Home789 Resources Pty Ltd v Chief Commissioner of State Revenue

[2023] NSWCATAD 263

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Home789 Resources Pty Ltd & others v Chief Commissioner of State Revenue [2023] NSWCATAD 263

Hearing dates:

12, 15, 16 and 18 May 2023

Date of orders:

13 October 2023

Decision date:

13 October 2023

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

J S Currie, Senior Member

Decision:

1. In respect of applications 2020/287512; 2020/287521; 2020/287537 and 2020/287546, the applications are dismissed under section 55 (1) (a) of the Civil and Administrative Tribunal Act 2013 on the basis that the applications have been withdrawn. The Tribunal notes that those applications were withdrawal on the basis of agreement between the relevant parties that:

(a) the issue of the amount of payroll tax payable by the Applicants for the period 1 July 2019 to 31 January 2020 is remitted to the Respondent to consider, and if he deems necessary, to issue a re-assessment following publication of the decision by the Tribunal in applications 2020/5300; 2020/5302; 2020/5305 and 2020/5306; and

(b) the Respondent undertakes not to take enforcement action against the Applicants in respect of any amount of payroll tax owing by the Applicants in respect the period 1 July 2019- 31 January 2020 whilst proceedings 2020/5300; 2020/5302; 2020/5305 and 2020/5306 remain on foot, without giving 21 days’ prior notice before doing so.

2. The decision of the Chief Commissioner on 15 March 2019 to group Home 789 Resources Pty Ltd with the other applicants and with Bright Austina Pty Ltd, SWASW Wealth Pty Ltd as trustee for the CJ Family Trust, and UFN A Epping Pty Limited as trustee for the UFN A Epping Unit Trust, (“the group”) is affirmed.

3. The decision of the Chief Commissioner on 15 March 2019 to disallow an application for exclusion from the group is affirmed.

4. With the exception of the payroll tax assessments for Daegeun Hwang (No.6 in the Tribunal’s reasons for decision); Hao Wang (No.12 in the Tribunal’s reasons for decision) and Yong Fang Chia (No 28 in the Tribunal’s reasons for decision), which are varied in accordance with the Tribunal’s reasons for decision, each of the payroll tax assessments issued to the Applicants for the tax years ended on 30 June 2013, 30 June 2014, 30 June 2015 and 30 June 2016 is confirmed.

5. In respect of the tax years ended on 30 June 2017, 30 June 2018 and 30 June 2019, by consent, the assessment of the Applicants’ respective liability for payroll tax is remitted to the Chief Commissioner for reassessment in accordance with the assessments previously issued which are the subject of review, including in respect of interest and penalty tax, subject to the following adjustments:

In respect of Home789 Resources Pty Ltd:

(1) for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $13,838.82 (not including penalty tax or interest);

(2) for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $15,471.01(not including penalty tax or interest); and

(3) for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $10,024.37 (not including penalty tax or interest).

In respect of Great Fortune Investment Pty Ltd:

(1) for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $30.12 (not including penalty tax or interest);

(2) for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $38.74 (not including penalty tax or interest); and

(3) for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Limited by $25.10 (not including penalty tax or interest).

6. The parties are directed to bring in short minutes of orders, which reflect the findings in this decision, including particulars of the variations to payroll tax assessment for the matters referred to in Order 4 and the matters agreed upon as described in Orders 1 and 5, within 28 days of publication of these orders.

Catchwords:

REVENUE- Payroll tax- Grouping of employers- business groups- real estate industry- discretion in Chief Commissioner to “de-group”: Payroll Tax Act 2007, section 79- whether discretion properly exercised.

REVENUE- Payroll tax- taxable wages- where each recipient had a connection with member or members of group-whether each recipient an employee - whether payments taxable wages for purposes of the Payroll Tax Act 2007, Part 2, Division 2- whether payments exempt – proper identification of persons under consideration- whether person under consideration ordinarily performs services of that kind to the public generally in relevant financial year.

Legislation Cited:

Administrative Decisions Review Act 1997 (NSW): sections 9, 58, 63.

Civil and Administrative Tribunal Act 2013 (NSW): sections 28, 55.

Payroll Tax Act 2007 (NSW): sections 6, 7, 10, 11, 13; Part 3 Division 7; sections 32, 34, 35, 70, 71, 72, 74, 79.

Taxation Administration Act 1996 (NSW): sections 96,100.

Cases Cited:

B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSW LR 481

Boston Sales and Marketing Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 139

Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788

Cessnock Tyres v Chief Commissioner of State Revenue [2017] NSWCATAD 368

Chief Commissioner of State Revenue v Paspaley [2008] NSW CA 184

Chief Commissioner of State Revenue v Seovic Civil Engineering Pty Ltd [2014] NSWCATAP 92

Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181

Conrad Linings v Chief Commissioner of State Revenue [2013] NSWADTAP 42

Construction Forestry Mining and Energy Union v Personnel Contracting Pty Limited [2022] HCA 1

Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25

Elanor Operations Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 104

Gauci v Federal Commissioner of Taxation (1975) 135 CLR 181; (1975) 8 ALR 155

Headware v Chief Commissioner of State Revenue [2015] NSWCATAD 166

Jones v Dunkel [1959] HCA 8; 101 CLR 248

Levitch Design Associates Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 215

Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42

Neale v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419

Novus Capital Ltd v Chief Commissioner of State Revenue [2018] NSWCATAD 72

Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 252

Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] 245 CLR 446

Texts Cited:

None cited

Category:

Principal judgment

Parties:

Home789 Resources Pty Ltd (First Applicant)
Great Fortune Investment Pty Ltd (Second Applicant)
UFN Resources Pty Ltd (Third Applicant)
Aust Sunshine Marketing Pty Ltd Fourth Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Counsel:
N Kulkarni (Applicants)
S Karagaratnam (Respondent)
Solicitors:
Dixon Holmes du Pont Lawyers (Applicants)
Crown Solicitor (Respondent)

File Number(s):

2020/5300, 2020/5302, 2020/5305, 2020/5306, 2020/287512, 2020/287521, 2020/287537, 2020/287546

Publication restriction:

Nil

reasons for decision

What is this matter about?

1. This matter raises two distinct issues arising from the imposition by the Chief Commissioner of State Revenue of New South Wales (Chief Commissioner) of payroll tax under the Payroll Tax Act 2007 (NSW) (PT Act) on certain companies (collectively, the Applicants) which carry on business in the real estate industry, in circumstances where the Chief Commissioner has grouped those companies for payroll tax purposes, under Part 5 of the PT Act.

2. Those issues are:

1. whether each of the Chief Commissioner’s decisions to group those companies and to refuse to remove some companies or combinations of companies from the group; that is, to “de-group” them, was the correct and preferable decision (the De-Grouping issue); and

2. whether payments made by particular Applicants to certain persons (comprising both natural persons and corporations) should be treated as taxable wages for the purposes of the PT Act (the Taxable Wages issue).

3. Each of the Applicants operates in what may be broadly described as the real estate industry. I have described below the unchallenged facts as to the ownership, control, business and functions of each of the companies involved.

4. It falls to me, on the basis of the extensive evidence adduced by each party, to determine both the De-Grouping issue and the Taxable Wages issue and to make appropriate orders, including orders which take into account the matters which have been agreed between the parties.

My decisions on each issue

5. For the reasons which follow, I have decided the two issues as follows:

1. In relation to the De-Grouping issue I have decided that each of the Chief Commissioner’s decisions; that is, to group the Applicants and not to de-group any of them, was the correct and preferable decision.

2. In relation to the Taxable Wages issue, as a result of discussions between the parties, the position of only 31 persons or related companies stand for determination. I am required to determine whether or not payments to each of those agreed 31 entities, examined individually for each of the relevant financial years, are taxable wages under the PT Act. I have concluded that payments made to 28 of them in particular financial years should be treated as taxable wages.

Partial settlement and withdrawal of some applications

6. Following discussions between the parties they have agreed that certain of the applications originally made, being applications 2020/287512; 2020/287521; 2020/287537 and 2020/287546 are withdrawn on the basis that:

1. the issue of the amount of payroll tax payable by the Applicants for the period 1 July 2019 to 31 January 2020 is remitted to the Chief Commissioner to consider, and if he deems necessary, to issue a re-assessment following publication of the decision by the Tribunal in applications 2020/5300; 2020/5302; 2020/5305 and 2020/5306; and

2. the Chief Commissioner undertakes not to take enforcement action against the Applicants in respect of any amount of payroll tax owing by the Applicants for the period 1 July 2019- 31 January 2020 whilst proceedings 2020/5300; 2020/5302; 2020/5305 and 2020/5306 remain on foot, without giving 21 days’ prior notice before doing so.

7. I have therefore formally dismissed the applicable applications, being numbers 2020/287512; 2020/287521; 2020/287537 and 2020/287546 under section 55 (1) (a) of the Civil and Administrative Tribunal Act 2013 (NCAT Act) and have noted the Respondent’s undertaking set out at [6] (b) above.

8. The parties have also agreed in the following terms to the remittal to the Chief Commissioner of the assessment of payroll tax for the tax years ended on 30 June 2017, 30 June 2018 and 30 June 2019 and I have ordered accordingly.

1. By consent, the assessment of the Applicants’ respective liability for payroll tax is remitted to the Chief Commissioner for reassessment in accordance with the assessments previously issued which are the subject of review, including in respect of interest and penalty tax, subject to the following adjustments

1. In respect of Home789 Resources Pty Ltd

1. for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $13,838.82 (not including penalty tax or interest);

2. for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $15,471.01(not including penalty tax or interest); and

3. for the period 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $10,024.37 (not including penalty tax or interest).

2. In respect of Great Fortune Investment Pty Ltd:

1. for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $30.12 (not including penalty tax or interest);

2. for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $38.74 (not including penalty tax or interest); and

3. for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Limited by $25.10 (not including penalty tax or interest).

Decisions on the remaining applications

9. For the reasons set out in detail below, I have decided the remaining issues as follows:

1. I have affirmed the Chief Commissioner’s decision of 15 March 2019 to group Home789 Resources Pty Limited (Home789 Resources) with the other Applicants and with Bright Austina Pty Limited, SWASW Wealth Pty Limited as trustee for the CJ Family Trust and UFN A Epping Pty Limited as trustee for the UFN A Epping Unit Trust.

2. I have also affirmed the Chief Commissioner’s decision on 15 March 2019 to disallow an application for exclusion from the Group.

