The NSW Civil and Administrative Tribunal affirmed a penalty assessment imposed following a payroll tax default, but reduced the interest premium component.

The applicant was a sole trader, trading as John Tacey Chemist, operating a number of pharmacies in New South Wales. He was properly grouped with the other taxpayers for the purposes of the Payroll Tax Act. He controls Central Drug Co Pty Ltd and Medan Holdings Pty Ltd as trustee of the Tacey Family Trust.

The Applicant had relied exclusively on the professional advice of his registered tax agent and accountant Mr Allan Bonner, trading as AW Bonner & Co. Mr Bonner had been his tax adviser for over 30 years and he had relied on Mr Bonner’s expertise and advice in all accounting, taxation and compliance matters, including payroll tax for all the taxpayers.

Mr Bonner conducted a bookkeeping service, operating under various names, including Nepean Placement Services (Nepean). Nepean was conducted by Mr Bonner only in a titular capacity, as the applicant paid staff, interviewed candidates, recruited them and managed the other aspects of that business. Nepean placed employees in the chemist and retail businesses operated by the other taxpayers involved, such that those businesses could not operate without the placed employees. Initially, staff were supplied to other shops only, but because of declining demand he believes that staff were supplied only to his chemist shops.

Mr Bonner was registered for payroll tax, but the wages paid by the other taxpayers were not declared through his registration, or at all. In light of the applicant’s involvement in the businesses conducted by the taxpayers, the Chief Commissioner concluded that the taxpayers were a ‘group’ within the meaning of Division 2 of Part 5 of the Payroll Tax Act and that a tax default had occurred, for which the taxpayers had provided no reason.

The Applicant co-operated with the OSR and accepted the primary tax assessed – making arrangements to pay it off.

However, he contested the 25% penalty for lack of reasonable care. The Tribunal found that he had not discharged his onus to show that there had been reasonable care, particularly as he was really the alter ego of Nepean.

The Chief Commissioner imposed penalty tax and interest pursuant to ss 21, 22 and 27 of the Taxation Administration Act 1996.The Applicant contested the ‘premium’ factor in the interest penalties (of up to 8%). The Tribunal found that there was very little ‘culpability’ in the Applicant’s behavior as he had relied on Mr Bonner’s advice for matters such as grouping and thresholds. The Tribunal amended the interest penalty and set the premium component at only 2%.

(Tacey v Chief Comr of State Revenue [2016] NSWCATAD 255, NSW Civil and Administrative Tribunal, Walker SM, 10 November 2016.)

[LTN 218, 10/11/16] [FJM]