In Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, the Tribunal considered the application of s 32 of the Payroll Tax Act 2007 (NSW) to payments for architectural services by Levitch Design Associates (LDA). While the Tribunal found that the agreement between LDA and Mr Wright constituted a “relevant contract” per s 32(1), LDA was able to prove the exemption in s 32(2)(b)(iv) applied to all but one financial year.
- The Tribunal found the exemption in s 32(2)(b)(i) was not satisfied. In order to qualify for the exemption, LDA had to establish that the architectural services are “not ordinarily required” by LDA, and that they are performed by a person who ordinarily performs services of that kind to the public generally. Despite LDA producing evidence that the fees paid for architectural services constituted an average of 4.7% over the relevant years, the Tribunal did not accept the gross value of fees to be an appropriate indicator of whether the services were ordinarily required. Instead it noted that invoices were issued for these services on a monthly basis from 2010 to 2012, indicating that the services were in fact ordinarily required by LDA.
- LDA also failed to meet the onus of proof in respect of s 32(2)(b)(ii) and (iii) regarding the 180-day and 90-day test, respectively. Importantly, the Tribunal commented that LDA must show the number of days on which architectural services were required. As LDA was unable to produce evidence showing the actual days worked by the contractor, neither exemption could be applied.
- The Tribunal was, however, satisfied that the contractor ordinarily performed architectural services of the kind supplied to LDA to the public generally during the 2008, 2010, 2011 and 2012 financial years, and therefore the exemption in s 32(2)(b)(iv) applied in respect of these years. Evidence provided by the contractor showed that in each of these financial years, architectural services provided to LDA constituted between 58% and 81% of the contractor’s total earnings. The exception was the 2009 financial year, where the Tribunal disallowed the exemption on the basis that the contractor generated 93% of its total earnings from LDA. As such, payments made to the contractor during the 2009 financial year were subject to payroll tax.
[IT 13.2.15]