3. In relation to the taxable wages issue I have decided that, with the exception of the payroll tax assessments for Daegeun Hwang (identified as No.6 in the reasons below); Hao Wang (No.12 in the reasons) and Yong Fang Chia (No 28 in the reasons), which are varied in accordance with my reasons below, each of the payroll tax assessments issued to the Applicants for the tax years ended on 30 June 2013, 30 June 2014, 30 June 2015 and 30 June 2016 is confirmed.

Contents of these Reasons

10. Because these reasons are, unavoidably, somewhat voluminous, I provide the following paragraph guide to the major topics:

INTRODUCTORY: Paragraphs [1]- [38]

DE-GROUPING ISSUE: Paragraphs [40]- [111]

TAXABLE WAGES ISSUE: Background and Parties’ cases :Paragraphs [112]- [122]

TAXABLE WAGES ISSUE: Analysis of the 31 entities: Paragraphs [123]- [265]

ORDERS: Paragraph [266]

Expression of names

11. The names many of the people involved in this matter have been expressed in the documentation or the oral evidence in what I understand to be the Mandarin (Hanyu Pinyin) dialect style (for example, “Mr Chu”) as opposed to the Cantonese dialect style (for example, “Mr Zhu”). I am not fluent in either of those dialects and not familiar with the correct application of them to people’s names.

12. Without intending any disrespect, I have used what I understand to be the Mandarin (Hanyu Pinyin) dialect style when referring to those people, for convenience and in order to avoid any confusion. I regret any incorrect or inappropriate references I may have made.

Statutory background: the payroll tax regime

13. In Novus Capital Ltd v Chief Commissioner of State Revenue [2018] NSWCATAD 72 at [4], Senior Member Norman Isenberg RFD provided a useful summary of the statutory regime for the imposition of payroll tax, in the following terms:

Payroll tax is a tax imposed by the Payroll Tax Act 2007 (NSW) (the Act) on employers (as defined) in respect of New South Wales wages (as defined) paid during each financial year. If total wages, including interstate wages (as defined) paid by an employer during a financial year, are below the statutory payroll tax threshold for that year, then no payroll tax is payable by that employer.

Section 13(1)(e) of the Act provides that “wages” includes any amount taken to be wages by any other provision of the Act…

The Act provides that if employers are part of a group for payroll tax purposes, then only a single threshold deduction applies to the whole group rather than each member of the group benefiting from a separate threshold deduction. Pursuant to s 81 of the Act, the Chief Commissioner may recover the whole of the relevant tax from all or any one of the group members.

Division 7 of Part 3 of the Act provides that certain amounts paid or payable during a financial year by a person (taken to be an employer) for or in relation to the performance of work relating to a relevant contract (as defined) are taken to be wages paid or payable during that financial year.

Grouping

14. Part 5 of the Payroll Tax Act, 2007 (NSW) (PT Act) makes detailed provision for the grouping of employers. Some provisions within that Part, in particular section 73 which deals with groups arising from the “tracing “ provisions, are quite complex, but relevantly section 72 provides the foundation for an understanding of the concept of a “group” for the purposes of the Act. Although the section is, of necessity somewhat long, I set it out in full.

72 Groups of commonly controlled businesses

(1) If a person or set of persons has a controlling interest in each of 2 businesses, the persons who carry on those businesses constitute a group.

(2) For the purposes of this section, a person or set of persons has a controlling interest in a business if--

(a) in the case of 1 person--the person is the sole owner (whether or not as trustee) of the business, or

(b) in the case of a set of persons--the persons are together as trustees the sole owners of the business, or

(c) in the case of a business carried on by a corporation--

(i) the person or each of the set of persons is a director of the corporation and the person or set of persons is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation, or

(ii) a director or set of directors of the corporation that is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation is under an obligation, whether formal or informal, to act in accordance with the direction, instructions or wishes of that person or set of persons, or

(d) in the case of a business carried on by a body corporate or unincorporate--that person or set of persons constitute more than 50% of the board of management (by whatever name called) of the body or control the composition of that board, or

(e) in the case of a business carried on by a corporation that has a share capital--that person or set of persons can, directly or indirectly, exercise, control the exercise of, or substantially influence the exercise of, more than 50% of the voting power attached to the voting shares, or any class of voting shares, issued by the corporation, or

(f) in the case of a business carried on by a partnership--that person or set of persons--

(i) own (whether beneficially or not) more than 50% of the capital of the partnership, or

(ii) is entitled (whether beneficially or not) to more than 50% of the profits of the partnership, or

(g) in the case of a business carried on under a trust--the person or set of persons (whether or not as a trustee of, or beneficiary under, another trust) is the beneficiary in respect of more than 50% of the value of the interests in the first-mentioned trust.

(3) If--

(a) 2 corporations are related bodies corporate within the meaning of the Corporations Act 2001 of the Commonwealth, and

(b) 1 of the corporations has a controlling interest in a business,

the other corporation has a controlling interest in the business.

(4) If--

(a) a person or set of persons has a controlling interest in a business, and

(b) a person or set of persons who carry on the business has a controlling interest in another business,

the person or set of persons referred to in paragraph (a) has a controlling interest in that other business.

(5) If--

(a) a person or set of persons is the beneficiary of a trust in respect of more than 50% of the value of the interests in the trust, and

(b) the trustee of the trust (whether alone or together with another trustee or trustees) has a controlling interest in the business of another trust,

the person or set of persons has a controlling interest in the business.

(6) A person who may benefit from a discretionary trust as a result of the trustee or another person, or the trustee and another person, exercising or failing to exercise a power or discretion, is taken, for the purposes of this Part, to be a beneficiary in respect of more than 50% of the value of the interests in the trust.

(7) If--

(a) a person or set of persons has a controlling interest in the business of a trust, and

(b) the trustee of the trust (whether alone or together with another trustee or trustees) has a controlling interest in the business of a corporation,

the person or set of persons is taken to have a controlling interest in the business of the corporation.

(8) If--

(a) a person or set of persons has a controlling interest in the business of a trust, and

(b) the trustee of the trust (whether alone or together with another trustee or trustees) has a controlling interest in the business of a partnership,

the person or set of persons is taken to have a controlling interest in the business of the partnership.

De-Grouping

15. Within Part 5 of the PT Act, section 67 confirms that a “group” does not include any member of the group in respect of whom a determination under Division 4 is in force. The section within Division 4 which is of primary relevance in that regard is section 79. It allows the Chief Commissioner to exclude persons from groups. An exercise of that power is often referred to as “de-grouping”.

16. Section 79 is in the following terms:

79 Exclusion of persons from groups

(1) The Chief Commissioner may, by order in writing, determine that a person who would, but for the determination, be a member of a group is not a member of the group.

(2) The Chief Commissioner may only make such a determination if satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Chief Commissioner considers relevant, that a business carried on by the person, is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group.

(3) The Chief Commissioner cannot exclude a person from a group if the person is a body corporate that, by reason of section 50 of the Corporations Act 2001 of the Commonwealth, is related to another body corporate that is a member of that group.

(4) This section extends to a  group constituted by reason of section 74 (Smaller groups subsumed by larger groups).

(5) A determination can be expressed to take effect on a date that is earlier than the date of the determination.

(6) The Chief Commissioner may by order in writing revoke a determination that applies in respect of a person if satisfied that the circumstances in which a determination may be made do not apply to the person.

(7) The revocation of a determination can be expressed to take effect on a date that is earlier than the date of the determination.

The Division 7 scheme: “relevant contracts” and contractor provisions

17. Sections 6 and 7 of the PT Act effectively impose payroll tax on the employer by whom taxable wages are made. The major question, which is the basis of the second issue in this case, is the extent and applicability of the term “taxable wages”.

18. Section 11 (1) (a) is the relevant provision and is in these terms:

11 Wages that are taxable in this jurisdiction

(1) For the purposes of this Act, wages are taxable in this jurisdiction if--

(a) the wages are paid or payable by an employer for or in relation to services performed by an employee wholly in this jurisdiction, or

19. Division 7 is titled “Contractor provisions”. Relevantly section 32 defines “relevant contract” for the purposes of Division 7, as follows:

(1)….a "relevant contract" in relation to a financial year is a contract under which a person(the "designated person" ) during that financial year, in the course of a business carried on by the designated person--

(a) supplies to another person services for or in relation to the performance of work, or

(b) has supplied to the designated person the services of persons for or in relation to the performance of work, or

(c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for re-supply of the goods to the designated person or, where the designated person is a member of a group, to another member of that group.

(2) However, a “relevant contract" does not include a contract of service or a contract under which a person (the designated person) during a financial year in the course of a business carried on by the designated person--

(a) is supplied with services for or in relation to the performance of work that are ancillary to the supply of goods under the contract by the person by whom the services are supplied or to the use of goods which are the property of that person, or

(b) is supplied with services for or in relation to the performance of work where--

(i) those services are of a kind not ordinarily required by the designated person and are performed by a person who ordinarily performs services of that kind to the public generally, or

(ii) those services are of a kind ordinarily required by the designated person for less than 180 days in a financial year, or

(iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services--

(A) provided by a person by whom similar services are provided to the designated person, or

(B) for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person,

for periods that, in the aggregate, exceed 90 days in that financial year, or

(iv) those services are supplied under a contract to which subparagraphs (i)-(iii) do not apply and the Chief Commissioner is satisfied that those services are performed by a person who ordinarily performs services of that kind to the public generally in that financial year

20. Relevantly, by section 34, a person who during a financial year:

(a) performs work for or in relation to which services are supplied to another person under a relevant contract, or

(b) being a natural person, under a relevant contract, re-supplies goods to an employer,

is taken to be an employee in respect of that financial year.

This Tribunal’s jurisdiction

21. As the decision by the Chief Commissioner to issue the notices of assessment has been the subject of a notice of objection by the Applicants, and as they are dissatisfied with the Chief Commissioner’s determination of that objection, this Tribunal has jurisdiction to review the Chief Commissioner’s decision, pursuant to Section 96 of the Taxation Administration Act 1996 (NSW) (Administration Act), section 9 of the Administrative Decisions Review Act (ADR Act) and section 28 of the Civil and Administrative Tribunal Act (NCAT Act).

22. In conducting that review I am required to determine the correct and preferable decision, having regard to the materials before me and the applicable law: section 63 of the ADR Act.

23. The decision under review here is the Chief Commissioner’s decision to issue the relevant assessments; not his decision to disallow Applicants’ objection: see Chief Commissioner of State Revenue v Paspaley [2008] NSW CA 184 at [28], per Basten JA.

