Downer EDI Engineering Pty Ltd v Chief Commissioner of State Revenue

Downer EDI Engineering Pty Ltd sought a review of the Chief Commissioner of State Revenue’s decision to assess it for payroll tax. The dispute centred on whether certain subcontracts were relevant contracts for payroll tax purposes under the Payroll Tax Act 2007 (NSW). Specifically, Downer EDI Engineering argued that the subcontracts in question were not relevant contracts as they involved the supply of services by subcontractors that were ancillary to the supply of goods or the conveyance of goods by means of a vehicle provided by subcontractors. The matter was heard in the New South Wales Supreme Court.

The primary legal issues before the court were the interpretation of sections 32(2)(a) and 32(2)(d)(i) of the Payroll Tax Act 2007 (NSW), which define the scope of relevant contracts. The court needed to determine whether the subcontracts were excluded from being relevant contracts and whether the supply of services by subcontractors was ancillary to the supply of goods or the conveyance of goods by means of a vehicle provided by subcontractors. The court also considered whether the decision in Smith’s Snackfood Company v Chief Commissioner of State Revenue [2013] NSWCA 470 was distinguishable from the present case.

The court held that the subcontracts were indeed relevant contracts for payroll tax purposes. It found that the supply of services by subcontractors was not ancillary to the supply of goods or the conveyance of goods by means of a vehicle provided by subcontractors. The court reasoned that the terms “supply” and “ancillary” should be interpreted in their ordinary and natural sense, and that Smith’s Snackfood Company v Chief Commissioner of State Revenue was distinguishable. Regarding the penalty tax and interest, the court determined that the scope of the discretion under section 33 of the Taxation Administration Act 1996 (NSW) was not confined by sections 28 and 29, and that the penalty should not be reduced to take into account the parties’ conduct.

The court dismissed Downer EDI Engineering’s application for review and upheld the Chief Commissioner of State Revenue’s assessment for payroll tax, penalty tax, and interest.