A taxpayer has been unsuccessful before the Full Court of the SA Supreme Court in its appeal against an earlier decision affirming the Commissioner’s decision to deny the de-grouping provisions contained in s 18I(1) of the Pay-Roll Tax Act 1971 (SA). The taxpayer had sought orders to exclude it from a group for SA payroll tax purposes for the period 1 July 2004 to 31 January 2007.
The taxpayer operated a medical services business and was grouped by the Commissioner of State Taxation (SA) with 4 other companies: Y Co – which carried on a medical practice owned by Dr Y and his wife; B Co – which carried on a medical practice owned by Dr B and his wife; V Co as trustee of the Y Family Trust – which beneficiaries included Dr Y and his family members; and G Co as trustee of the B Family Trust – which beneficiaries included Dr B and his family members.
Doctors Y and B were the sole directors and sole shareholders of the taxpayer, which in turn was a trustee of a unit trust. All of the profits from the operations of the taxpayer were required to be paid to the unit trust which in turn distributed those profits to the unit trust holders, V Co and G Co, which in turn made distributions to the beneficiaries of the Y and B family trusts, respectively.
The Full Court dismissed the taxpayer’s appeal and held the Supreme Court had correctly considered the test in s 18I(1). The Full Court was of the view the taxpayer’s business was not substantially independent of, and was substantially connected with, the businesses carried on by other members of the group.
(Port Augusta Medical Centre Pty Ltd v Comr of State Taxation [2012] SASCFC 7, SA Supreme Court, Full Court, Anderson, Kelly, Kourakis JJ, 16 February 2012.)
[LTN 32, 17/2]