24. The role of the Tribunal in determining an application for administrative review under section 63 of the ADR Act is:

“… to decide what the correct and preferable decision is having regard to the material then before it, including the following:

(a) any relevant factual material,

(b) any applicable written or unwritten law.”: s 63(1).

25. For the purpose of making its decision, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision: ADR Act s 63(2).

Taxpayer’s onus of proof and the standard of proof

26. It is of fundamental importance that under section 100 (3) of the Taxation Administration Act 1996 (NSW) (Administration Act), in a review of this nature the applicant taxpayer has the onus of proving their case. So the Applicants are required to prove all matters necessary to enable me to answer the issues their favour.

27. The requisite standard of proof is the balance of probabilities: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 (“Cornish”) at [31]; B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSW LR 481 (“B&L Linings”), per Allsop P at [87] and [104]; Gauci v Federal Commissioner of Taxation (1975) 135 CLR 181; (1975) 8 ALR 155 (“Gauci”).

28. In Levitch Design Associates Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 215 (Levitch) at [27], the Tribunal acknowledged that the taxpayer’s evidence must not be regarded as prima facie (at first appearance) unacceptable and must be considered on its merits without any predisposition, but the Tribunal confirmed the nature of applicant’s onus and the standard of proof, as recorded in Cornish, B & L Linings and Gauci. The Tribunal in Levitch was of the view that s 100 (3) of the Administration Act:

… requires the applicant to prove or establish on the balance (preponderance) of probabilities all matters necessary to enable the tribunal to answer the statutory question in the applicant’s favour, and all the facts on which the applicant relies to claim the exemption.

29. As was also emphasised in Levitch at [27], the onus rests firmly and only on the Applicant: there is no onus or obligation on the Chief Commissioner to demonstrate that the assessments were correctly made. Nor is there any statutory requirement that the assessment or assessments in question must be sustained or supported by evidence.

The Chief Commissioner’s decision to group and to assess payroll tax

30. On 15 March 2019 the Chief Commissioner notified Home789 Resources that it was grouped with the other companies within the definition of the Group (see definition at [39]- [40] below) . The Chief Commissioner also issued the Group with payroll tax assessments (the Assessments) for the periods 1 July 2012 to 31 January 2019 and imposed penalty tax at 25% and interest at the market rate.

31. By a separate letter also dated 15 March 2019 the Chief Commissioner disallowed an application for exclusion from the Group (the Exclusion Decision).

32. On 8 July 2019 the Applicants objected to the Assessments and to the Exclusion Decision and on 14 November 2019 the Chief Commissioner partly allowed the objection.

33. On 7 January 2020 the Applicants each filed separate applications for review with the Tribunal. On 6 October 2020, the Applicants filed further separate applications for review relating to an estimate assessment raised by the Chief Commissioner for the period 1 July 2019 to 31 January 2020. That estimate assessment was based on the assessment for financial year 2018 to Home789 Resources and included 25% penalty tax.

Documentary material, testimony and submissions

34. In the course of the matter, from the filing of the applications with the Tribunal to the conclusion of the hearing, each party lodged extensive documentation which runs to several thousand pages.

35. For example there are 7 volumes of documentation lodged in accordance with section 58 of the ADR Act (containing more than 1,800 pages), 5 large folders containing in total over 2,400 pages, being annexures to Mr Chu’s affidavit, two boxes containing summonsed material of approximately 500 pages, further boxes containing the Applicants’ tender bundle consisting of over 1,800 pages. In addition 8 Registry files have been opened in respect of the matters and they contain in total over 2,000 pages.

36. The principal affidavits filed were, for the Applicants the affidavit of Mr Walton Chu dated 9 April 2021 and for the Chief Commissioner the affidavit of Thomas Millett dated 12 October 2022.

37. To particularise every document made available would be an arduous and not particularly beneficial task and I do not propose to do so.

38. The principal written submissions to which I have had regard are:

1. For the Applicants: Outline of Submissions lodged 11 April 2021, Further Outline of Submissions filed on 21 June 2022, Summary of Argument on Taxable Wages Issue dated 18 May 2023.

2. For the Chief Commissioner: Submissions and Aide-memoire filed 13 October 2022, which were the Chief Commissioner’s principal written submissions, submissions and aide-memoire table dated 18 May 2023 as to “operation of group and constituent applicants” and “why s79 discretion should be refused” and a full “outline of submissions “ document of the same date attaching an analysis of the position of and alleged income for each relevant financial year for each of the 31 individuals and entities subject to findings in relation to the Taxable Wages issue.

Uncontested facts – Applicants’ corporate structure

39. The following details of that structure are either uncontested, or readily apparent from the documentary material made available, or are asserted in submission by the Chief Commissioner and not challenged by Home789. They describe the position as at the date of the commencement of the hearing, as I understand it from the parties’ submissions.

1. Mr Walton Chu, who is also known as Kai Zhu (Mr Chu) is and at all relevant times has been the sole director and sole shareholder of Home789 Resources and the sole shareholder and director of Great Fortune Investments Pty Limited (GFI). Mr Chu is a licensed real estate agent.

2. Mr Chu was also, at least in the periods 1 February 2012- 16 July 2013; and 9 November 2014- 21 December 2016, the sole director and sole shareholder of Bright Austina Pty Limited (Bright Austina). That company was de-registered on 21 December 2016.

3. Mr Chu owns more than 50% of the issued share capital of UFN A Epping Pty Limited . That company is the trustee of the UFN A Epping Unit Trust and Mr Chu has a beneficial interest in more than 50% of the units in that trust.

4. Mr Chu is also a discretionary beneficiary of more than 50% by value of the trusts of the CJ Family Trust. The primary beneficiaries of that trust are his wife Ms Whitney Jiang (also known as “ Mrs Chen Jiang” or “Mrs Zhen Jiang”) and the children of Mr Chu and Ms Jiang. The trustee of that trust is SWASW Wealth Pty Limited (SWASW Wealth) and in that capacity SWASW Wealth applied for and currently holds the intellectual property rights in the brand name “Home789”.

5. SWASW Wealth in that capacity as trustee of the CJ Family Trust is the sole shareholder in UFN Resources Pty Limited (UFN) and holds 99% of the shares in Australian Sunshine Marketing Pty Ltd (ASM). ASM trades, in part, as “Home789”. Ms Jiang was, until July 2016 a director of ASM

THE DE-GROUPING ISSUE

The Chief Commissioner’s assessments and Exclusion Decision

40. Following an investigation under Division 2 of Part 9 of the Administration Act, on 15 March 2019 the Chief Commissioner notified Home789 Resources that pursuant to the PT Act, sections 72(2) (which deals with groups of commonly controlled businesses) and 74(1) (which deals with smaller groups subsumed by larger groups), Home789 Resources had been grouped with:

1. GFI;

2. Bright Austina Pty Ltd;

3. SWASW Wealth as trustee for the CJ Family Trust;

4. ASM;

5. UFN; and

6. UFN A Epping Pty Limited, as trustee for the UFN A Epping Unit Trust.

41. Home789 Resources and those 6 entities have been collectively referred to by the Chief Commissioner as “the Group” and I will use the same term.

42. Under cover of the same letter of 15 March 2019 the Chief Commissioner raised assessments of payroll tax for the periods 1 July 2012 to 31 January 2019 (the Assessments). The Chief Commissioner also raised estimate assessments for the tax years 1 July 2017 to 30 June 2018 and 1 July 2018 to 31 January 2019. He also imposed penalty tax at 25% and interest at the market rate.

43. As at the date of the Chief Commissioner’s major written submissions, being 13 October 2022, the amount of payroll tax assessed, penalty tax and interest was approximately $1.04 million.

44. By a separate letter of 15 March 2019, the Chief Commissioner disallowed an application for exclusion from the Group (Exclusion Decision).

The real issues

45. The real issues in relation to de-grouping are these:

1. whether the Chief Commissioner’s decision to group the Applicants pursuant to the common control and subsuming provisions in sections 72 (2) and 74 (1) of the PT Act, was or was not the correct and preferable decision; and

2. to the extent that the decision was the correct and preferable one, whether the Tribunal, standing in the shoes of the Chief Commissioner, should exercise the discretion conferred by section 79 of the PT Act to determine that a person who has or particular persons who have been treated as part of that group should not be so treated.

The Applicants’ case

Applicants’ “Core Facts”- corporate structure and functions

46. On the final day of the hearing, Counsel for the Applicants handed up a document entitled “Core Facts on De-Grouping Issue”. I have referred below to the facts asserted at paragraphs [3] to [18] of that document as “the Applicants’ Core Facts”. As I understand the position as reflected in the Applicants’ Core Facts:

1. the Applicants collectively admit (or where the context permits, the relevant Applicant admits) those facts; and

2. where the facts are expressed in the past tense, they apply to the situation at all relevant times for the purposes of these proceedings.

Applicants’ submissions - business functions of entities, Conjunction Agreements

47. The Applicants’ Core Facts include the following assertions, which unless otherwise stated are made as at all relevant times for the purposes of the relevant assessments of payroll tax.

1. Each of the Applicants operates or has operated in the real estate industry.

2. Home789 Resources carried on a real estate agency business. It acted as an agent, usually for vendors but occasionally for prospective purchasers, in respect of sales of real property. Mr Walton Chu was its sole director and shareholder.

3. Great Fortune Investments Pty Ltd (GFI) provided property management services to owners in respect of the leasing of their property. Mr Chu was its sole director and shareholder.

4. Aust Sunshine Marketing Pty Ltd (ASM) provided project marketing, advisory and related services to property developers. Whitney Jiang and Hui Fang Cao (that is, Mr Chu’s wife and mother-in-law respectively) were its directors until July 2016. In July 2016 Whitney Jiang ceased being a director and Hui Fang Cao remained the sole director. 99% of the shares in ASM were held by SWASW Wealth, in its capacity as trustee of the CJ Family Trust. The primary beneficiaries of the CJ Family Trust were Mr Chu, Ms Jiang and their children.

5. ASM generated revenue from the services it provided to property developers. The arrangement was that ASM was remunerated for those services by being appointed as exclusive selling agent for the units being sold by the particular developer. So, ASM’s business was directed at securing the custom of developers. All of the dealings with developers were undertaken by Ms Jiang and Ms Cao was occasionally also involved, where the developer was an overseas entity.

6. Although appointed as the “selling agent”, in reality ASM did not itself undertake any marketing or sales activities with respect to the units being developed. Rather, it entered into agreements (Conjunction Agreements) with licenced real estate agents for this purpose.

