On Mon 17.10.2016, the NSW Supreme Court refused a taxpayer’s application for a payroll tax refund for the period 1 July 2009 to 30 June 2014.
The National Institute of Dramatic Art (NIDA) (the taxpayer) sought a refund of $2,540,040 of Payroll Tax, contending that its wages were exempt pursuant to cl 12(1)(c) of Sch 2 to the Payroll Tax Act 2007 (NSW), which provides as follows.
“12 Continuation of certain exemptions—religious institutions, public benevolent institutions, non-profit and charitable organisations
(1) Wages are exempt wages for the purposes of this Act if they are paid or payable by:
…
(c) by [sic] a non-profit organisation (other than a school or college, statutory body or an instrumentality of the State) having as one of its objects a charitable, benevolent, philanthropic or patriotic purpose, to a person in respect of time when the person is engaged in charitable, benevolent, philanthropic or patriotic work of the non-profit organisation, being a non-profit organisation in existence immediately before the repeal of the Pay-roll Tax Act 1971, …
…”
The taxpayer argued that although as part of its activities it conducted a college or school, its essential character was that of a promoter of the arts and that this was a charitable purpose and that all of its activities were directed towards that purpose and thus all of its wages were exempt under cl 12(1)(c).
The Chief Commissioner argued that all or almost all of the taxpayer’s activities were ancillary to its conduct of a drama school. The Chief Commissioner further argued that the fact that the taxpayer may be characterised as a promoter of the arts did not mean that it was not also a school or college within the meaning of cl 12(1)(c) and that therefore the exemption did not apply.
The Supreme Court accepted and applied a broader definition of “school” and after consideration of the taxpayer’s “school-type activities” and concluded that NIDA was a ‘school or college’ within the meaning of the exclusion in s12(1)(c) of the Act. It said the following.
- Considering its activities as a whole I would characterise NIDA as being a school or college, even if it were necessary to choose between its being a school or college on the one hand, or being a promoter of the dramatic arts on the other. Of course the two are not mutually exclusive. Even if its school-type activities are confined to its undergraduate and graduate programs and its Vocational Education and Training Programs, they are nonetheless activities carried out on a significant scale (State Superannuation Board v Trade Practices Commission at 306). I would go further and say that they were the “predominant and characteristic activity” of NIDA which are supported by its other activities. When the school-type activities of the NIDA Open Program are also taken into account that conclusion is even clearer.
Accordingly, the Court affirmed the Chief Commissioner’s decision to refuse the payroll tax refund application for the relevant period.
(The National Institute of Dramatic Art v Chief Comr of State Revenue [2016] NSWSC 1471, NSW Supreme Court, White J, 17 October 2016.)
[LTN 200, 17/10/16]