The NSW Civil and Administrative Tribunal has ordered the Commissioner to exercise his discretion to de-group 3 taxpayers under s 79 of the Payroll Tax Act 2007 (NSW).
The Commissioner had issued payroll tax assessments to the taxpayers for the financial years 2008 and 2012. During the relevant years, one of the taxpayers (Excell Management Pty Ltd) supplied contract workers to the other 2 taxpayers (Seovic Civil Engineering Pty Ltd and Seovic Engineering Pty Ltd). It was common ground that Civil and Excell constituted a group and Engineering and Excell constituted a group under s 72 of the Payroll Tax Act. It was also not disputed that the 3 taxpayers were a group under s 74 of the Payroll Tax Act. The directors and shareholders of the 3 taxpayers were various members of the S family. The only issue was whether the Commissioner should exercise his discretion to de-group the taxpayers.
The Tribunal noted the Commissioner has accepted that Civil and Engineering each carried on a business independently of each other and without any connection with each other. They were only grouped under s 72 during the relevant period because the provisions applied when contract workers were supplied by Excell to Civil and to Engineering. The larger group was created by the automatic operation of the provisions of s 74, and as soon as Excell ceased its business to supply contract workers to Civil and Engineering, both Civil and Engineering were again entitled to their respective threshold.
The Tribunal remitted the matter to the Commissioner to exercise his discretion to de-group the taxpayers. It held there were “ample grounds” for the exercise of the discretion “to avoid of what can be best described as a harsh and unreasonable outcome on the technical application of the grouping provisions”. In this matter, the Tribunal said “Excell was conducting quite an independent business in the relevant period, being the supply of contract workers.” It added that although Excell was owned by a member of the S family, “there was no evidence of any control by either Civil or Engineering in the management of Excell.”
(Seovic Civil Engineering Pty Ltd & Ors v Chief Comr of State Revenue [2014] NSWCATAD 52, NSW Civil and Administrative Tribunal, Verick SM, 30 April 2014.)
[LTN 83, 5/5/14]