7. Under each Conjunction Agreement, commission flowing from the sale of a home unit was split between ASM and the licensed real estate agent who introduced the sale. It is an important aspect of the Applicants’ case in relation to both the De-Grouping issue and the Taxable Wages issue that the marketing and sales activities in respect of units which were to be sold as outlined above was undertaken by these other licensed real estate agents. It is made clear in the Applicants’ Core Facts document that, upon sale of a home unit, ASM derived income from that sale (presumably pursuant to the relevant Conjunction Agreement), that income representing a portion of the commission.

1. The Applicants’ submission is that Home789 Resources derived revenue from acting as agent in respect of sales of real property and its business was managed and controlled by My Chu; that it had on average only 10-15 employees, each of whom worked at the direction of Mr Chu. Home798 Resources and its employees undertook sales and marketing activities; including online listings, preparing brochures and other advertising material, conducting inspections, liaising with vendors, purchasers and other parties, holding deposits and arranging settlements.

2. Home798 Resources had three distinct lines of real estate business:

1. firstly; it advertised its services to and was engaged by members of the general public and for this purpose maintained its own website as well as a profile on the other major real estate websites such as Domain and real estate.com.au, on which it was listed as an agent for property listings;

2. secondly; it was also one of the licenced real estate agents who acted as agent for the sale of units in development projects of which ASM was appointed as the exclusive selling agent. Like the other agents participating in that arrangement, when in this situation a sale resulted from Home789 Resources’ activities in this area, Home789 Resources was entitled to an agreed portion of commission, under a Conjunction Agreement; and

3. thirdly; it also entered into Conjunction Agreements with licenced real estate agents, where it did not have the capacity to undertake sales agent activities at the time. Again, the commission was split between Home789 Resources and the engaged agent who had actually carried out the marketing and sales activity.

10. UFN provided administrative, book-keeping and related services on behalf of foreign investors who had invested or who planned to invest in property development property projects in Sydney.

11. As confirmed in the Applicant’s submissions, ASM’s business was conducted almost entirely by Ms Whitney Jiang (the wife of Mr Walton Chu) even after she ceased to be a director in July 2016 and 99% of ASM’s shares were held by SWASW Wealth Pty Ltd as trustee of the CJ Family Trust.

Applicants’ submissions- pattern of business operations

1. As I understand it, from the Applicants’ Core Facts and related documentation, at all relevant times, the Applicants operated in the following way:

1. ASM generated revenue from the services it provided to property developers. It was remunerated by being granted exclusive agency agreements, under which ASM was appointed by the developer as the exclusive selling agent in respect of all units in any particular development.

2. ASM obtained listings of off-the-plan properties from property developers as their exclusive agent and then granted Home789 Resources the status of a “conjunction listing agent”. Home789 Resources thereby gained access to such listings.

3. Home789 Resources listed the properties on its database, marketed them and engaged sales agents to sell the listed properties.

4. On settlement of sale of a property, the purchaser paid he property developer. In turn the property developer paid ASM its commission. ASM then paid Home789 Resources and Home789 Resources then paid the individual sales agent.

5. Purchasers who purchased a property from Home789 Resources as an investment could engage GFI to manage the property or relist it for sale by Home789 Resources; and

6. UFN provided administrative, book-keeping and clerical support including to ASM.

7. ASM did not itself undertake any marketing or sales activities with respect to the units.

8. Home789 Resources derived revenue from acting as an agent in respect of sales of real property. It undertook marketing and sales activities. It maintained a website as well as a profile on the Domain and realestate.com.au websites, where it was listed as an agent for property listings.

2. ASM and Home789 Resources entered into a Service Agreement dated 29 December 2013, which governs their relationship and there are no other written agreements between the Applicants.

3. GFI received income from the property management services it provided to owners.

4. Home789 Resources, GFI and ASM leased adjacent commercial suites in Redfern.

5. In the relevant period:

1. approximately 90% of the units of which ASM had been appointed as the exclusive selling agent were sold through the activities of Home789 Resources;

2. the majority of GFI’s clients were referred after having had dealings with Home789 Resources; and

3. approximately 60% of the properties managed by GFI were referred by Home789 Resources.

The Applicants’ case on this issue

48. The Applicants contend that the Tribunal, standing in the shoes of the Chief Commissioner in respect of actions under section 79 of the PT Act, should de-group certain of the Applicants; in particular Home789 Resources, GFI, ASM and UFN.

49. That contention is made because, as it is put in the Applicants’ written submissions received on 11 April 2021 at [20]:

Each of ( Home 789 Resources, GFI, ASM and UFN ) carried on distinct and separate businesses, which were independent and not relevantly connected. In that regard, it is not necessary to show the absence of any connection or inter-relation between the businesses; the connection must be material and involve influence over the conduct of the other business.

50. The last phrase is submitted in reliance on Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 (Tasty Chicks) and Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42 (Lombard Farms), which are discussed further below.

51. It is said on behalf of the Applicants that they will demonstrate that the Chief Commissioner’s key assertions on this issue lack merit, either because they are unsupported by the evidence or do not indicate an absence of independence. Those “key assertions” are identified as being those made in reliance on factors set out at pages 851-853 of the bundle of documents (the section 58 bundle) which was provided by the Chief Commissioner pursuant to section 58 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act). I understand the Chief Commissioner’s key assertions to be that:

1. Mr Chu had significant control and influence over each business;

2. the businesses all operated in the real estate industry;

3. all the businesses are located at the same premises;

4. the businesses market themselves as “a one-stop shop” with “Home789” branding;

5. the Applicants collectively carried on a single business;

6. there was significant financial interdependency;

7. there was shared sales staff; and

8. the businesses had a continuous relationship.

52. In the written submissions made on behalf of the Applicants those factors are addressed as follows (the numbered sub-paragraphs below corresponding with those in the preceding paragraph and abbreviated sub-headings having been inserted for clarity):

1. (Mr Chu’s significant control and influence). Mr Chu did not have significant control and influence over each business. While he did manage Home789 and GFI, Ms Jiang and Ms Cao controlled and managed ASM and UFN respectively. Mr Chu’s daily activities involved managing the marketing and sales activities of Home789 and the property management services provided by GFI and he was not involved in the conduct of the business of ASM or UFN.

2. (All businesses operated in the real estate industry). The fact that all the businesses operated in the real estate industry and had dealings with each other is an insufficient basis upon which to group them. There was no structural dependence upon each other; for example, although Home789 had additional stocks of available real estate on its books as a result of its contractual relationships with ASM, it was by no means reliant upon that stock to carry on its business. Similarly, the viability of ASM’s business did not depend on the sale of units by Home789: it could and did depend on Conjunction Agreements with other real estate agents to achieve sales.

3. (All businesses are located in same premises). This factor is not expressly admitted but not expressly denied. The Appellants say that the rent payable under the leases for the Redfern office premises were at commercial rates. If a lease had ended that would have required the tenant to vacate the premises, although no indication was given that any such lease did so expire during relevant periods. The leasing by the various allegedly Group entities of adjacent suites was said to be:

… a matter of convenience and not indicative of influence over conduct.

4. (Applicants’ businesses marketed as a “one-stop shop”). The businesses did not market themselves as a “one-stop shop” under common branding as “Home 789”. Home789 Resources did maintain a website which was used to market to the general public:

…because that was an important source of work and that was also the case to a lesser extent for GFI and UFN.

But ASM did not maintain a website, because its business depended upon establishing and maintaining relationships with large and sophisticated developers and web contact was unnecessary for that. Additionally, although marketing material, such as the property listings on Domain and Real Estate.com referred to “Home789”, there was no reference on those sites to the other businesses.

5. (The Applicants collectively carry on a single business). There was more than one overall business carried on. The businesses had distinct operations and were managed and controlled by different people. They derived their income in different ways.

6. (Significant financial interdependency). There was no financial interdependence as alleged. The assertion on behalf of the Chief Commissioner that between 2014 and 2017 Home789 Resources received most of its income from ASM involves a misunderstanding of the nature of the agreement between them, and of Conjunction Agreements. In the Applicants’ submission they did not involve the provision of services between the licenced real estate agents who are party to them. Rather, the marketing and sales activities undertaken by an agent were undertaken in the agent’s capacity as agent for the vendor. In the Applicants’ submission, the fiduciary obligations which arise are owed to the vendor.

7. (Shared sales staff). There was no shared sales staff. ASM and UFN had no sales staff whatsoever. Home789 Resources and GFI did not share staff. There are some individuals who have moved employment from one company within the asserted group to another.

8. (Continuous relationship). From time to time it was commercially beneficial for various Applicants to have dealings with other Applicants. That of itself does not indicate business integration. Such integration was not structurally necessary. It was simply commercially sensible for some Applicants to deal with other Applicants, where appropriate.

Chief Commissioner’s case on this issue

53. The Chief Commissioner provided detailed written submissions on 13 October 2022 and at the hearing Counsel for the Chief Commissioner handed up a document entitled “Chief Commissioner’s Aide Memoire”, which comprised two sections, each of which included submissions on particular aspects of the De-Grouping issue, headed respectively:

A. Operation of Group and Constituent Applicants; and

B. Evidence : why s.79 discretion should be refused.

54. Broadly, the Chief Commissioner’s case in relation to the De-Grouping issue is that the Applicants have failed to demonstrate that the Chief Commissioner erred either in grouping the Applicants under sections 72 (2) and 74 (1) of the PT Act or in failing to de-group any of them by an exercise of the available discretion to do so under section 79 of that Act.

55. Through Counsel, the Chief Commissioner has emphasised that he bears no onus to demonstrate that the decisions to group and not to de-group were the correct and preferable ones. He relies in the authorities as to the onus of proof discussed above in that regard. He contends on that basis that the onus in respect of these matters rests clearly upon the Applicants.

56. The Chief Commissioner further contends that when I consider the full and actual corporate and business structure, I will conclude that the Applicants have failed to satisfy the necessary onus and standard of proof and that an application of the recognised principles of law relating to grouping for payroll tax to the evidence will lead me to reach the following conclusions.

1. The Applicants are part of a group of businesses each of which operates in the real estate industry under the brand name “Home 789”, the intellectual property in that name being held by SWASW Wealth as the trustee for the CJ Family Trust.

2. The Group is marketed as a “one stop shop” for property investment and development and properties are advertised by the group using the branding “Home789”. I am referred to Headware v Chief Commissioner of State Revenue [2015] NSWCATAD 166 (Headware) at [77] and Cessnock Tyres v Chief Commissioner of State Revenue [2017] NSWCATAD 368 (Cessnock Tyres) at [57].

