15] Reasons, 6.
[16] Reasons, 4, 20.
[17] Reasons, 4.
[18] Reasons, 20.
[19] Reasons, 5, referring to Letter from State Revenue Office to Hall & Wilcox Lawyers “Re: Eastern Van Services Pty Ltd (‘EVS’) and Payments to Contractors” (21 September 2006).
[20] Letter from State Revenue Office to Hall & Wilcox (29 August 2005) (Appellants’ emphasis).
[21] Letter from State Revenue Office to Hall & Wilcox (9 December 2005).
[22] Statement of Marek Lamaskewski, dated 28 October 2015.
[23] [1990] HCA 43; (1990) 64 ALJR 606.
[24] And as to a statement with respect to the general purpose of the Payroll Tax legislation in this respect, see below, [31].
[25] Appellant’s Submissions (17 August 2018), [14].
[26] Cf HFM043 v The Republic of Nauru [2018] HCA 37, [21]–[24].
[27] See Payroll Tax Act 2007 Pt 2, Divs 1, 2.
[28] Payroll Tax Act 2007 s 13(1)(e).
[29] Victoria, Parliamentary Debates, Legislative Assembly, 27 October 1983, 1579-80.
[30] (1994) 28 ATR 1082 at 1089 [19].
[31] (1998) 40 ATR 304 at 314 [41].
[32] Accident Compensation Commission v Odco Pty Ltd [1990] HCA 43; (1990) 64 ALJR 606.
[33] Drake Personnel Ltd v Commissioner of State Revenue (Vic) (1998) 40 ATR 304 at 313 [37].
[34] Drake Personnel Ltd v Commissioner of State Revenue (Vic) (1998) 40 ATR 304 at 315 [43].
[35] Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635.
[36] Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 at 647 [29]; see also at 639 [6], 665 [79].
[37] Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 at 652 [43].
[38] Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 at 653–4 [46]–[48].
[39] Part 6 of the State Taxation (Further Amendment) Act 1998, assented to on 1 December 1998, and see the express discussion of Balmford J’s decision in Victoria, Parliamentary Debates, Legislative Assembly, 27 October 1998, 731.
[40] [2000] VSCA 122; (2000) 2 VR 635 at 648 [33].
[41] [1990] HCA 43; (1990) 64 ALJR 606 at 608–9.
[42] [1990] HCA 43; (1990) 64 ALJR 606 at 612–3.
[43] Victoria, Parliamentary Debates, Legislative Assembly, 27 October 1983, 1579; see Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788, [218]–[219]; Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, [22]–[26].
[44] Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, [23], quoting from the Explanatory Memorandum to the analogous amendments made to the New South Wales payroll tax legislation.
[45] Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788; (2005) 60 ATR 237 at 264 [219], [221].
[46] Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, [23], quoting from the Explanatory Memorandum to the analogous amendments made to the New South Wales payroll tax legislation.
[47] Re Behmer & Wright Pty Ltd and the Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1089 [19]; Re Roden Security Services Pty Ltd v Chief Commissioner of State Revenue (2010) 78 ATR 555 at 564–5 [44]–[51]; Drake Personnel v Commissioner of State Revenue (1998) 40 ATR 304 at 314 [41] (Balmford J).
[48] Re Behmer & Wright Pty Ltd and the Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1089 [19].
[49] Re Behmer & Wright Pty Ltd and the Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1089 [19].
[50] Re Roden Security Services Pty Ltd v Chief Commissioner of State Revenue (2010) 78 ATR 555 at 565 [47], 565 [50]; see also Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, [62].
[51] Drake Personnel Ltd v Commissioner of State Revenue [2000] VSCA 122; (2000) 2 VR 635 at 653 [46].
[52] Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, [91]–[94]; Re Roden Security Services Pty Ltd v Chief Commissioner of State Revenue (2010) 78 ATR 555 at 565 [49].
[53] Re Behmer & Wright Pty Ltd and the Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1089 [19].
[54] And see Appellants’ Reply (14 September 2018), [5] which (excluding any reference to merits) effectively summarises the position reached in these reasons.
[55] Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, [97].
[57] Drake Personnel Ltd v The Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 at 653 [46].
[58] Drake Personnel Ltd v The Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 at 653 [46], set out above at [37].
[59] A point noted by Presiding Member Pagone in Re Behmer & Wright Pty Ltd and the Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1088 [16].
[60] Payroll Tax Act 2007 s 32(2)(b)(i).
[61] Payroll Tax Act 2007 s 32(2)(b)(ii).
[62] Payroll Tax Act 2007 s 32(2)(b)(iii).
[63] Re Behmer & Wright Pty Ltd and the Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1088–9 [17].
[64] Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; [2000] 2 VR 635 at 651–2 [43]; and see above, [37].
[65] Emphasis added.
[66] Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 at 653 [46] (emphasis in original).
[67] Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 at 651–2 [43]; and see above, [37].
[70] Plaintiff M64/2015 v Minister for Immigration and Border Protection [2015] HCA 50; (2016) 258 CLR 173 at 185–6 [25], 195 [59]; Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 271–2, 278, 282.
[71] Reasons, 16, 20.
[72] Drake Personnel Ltd v Commissioner of State Revenue (Vic) [2000] VSCA 122; (2000) 2 VR 635 at 653 [47].
[73] Reasons, 21.
[74] Cf the approach of the Commissioner in his submissions which, in effect, invites the Court to investigate the events and to determine the position in this respect itself: see Respondent’s Submissions (7 September 2018), [26]–[60].
[75] [1975] HCA 5; (1975) 132 CLR 535.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/vic/VSC/2018/609.html