3. Each of the Applicants is located in common physical premises (which may be adjacent to each other) and each shares common space, facilities, resources, clerical and book-keeping services and use the same legal and accounting representatives. Counsel for the Applicants referred me to Tasty Chicks and Lombard Farms.

4. The rental and utility payments made as between what may be considered Group members are disproportionate with neither ASM nor UFN contributing to these outgoings.

5. Sales staff are shared across the alleged Group. I am referred to Conrad Liningsv Chief Commissioner of State Revenue [2013] NSWADTAP 42 (Conrad Linings) at [56].

6. The Group operates in the real estate industry and the operations of constituent entities are, in the Chief Commissioner’s phrase “inextricably linked” and the Applicants have conceded that the businesses are complementary.

7. Mr Chu, his wife Mrs Zhen Jiang and his mother-in-law Ms Hui Fang Co (between them) own the businesses conducted by the Group. There is substantial commonality in such ownership and has been at all relevant times: see Conrad Linings at [53]. The Applicants have conceded that notwithstanding Ms Jiang’s resignation as a director of ASM, she continues to be involved in that company’s day-to-day operations and decision-making.

8. Mr Chu is able to influence the strategic and financial decisions of each of the businesses in the Group; as to which the Chief Commissioner cites Boston Sales and Marketing Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 139 (Boston Sales and Marketing) at [26] and Conte Mechanical and Electrical Servicesv Chief Commissioner of State Revenue (2011) 85 ATR 120; [2011] VSC 104 (Conte Mechanical) at [12].

9. By reason of the matters set out immediately above, any absence of the exclusive listing secured by ASM and provided to Home789 Resources or absence the volume of property management work provided by Home 789 Resources to GFI, would be a significant impairment to GFI. Equally, without the support it has from ASM, UFN, which does not generate income, would be severely financially constrained or insolvent.

10. The close relationship between the members of the Group was continuous in the period 2013 to 2019. The transactions between Group members are not sporadic but regular and continuous.

11. There are no service agreements between ASM, GFI and UFN, despite ASM effectively funding UFN. There are no service agreements between Home789 Resources and GFI and UFN, despite GFI obtaining most of its work from Home789 Resources: see Regis Mutual Managementv Chief Commissioner of State Revenue [2015] NSWCATAD 213 at [93].

12. A substantial percentage by volume and by value of the total business of each relevant Group member arises from the activities of another Group member or members.

13. The matters set out above establish that there are substantial commercial connections and interdependencies between the various businesses.

Relevant principles from the leading cases

57. In Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] 245 CLR 446, being the appeal from the decision of the NSW Court of Appeal in Tasty Chicks, the High Court at [8] identified the purpose of the grouping provisions as having been designed to counter tax avoidance through the splitting of business activities by the use of additional entities, each attracting a threshold. The Court observed that the provisions were made available to enable the Chief Commissioner to determine that in those circumstances it would be unreasonable allow the ‘grouping’ provisions to apply.

58. Those observations were more recently discussed and applied by Ward CJ in Eq (as her Honour then was) in Elanor Operations Pty Limited v Chief Commissioner of State Revenue [2022] NSWSC 104 (Elanor Operations), including by reference to the decision of the Appeal Panel of the NSW Administrative Decisions Tribunal in Lombard Farms. In Elanor Operations, at [57], her Honour said:

The question is whether, objectively determined, having regard to the nature of the connections between group businesses, it can be said that the businesses are independent and not connected; that question being one of fact and degree (see Lombard Farms…), no single factor being determinative. In Lombard Farms (at [50]) it was said that ‘[i]t is not the case that any connection between businesses will disentitle an applicant from de-grouping’; rather, the connection must be material ‘and not insignificant or inconsequential’ and then connection must affect the business ”in some real or practical sense”.

59. Her Honour went on, at [58], to confirm that the relevant question in the case before her was as to whether, and if so to what extent, the business carried on by each plaintiff was carried on independently of, and not in a way that is connected with the carrying on of, a business carried on by another plaintiff. Her Honour concluded that passage by confirming that that issue is to be determined:

…having regard to matters such as the nature and degree of ownership and control of the business; and the nature of the relevant businesses.

60. The result in Elanor Operations demonstrates that even where one person is the sole director of a number of companies and has effective ownership of all or most of the issued shares in each of them, that in itself will not be conclusive of the issue of whether those companies should be ‘grouped’ for the purposes of the payroll tax legislation. Her Honour found in that case that the sole director, Mr Willis’, effective ownership of all or most of the issued shares in the companies was unlike the situation where grouped businesses are essentially separate parts of associated enterprises operated for the benefit of the same persons.

61. That result obtained because of the particular facts of the case. Each company operated the business of a separate managed investment fund being a property fund and each such fund was owned by a different group of investors. So the result in Elanor Operations obtained because ultimate control and ownership of the businesses rested with the members of each fund. Her Honour appears to have accepted the propositions put by the plaintiffs to the effect that Mr Willis’ position as sole owner of the shares and particularly as sole director was constrained by the fiduciary duties which he owed to each plaintiff, so that Mr Willis was bound to act strictly for the benefit of each specific company, without consideration of the benefits (or detriments) that might result to others. The beneficiaries of each fund were the ultimate owners. At [63] Her Honour, in summarising the plaintiff’s case (which ultimately prevailed), observed that although under the relevant trust deed the beneficiaries did not have day to day control of any of the businesses, as beneficiaries they could use their common law powers to remove the trustee and:

(i)n that critical sense it is said that ultimate control and ownership of the business rests in the members.

62. Her Honour added, at [155], that Mr Willis, the sole director and shareholder was:

…constrained in his ability lawfully to control the direction or conduct of the businesses…once they are sold off to investor syndicates; and those businesses are required to be run in the interests of the members of the particular discrete fund.

63. Significantly, as Her Honour recognised, the result may well be different where that ultimate control and beneficial ownership does rest with the directors and shareholders. That is the position in the present case.

64. Her Honour also emphasised, at [57], that in order to attract the grouping provisions, the connection between the corporate entities must affect their business ”in some real or practical sense”, citing Lombard Farms at [51]. That paragraph [51] in the Lombard Farms decision was, usefully, quoted in full by Her Honour:

To say that there can be absolutely no connection between the businesses .sets the bar too high. The question is one of fact and degree…To disentitle an applicant to de-grouping, the connection must be meaningful in a commercial sense and not immaterial or inconsequential to the carrying on of the business…There must be a finding of substantial absence of connection and substantial independence between the businesses to warrant the exercise of the discretion.

65. Her Honour concluded as follows:

Thus the relevant question…is as to whether, and to what extent, the business carried on by each plaintiff is carried on independently of and not in a way that is connected with the carrying on of, of a business carried on by another plaintiff. That issue is to be determined having regard to matters such as the nature and degree of ownership and control of the businesses; and the nature of the businesses.

66. Boston Sales & Marketing makes it clear at [22] that the fact that the same person owns and controls all of a group’s members does not mean a fortiori (without stronger reason) that the businesses are not carried on independently and are unconnected and therefore does not impede a finding to that effect; but:

equally, (the fact) that the nature of the businesses in the group are different does not answer the question whether the relevant businesses are not carried on independently and are unconnected.

67. The focus must be on the overall nature of the connections between the businesses. That was recognised by the Appeal Panel of this Tribunal in Chief Commissioner of State Revenue v Seovic Civil Engineering Pty Ltd [2014] NSWCATAP 92 (Seovic) where it was found that one company, Exell, provided a significant proportion of the workforce of both other companies in the group and provided most of not all the administration and day to day management of staff. The Appeal Panel concluded that it was difficult to see how, without the staff provided by Exell the other business could have functioned; it was not a:

..passing, infrequent or random connection. (The connection) is material and goes to the heart of the carrying on of the business of (the other two companies).

68. As Lombard Farms and the other authorities cited make clear, the focus is on the connections between the relevant businesses and the nature of the businesses carried on, not on the composition or nature of the entities themselves.

69. The analysis of the issue in Lombard Farms, as subsequently approved elsewhere, makes it necessary to conduct a practical and commercially realistic investigation of the way in which and the degree to which the businesses under consideration operate in practice in that sector of the commercial world in which they exist. That must involve a commercially realistic assessment of just how each of the relevant businesses operates and interacts within the sphere of commerce in which they exist and whether, on that basis, they can be said to be independent and not connected.

70. The final important point of principle is as stated Ward CJ in Eq in Elanor Operations at [81], citing the judgment of Meagher JA in the Seovic decision in the Court of Appeal: Seovic Engineering Pty Ltd vChief Commissioner of State Revenue [2015] NSWCA 242(Seovic Appeal) at [22] :

It may readily be accepted that the broad purpose of the power to exclude is to enable the Chief Commissioner to relieve against the unreasonable operation of the grouping provisions. However the circumstances in which the power to do so is engaged are described in s 79(2). Whilst that description should be construed having regard to that purpose, it nevertheless remains the position that the Commissioner must in terms be satisfied that the business sought to be excluded is not connected with the carrying on of another business.

Consideration- The absence of direct evidence from Mr Chu

71. I commence my consideration of the De-Grouping issue by commenting on the absence of direct evidence at the hearing from Mr Walton Chu. It appears most likely that Mr Chu’s position in the group at relevant times gave him a unique and comprehensive knowledge of the businesses and structures involved, the nature and degree of the real commercial links between the businesses, the real connections between them and the extent to which the viability of a particular business is dependent upon those connections.

72. The Chief Commissioner has observed and it seems clear that:

Mr Chu has significant and indirect interests in each of the (relevant) entities…

73. Mr Chu’s capacity to provide evidence of the important matters mentioned above arises from the key positions he held, which as I understand them, relevantly include, positions as:

1. the sole director and shareholder of Home789 Resources,

2. the sole director and shareholder of GFI,

3. the owner with his wife Ms Whitney Jiang of the vehicle (SWASW Wealth) which as trustee of the family trust owns 99% of ASM as well as 100% of UFN; and

4. the owner of a majority of issued shares in UFN A Epping Pty Limited, which in turn acts as the Trustee of the UFN A Epping Unit Trust.

74. Those positions provided Mr Chu with insight, which could have been shared with the Tribunal, as to matters which are influential and in some cases vital to the real issues in this case, such as the role of each entity, the extent of the connection between various businesses and entities and the licenced real estate agents with whom there was engagement of some sort and the workings of the Conjunction Agreements. Indeed it might reasonably have been anticipated that he would be the key witness for the Applicant in respect of these matters. Yet he was not called as a witness and did not participate in the hearing.

75. Counsel for the Chief Commissioner invites me to draw the inference arising from Jones v Dunkel [1959] HCA 8; 101 CLR 248 in respect of this absence of Mr Chu from the hearing.

76. The “Jones v Dunkel principle” has been expressed in various, slightly varied forms but relevantly it applies where a witness, who appears to be in a particular party’s camp is not called upon to give evidence and there is no explanation tendered for that. The principle is that in those circumstances the court or tribunal may assume that that witness’ evidence would not have assisted that party’s case.

77. An affidavit by Mr Chu sworn on 9 April 2021 was filed as part of the Applicants’ case. So in that sense and in that form, evidence was given by him. He was initially required by the Chief Commissioner to attend for cross-examination on his affidavit, but at the hearing that requirement was not pressed.

78. Nevertheless, in my view the Jones v Dunkel inference remains available in respect of the lack of evidence from Mr Chu on the De-Grouping issue, because his affidavit of 9 April 2021 is almost entirely devoted to addressing the Taxable Wages issue. Only 3 of its 266 paragraphs relate in any way to the De-Grouping issue and they do so within a very restricted compass. Paragraph 263 of the affidavit merely confirms the acquisition of Home789 Resources by 789 Holdings Limited on 13 August 2018, asserts that Home789 Resources “carries out a property sales business” and that following its acquisition by 789 Holdings Limited Home789 Resources has continued to carry out a property sales business and a property management business in NSW and to derive its revenues from commissions paid by vendors of residential properties for successfully selling their properties and leasing fees and commissions paid to property owners to lease and manage residential and commercial properties on their behalf. Paragraph 264 contains a cross-reference to attached company searches including a search for Home789 Resources. Paragraph 265 simply confirms that there has been no change to ASM’s corporate structure and operations.

79. All that evidence is over two years old. None of the other 263 paragraphs relates to the De-Grouping issue. They are all directly concerned with the Taxable Wages issue.

80. So Mr Chu’s affidavit evidence which related to the De-Grouping issue and in respect of which he was not required for cross-examination was of very limited scope and was largely confirmatory of other evidence adduced as to those matters.

81. I cannot see that the existence prior to the hearing of that narrow scope of evidence from Mr Chu through his affidavit inhibits the making of a Jones v Dunkel inference in respect of the failure of the Applicants to adduce evidence from him on the De-Grouping issue at the hearing.

82. I therefore find that evidence at the hearing from Mr Chu in relation to the De-Grouping issue, which would probably be the best evidence available on that subject from the person with the most detailed knowledge of it, would reasonably have been expected to be adduced and I draw a Jones v Dunkel inference in respect of the absence of Mr Chu and his evidence on that issue.

The absence of direct evidence from Ms Jiang and Ms Cao

83. Counsel for the Chief Commissioner further submits that a Jones v Dunkel inference should also arise in respect of the lack of direct evidence from Ms Whitney Jiang and Ms Hui Fang Cao on the de-Grouping issue.

84. Relevantly, the Chief Commissioner’s case on this issue is that the documentary evidence establishes that, between them, Mr Chu, his wife Ms Jiang and his mother-in-law Ms Cao owned businesses which were within the group such that there was substantial commonality of control in the period in question. The Chief Commissioner says that the fact that that is denied (or at the least not admitted) by the Applicants does not alter the fact that Ms Jiang and Ms Cao could also have provided, at the least, significant evidence and explanation as to their respective roles in managing and directing the relevant businesses and perhaps as to the degree of business integration between the various companies and, specifically, evidence pertinent to the Chief Commissioner’s key assertions relating to the De-Grouping issue which are set out at [39] above.

85. I accept that contention. No explanation for the absence of Ms Jiang and Ms Cao was given. Although the Chief Commissioner apparently did not advise the Applicants or their lawyers that the two ladies were required, there was no necessity to do so, as neither of them provided any affidavit evidence on which she could be cross-examined. But, given their respective key positions in the alleged group and the information they may have been able to provide favourable to the Applicants’ case as outlined immediately above, it is reasonable to expect that at least some evidence from them would have been adduced.

86. I therefore draw a Jones v Dunkel inference in respect of the absence of each of them and their respective evidence on the De-Grouping issue.

Limited nature of the Jones v Dunkel inference

87. The Jones v Dunkel inference is somewhat limited. It is an adverse inference that, if the evidence (here, testimony by each of Mr Chu, Ms Jiang and Ms Cao) had been adduced it would not have assisted the Applicants’ case.

88. It cannot be inferred, and I do not infer, that the evidence of any of those potential witnesses would have been unfavourable to the Applicant’s case. The absence of their evidence cannot be used to discount the probative value of any other evidence adduced by the Applicants and the failure to adduce it cannot of itself convert conjecture into inference: ASIC v Hellicar (2012) 247 CLR 345 at [168] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ at [168]; Odgers Uniform Evidence Law; 16^th edition (2021) [EA.55.180] p 345, note 61). Similarly the failure to adduce evidence from them cannot be used to plug any evidentiary gaps in the Chief Commissioner’s case: Odgers op.cit., p 346, note 64.

De-Grouping: Findings and conclusions

89. In considering the De-Grouping issue I have considered:

1. the written submissions of the Applicants on that issue lodged on 11 April 2021;

2. the document handed-up by Counsel for the Applicants entitled “Core Facts on De-grouping Issue”;

3. Counsel for the Applicants’ oral submissions on the issue;

4. an Aide-Memoire handed up by Counsel for the Chief Commissioner and which covered firstly, the operation of the alleged group and secondly, the evidence on the basis of which it was submitted that the section 79 discretion should be refused;

5. the Chief Commissioner’s written and oral submissions in relation to the issue;

6. the relevant documentary evidence, including the Exhibits and the relevant documents in the section 58 bundle; and

7. the application of the facts to the principal authorities discussed above.

90. In addition, I have applied the Jones v Dunkel inference in the limited manner discussed above in respect of the lack of direct evidence from Mr Chu, Ms Whitney Jiang and Ms Hui Fang Cao.

91. In particular, I have taken into account that it is the Applicants who, by operation of section 100 (3) of the Administration Act bear the onus of proving their case. The Applicants are required to prove all matters necessary to enable me to answer the issues their favour.

92. As result of that process, I have concluded as follows on the De-Grouping issue, by reference to the key assertions of the Chief Commissioner made at pages 851-853 of the section 58 bundle and summarised at [39] above.

(1) Mr Chiu’s significant control and interest.

93. In light of the unchallenged or otherwise readily apparent facts described above and in the absence of any explanation which might have been given by Mr Chu, Ms Jiang or Ms Cao, I find that Mr Chu was at all relevant times able to influence the strategic and financial decisions of Home789 Resources, GFI, SWASW Wealth and ASM.

94. I reject the Applicants’ contentions that Mr Chu did not have control and influence over each business. I reject the contention that the extent of his daily activities concerned managing marketing and sales for Home789 Resources and GFI. The onus of establishing those matters on the balance of probabilities lies clearly with the Applicants and they have not discharged that onus.

95. Even if those contentions had been established, it remains the case that the extent of a person’s “daily activities” in a business do not necessarily limit the scope of his or her control and interest. A person’s capacity to control a business is measurable not simply by their “usual daily activities” in a particular business. The natural meaning of the terms “control” and “influence” is broader than that. Someone who owns all or a majority of shares in a corporation and can effectively control the composition of its board clearly exercises significant control and influence over that corporation’s business.

96. I am satisfied on the balance of probabilities that Mr Chu had the capacity to do that and that he exercised that capacity, in respect of the businesses of Home789 Resources, GFI, ASM and UFN.

97. I find that Mr Chu had significant interest and control as alleged.

(2) All businesses operated in the real estate industry

98. The Applicant s’ collective response to this assertion is in the following terms in their written submissions:

The fact that all the businesses operated in the real estate industry and had dealings with each other is not a sufficient basis to group them. There was no structural dependence on each other. The arrangements Home789 (Resources) had with ASM resulted in it having additional stock to sell, but it was by no means reliant on that stock. Likewise, ASM did not depend on Home789 (Resources) to sell the units as it could, and indeed did, enter into conjunction agreements with licenced real estate agents. That the businesses were involved with each other is no warrant to conclude that the businesses were effectively a single business for the purposes of the Act.

99. This submission is expressed in terms which go beyond the scope of the particular assertions of the Chief Commissioner to which they are a response. As I understand it, the Chief Commissioner says only that one matter which might go to the classification of the businesses as a “group” for the purposes of Part 5 of the PT Act is the fact that the businesses operate (in some capacity) within the same industry, being the real estate industry.

100. I find that all the businesses operate in some way in the real estate industry. I agree that this of itself is insufficient to ground a finding that they should be grouped.

(3)All businesses were located in the same premises

101. As I understand the submissions made for the Applicants, it is not disputed that the relevant companies under consideration leased and carried on business from adjacent suites in an office building in Redfern, Sydney. The Applicants submit that this in not indicative of influence over conduct. Their submission continues in these terms:

The leases were at commercial rates. At any time it was possible that one of the leases would end requiring that lessee to vacate the suite. In that scenario, the other leases would have remained on foot.

102. The last two sentences state the obvious and do not materially advance the Applicants’ case. The significance of the common premises is drawn out by the Chief Commissioner’s submissions at [28] (c). There are two factors raised by the Chief Commissioner: firstly that the businesses share at least some common space, have one reception area, one telephone number and share the same legal and accounting advisers and representatives; and secondly that rental payments are disproportionate between the various entities and neither ASM nor UFN contribute to rent or utilities. Those two factors do not seem to be addressed on behalf of the Applicants.

103. Bearing in mind the onus and standard of proof applicable as explained above, I find that all the businesses partially shared the office premises in that they shared at least some common space and a common reception area and receptionist, the same telephone number and legal and accounting advisers and representatives; and that rental payments are disproportionate between the entities who use the premises.

(4)Businesses marketed as a “one-stop shop” under ”Home789” common branding

104. The Applicants’ response to this assertion is summarised at [37] (4) above.

105. I am satisfied on the balance of probabilities, for the following reasons, that the business was marketed as a “one-stop shop”. The following are the main indicia of that.

1. There was a “Home789” website which was used to market to the general public and there were property listings of widely-used industry sites such as Domain and RealEstate.com which referred to “Home789”;

2. “Home789” was a brand. The intellectual property in that name had been protected and was held by SWASW Wealth as trustee for the CJ Family Trust. The primary beneficiaries of that trust were Mr Walton Chu his wife Ms Whitney Cheng and their children. The brand was used for the benefit of various of the companies within the alleged group; for example ASM traded, in part, as “Home789”.

3. ASM did not maintain a website. It did not need to, because its business was derived as a result of and depended upon relationships with large, sophisticated real estate developers and web marketing was unnecessary for that.

187. The Chief Commissioner’s contentions are these:

1. Ms Ae Choi did not have a real estate licence of any sort in FYs 2015 or 2016 (AB 4650), her licence having taken effect from 5 October 2016. Accordingly, she could not legitimately have been providing real estate services to the public directly or by way of independent contract in those financial years.

2. The purported licence agreement (AB 4654), having been dated 6 October 2016 and being of apparent effect from that date can have no relevance to events or relationships in the financial years under consideration.

190. I have concluded that amounts paid to Ms Ai Choi by Home789 Resources in FYs 2015 and 2016 have been correctly treated by the Chief Commissioner as payments to a common law employee and so are taxable. The assessments must be upheld.

15. Jian Liu (aka Jason Liu) (Category 2 for FYs 2015 and 2017)

191. Mr Lieu made a statutory declaration dated 24 September 2020 for the purposes of these proceedings in support of the Applicants’ case. [AB 4568] The Chief Commissioner gave notice that he was required to attend the hearing for cross-examination on that declaration. He failed to do so and no reason was given for his failure. In accordance with my observations at [116](4) above I have had regard to Mr Liu’s statutory declaration for context only and I give it no weight.

192. I do not understand the Applicants to have made any submissions as to Mr Liu’s status in FY 2015,

193. In relation to FY 2016, they assert that Mr Liu:

..obtained and maintained special qualification as a licenced real estate agent on and from 5 August 2016. He complied with regulatory requirements of operating a business, including ABN registration and taxation:(s58, p1302; AB 3581-6).

194. The Applicants also assert that in FY 2016 the following positions obtained and occurred:

1. on and from 5 August 2016 Mr Liu held “special qualification” as a real estate agent. [s58, p 1302]

2. He complied with the formal legal requirements for commencing a business, including ABN registration and taxation. [s58, p 1302]

3. His income from real estate work for one or more of the Applicants was $8,590.91 or approximately 51% of his total income.[AB 3582].The remaining 49% is not subject to submissions from the Applicant.

195. However, I can see nothing in the Applicants’ evidence or submissions which successfully refutes the case put by the Chief Commissioner that the payments totalling $8,590.90 for FY 2016 were correctly treated as payments to a common law employee and so were taxable wages. The assessments must be upheld.

16. Jinglu Lu ( Income for FYs 2015 and 2016)

196. Ms Lu made a statutory declaration dated 24 December 2020 [AB Vol 4, 4568]. She attended the hearing and was examined and cross-examined on her declaration. In both examination and cross-examination her testimony was at times inconsistent and somewhat halting on significant matters. For example, when taken by Counsel for the Applicants to the documentation which might verify her income of $172, 673.50 for FY 2016 and asked in effect whether that derived from real estate business, Ms Lu responded:

That was the calculation at that time.

197. In response to follow-up questions she was uncertain, saying at one stage that she “couldn’t remember these figures” and when subsequently asked if the figures were correct she responded that they:

..appear to be right but I don’t know.

198. When taken to the document marked as MFI-3 in cross-examination, Ms Lu was uncertain and somewhat prevaricative as to the composition and accuracy of the total income of $113,198 for FY 2016, as shown in the account statement referred to in MFI-3. She was asked whether that figure reflected her purported total income from “marketing contracts with Home 789”. She initially responded:

It may not be correct. Some of it may have been added on.

199. When asked in cross-examination whether, at the time she signed the statutory declaration she saw the annexure, Ms Lu answered:

When I signed the document they were filling out the form at the end.

200. When asked to identify “they” she replied initially that she couldn’t remember but the person was a manager and when asked to identify the manager she confirmed it was:

The manager from 789

201. I allowed further cross-examination, under which Ms Lu conceded that the figure representing her income “as real estate agent” by reference to sales for FY 2016 was $127,672 differed from the figure she had affirmed in her statutory declaration at paragraph 6(b) . She thought that “may have been a typing error”. When Counsel in cross-examination pointed out that the figure she gave was inconsistent with that in a bank statement which she had verified in examination-in-chief of $113,198, her answer was somewhat confusing. I recorded it as:

This one I also have to take into account the after-tax income and an amount I had to pay to someone else.

202. Even making some allowance for the fact that Ms Lu (who otherwise spoke clearly in English) may have some elements of ongoing difficulties with the subtleties of the English language, I found her evidence at times to be prevaricative or otherwise inconsistent in important areas and therefore unsatisfactory and unreliable. I gave her oral evidence very little weight.

203. I agree with the summation provided in the Chief Commissioner’s outline submissions handed up on the final hearing day, to the effect that:

1. Ms Lu’s evidence as to both FYs 2015 and 2016 was unsatisfactory.

2. Even if it were to be accepted that Ms Lu generated sales from non-Home789 entities in FY 2016 of $31,275 ( as appears from paragraph 7 of her statutory declaration in evidence), that is only approximately 18% of her total business income in 2016 and that does not support a conclusion that in that year she was an independent contractor providing real estate services to the public generally.

3. There is no evidence that the payments made by Home789 Resources to Ms Lu in FYs 2015 and 2016 was in any way referable to the Conjunction Agreement dated 29 April 2014 (AB 4575)

4. The document titled “conjunction agreement” dated 20 September 2017 ( AB 4577) is not relevant to the issues before me: it postdates the relevant periods.

204. As a result the Applicants have not discharged the onus they bear to the standard of proof required so as to persuade me that Ms Lu provided real estate services to the public generally in FY 2015 or FY 2016, so as to attract the exemption from payroll tax undersection 32 (2) (b)(iv) of the PT Act, the assessments must be upheld.

17. Jun Da (Category 2 for FY 2015)

205. From the documents at AB 925 and AB 929 it is clear that:

1. Mr Da did not have professional indemnity insurance from FY 2015 (as she herself confirmed). As she said :

I only had a real estate certificate.

2. There is no other evidence that he did hold a real estate licence in that FY and that it seems, from document AB 925, that what he held was a certificate which did not permit the conduct of real estate activities unless employed by a real estate agent.

206. Although the evidence is that Mr Da issued invoices to Glory Group that is not evidence as to the type of services reflected by the invoices.

207. The Applicants have not discharged the onus they bear to the standard of proof required so as to persuade me that payments to Mr Da in FY 2015 were incorrectly treated as payments to a common law employee and so are taxable wages. The assessments must be upheld.

18. Kostralia & Associates Pty Ltd(Kostralia) (Hun Ja Kim) (Category 3- FYs 2016, 2017)

208. Ms Hun Ja Kim, a director of Kostralia, made a statutory declaration [AB 4495] for the purposes of these proceedings in support of the Applicants’ case. The Chief Commissioner gave notice that she was required to attend the hearing for cross-examination on that declaration. She failed to do so and no reason was given for her failure. In accordance with my observations at [116](4) above I have had regard to Ms Kim’s statutory declaration for context only and I give it no weight.

209. The Chief Commissioner confirms that a Licence Agreement [AB 3890] was entered into on 15 December 2016. The Agreement appears to be formally deficient as to a basic requirement: it is not clear that Kostralia is a party for these reasons:

1. The front page describes the Licensee as “Hyun Ja Kim trading name Kostralia & Associates”;

2. On the front page next to “Trading name” the words and symbol “Kostralia & Associates” appear

3. The space for the ACN of any corporate party is left blank.

4. On the execution page, page 10, in the 3^rd execution space , no party or other person is identified. The space next to the words “Signed by” is blank. A signature appears. It appears to be somewhat similar to Ms Lim’s signature above, but it is not identified.

5. The 3^rd execution clause wording is as follows:

SIGNED BY: [blank space]

Pursuant to the authority in s127 of the Corporations Act 2001.

210. The Applicants appear to concede in their submissions of 18 May 2023 at [66] that the position is unclear. They say the Agreement was executed under section 127 of the Corporations Act (2001) and “it may be inferred that Kostralia was indeed a party”. But the Applicants bear the burden of proof and for the reasons explained above I am not prepared so to infer.

211. I conclude on this aspect that it has not been established on the balance of probabilities that Kostralia was a party to the Licence Agreement.

212. The Applicants further submit that, in any case, the agreement was on the same terms as that entered into by Hao Wang. That may be the case but of course it does not follow that I must reach the same conclusion I did in relation to Hao Wang ( which is set out at heading 12 above).

213. Counsel for the Applicants relied upon the recent decision of the High Court in Construction Forestry Mining and Energy Union v Personnel Contracting Pty Limited [2022] HCA 1. In that case, Gordon J, in the plurality, in relation to determination of issues such as the present one, warned at [181] against being distracted from the relevant analysis, which must be based on

…whether the totality of the relationship created by contract between the person and a purported employer is one of employee and employer. 

214. Her Honour went on, at [183] to formulate the issue in this way:

The better question to ask is whether, by construction of the terms of the contract, the person is contracted to work in the business or enterprise of the purported employer. That question is focused on the contract, the nature of the relationship disclosed by the contract and, in this context, whether the contract discloses that the person is working in the business of the purported employer. ….where the contract is oral, or partly oral and partly in writing, subsequent conduct may be admissible in specific circumstances for specific purposes – to objectively determine the point at which the contract was formed, the contractual terms that were agreed or whether the contract has been varied or discharged.

215. With specific reference to the payroll tax legislation, Gzell J in Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788 (Bridges) made pertinent observations directly specifically at the payroll tax legislation and its application to particular facts. His Honour said, at [221] :

The structure of the Payroll Tax Act 1971, s 3A is to define, in broad terms, a relevant contract. If an arrangement answers that description, the second step is to determine whether any of the exceptions apply…It is because of the non-application of an exception that the object of taxing the putative subcontractor who works exclusively, or primarily, for one person under a contract whose object is to obtain the labour of that person, is achieved.

216. An application of those principles to the position of Ms Kim and Kostralia as revealed by the facts of the present case, and the need to focus on “totality of the relationship” in the manner described by Gordon J, must begin with the Licence Agreement and the significant fact that, whatever the intent of the relevant parties, Kostralia was in fact not a party to that agreement.

217. I add that Ms Kim would have been the primary witness as to many of the factual issues arising from consideration of this entity, including the execution and possible application of the Licence Agreement. Her evidence in chief and under cross-examination may well have been significant in assisting the Applicants to satisfy the onus of proof which they bear.

218. I am satisfied that there was a corporate entity “Kostralia Pty Limited”. That company’s company tax returns for FY 2016 and FY 2017 which are contained in Mr Millett’s affidavit , Exhibit TM-1 at, respectively, pages 24-26 and 37-49 (and which are unsigned) describe the company’s main business activity as “Real Estate Services” and demonstrate that in FY 2016 100% of the company’s income (ignoring anomalous reporting) was derived from payments from Home789 Resources and/or GFI; and in FY 2017 99% of its income was represented by payments from Home789 Resources and/or GFI.

219. Notwithstanding those matters I agree with the Chief Commissioner’ summation of the facts and I find that:

1. there is no evidence that Kostralia held a real estate licence in FYs 2016 or 2017;

2. the licence held by Ms Kim commenced only on 20 October 2016 and so is not relevant when considering the position in FY 2016;

3. there is no evidence that any payment by Home789 Resources to Kostralia in FY 2017 is referrable to the Licence Agreement dated 15 December 2016

220. In relation to FYs 2016 and 2017 I am satisfied on the basis of the evidence and the Chief Commissioner’s written submissions and in light of the evidentiary burden which lies completely upon the Applicants and the gaps in the evidence left by them, that the conclusion which I must come to is that during those financial years Kostralia was not providing real estate services to the public generally so as to attract the exemption from payroll tax undersection 32 (2) (b)(iv) of the PT Act and accordingly the payments to Kostralia by Home789 Resources are taxable wages. The assessments must be upheld.

19. Lin Yi (Category 3 for FYs 2015, 2016 and 2017)

221. Lin Yi did not provide any direct evidence.

222. The documents disclose that in FY 2015 Ms Li was an employee of GFI, notwithstanding that she had obtained qualification as a licensed real estate agent on 7 August 2013.

223. On my review of the available evidence as referred to by the parties in their respective submissions, I find that Ms Yi was not carrying on a business of providing real estate services to the public generally so as to attract exemption under section 32 (2) (b)(iv) and that she was an employee of GFI in FYs 2016 and 2017.

224. Accordingly payments to her by Home789 Resources or GFI in the 3 financial years under consideration were taxable wages. The assessments must be upheld.

20. Mira Lee ( Category 3 for FYs 2014 and 2016; Category 1 for 2015)

225. The Chief Commissioner submits that Ms Lee was an employee of Home789 Resources in these two financial years, on the basis that she is shown on the PAYG summary and employee list of Home789 Resources, she entered into a casual employment agreement on 20 August 2014 [s58, p289] and she apparently informed State Revenue that she was employed in the role of casual office staff`[s58, p236]

226. She was employed by Home789 Resources in 2015. Her tax records indicate that she earned total business income of $15,559 in FY2014 [AB 1293]. In that financial year she earned $11,591 or 75% of that total income from Home789 Resources.

227. In FY 2016 tax records show that she received total business income of $41,805, with $28,168.63 or 68% of that being paid by Home789 Resources.

228. The Applicants have failed to establish that Ms Li, during the 3 financial years in question, Ms Lee was other than an employee of group entities during the 3 financial years in question. The assessments must be upheld.

21. Ni Liu (Category3 for FY 2013)

229. Ni Liu was at relevant times a director and the majority shareholder in a company, Best Choice Investment Pty Ltd (Best Choice). She did obtain qualification as a licensed real estate agent on 24 February 2012 (AB 4726) and maintained that status. Best Choice has held a corporate real estate licence since 27 February 2012 and Ni Liu is noted as the licensee in charge.

230. However the Chief Commissioner submits that there is no probative evidence that Best Choice carried on the business of providing real estate services to the public generally in FY 2013 and there is no evidence of its revenue in that financial year. The documents appearing at AB 4730 relate only to the FY2018 and are not relevant to the position in FY2013.

231. I am invited by the Applicants to infer that because real estate activities were carried on by Best Choice and by Ms Liu on its behalf at the time the licence was acquired in FY2012, it is open to me to infer that those activities continued and Ms Liu continued to act in that capacity on behalf of Best Choice in 2013.

232. However, I refuse to make such an inference. Evidence that something occurred or that a particular status was acquired at one time does not justify the drawing of an inference that that status continued to a particular future time. The Applicants bear the onus and burden of proving all essential facts and they have failed to do so. The assessments must be upheld.

22. Shui Cheung Lam (Category 3, FY 2017)

233. There is evidence that Ms Lam obtained special qualification as a licenced real estate agent on 19 March 2015 (B 4240) and that she entered into a Licensee Agreement with Home789 Resources on 9 February 2017 (AB 4245).

234. However, in relation to FY 2017 there are no relevant tax returns, no evidence of any real estate services being offered to the public generally, so as to be exempt under section 32 (2) (b) (iv) of the PT Act. There is no evidence that the payment made by Home789 Resources to her in FY2017 is in any way referable to the Licence Agreement; no evidence as to tax returns for FY 2017, or as to real estate services being offered to the public generally in FY 2017.

235. I am not persuaded that Ms Lam provided real estate services to the public generally in FY 2017 so as to be exempt under section 32 (2) (b) (iv) of the PT Act. The assessments must be upheld.

23. Suresh Rajbahak (Category 1,FYs 2015 and 2016)

236. The Home789 Resources PAYG Summary and employee list for FYs 2015 and 2016 (s58, p65), a casual employment agreement of 30 April 2015 (s58, p309) and the statement by Mr Rajbahak recorded at (s58, p309) establish clearly that he was an employee of Home789 Resources in FYs 2015 and 2016. So payments to him are correctly characterised as taxable wages. The assessments must be upheld.

24. Tianbing Liu (Category 1 FY 2016; Category 2 FYs 2014 and 2015; Category 3 FY 2017)

237. Mr Liu made a statutory declaration (Liu Statutory Declaration) in support of the Applicants’ case (AB 4700) and he was examined and cross-examined on it. Under cross-examination he was imprecise and uncertain as to several important elements of his testimony.

238. In relation to the position in FYs 2014 and 2015 he ultimately conceded that :

1. he did not have a real estate licence prior to 13 August 2016, but rather, from 21 July 2014 he held authority to act as a real estate salesperson, which was subject to a condition that could only act under the supervision of a licenced real estate agent (MFI-2, p3) and

2. he was employed by Home389 Resources in the relevant period, prior to 13 August 2016.

239. On that basis I find that payments to Mr Liu in FYs 2014 and 2015 are correctly treated as taxable wages.

240. I also find that Mr Liu was an employee of Home789 Resources in FY 2016. That that was likely to be the position emerged from his cross examination and that fact is confirmed in the Home789 Resources PAYG Summary and employee list for that financial year (s58, p65)

241. Turning to FY 2017, it is clear from the evidence that all of his income from real estate activities for that year was derived from Home789 Resources: Lieu statutory declaration at [8]. I find that all payments to him from that source constituted taxable wages. The assessments must be upheld.

25. Vision Tower Pty Ltd (Zhen Shang) (Category 4, FYs 2015 and 2016)

242. During FYs 2015 and 2016 Mr Zhen Shang was a director of Vision Tower Pty Ltd (Vision Tower).

243. Significantly, he was also an employee of Home789 Resources in that period , as is evident from that PAYG Summary and employee list for the relevant period ( s58, p65) and a casual employee agreement which he signed (s58 p236).

244. He held the role of business development manager in FYs 2015 and 2016 (s58, p345). At al relevant times he used a Home789 Resources email address.(s58, p345).

245. I understand the Applicants to assert that notwithstanding the above, in FY 2016 Mr Shang should not be treated as an employee for that year because he earned income from real estate activities of $ 198,491, of which only $ 147,422 ( just over 74%) was received from any of the Applicants.

246. In light of the facts established as recorded at [229]- [231] I find that he was an employee of Home789 Resources in each of the financial years under consideration. The assessments must be upheld.

26. Wenshan Fu (Category 2 for FY 2016)

247. It appears that some significant documents submitted by the Applicants in support of their case relating to Ms Fu are not relevant to the period under consideration; for example the licence document at AB 2414, the evidence of professional indemnity cover at AB 4218 and the document at AB 4219. Similarly the document entitled “Sales Partner Agreement” dated 18 April 2016 (AB 4223) appears to cover only 2 months of the relevant period, but, as the Chief Commissioner contends there is no evidence before me which establishes that there was a nexus between that agreement and the payments made to Ms Fu during FY 2016.

248. I find that Ms Fu was an employee at relevant times, the payments are correctly considered as taxable wages and the assessments must be upheld.

27. Xiaochun Dai (FYs 2015, 2016 and 2017)(Also referred to as ‘Xiaochun Dui’)

249. Ms Dai was a director of DXC Marketing Pty Ltd which has been dealt with at heading 7 above. The Applicants, in their written submissions handed up on the last day of the hearing, appear to concede that in FY 2017 of Ms Dai’s total personal income for FY2017 of $ 120,184, some $112,835.08, or 93.9%, came from the Applicants.

250. It seems clear that she was an employee of Home789 Resources in each of the FYs 2015, 2016 and 2017. For FY 2015 she appears personally on the PAYG summary and employee list (s58 p65); there is a casual employment agreement for her dated 30 April 2015 (s58 p293)and the Applicants described her role as “casual staff for office display” (document at s58 p236) for each of FY 2015 and FY 2016. For FY 2017 the document at 2353 of Summons Material is PAYG documentation in respect of Ms Dai from ASM.

251. The Applicants assert that Ms Dai held “a special qualification as a real estate agent” from 25 January 2014 (s58 p1291) licence to carry on the activities of a real estate agent, but in light of the evidence summarised immediately above the Applicants have not established that she personally provided real estate services to the public generally in the years under consideration, so as to be exempt under section 32 (2)(b) (iv) of the PT Act. The assessments must be upheld.

28. Yong Fang Jia (Category 3, FY 2017)

252. The brief submission of the Chief Commissioner in relation to Ms Jia is to the effect that the Applicants have not satisfied the burden of proof which they bear in relation to her position.

253. The Applicants contend that Ms Jia:

1. obtained on 25 January 2014 and maintained throughout FY17 a qualification as a licensed real estate agent s58 p1291;

2. complied with the regulatory obligations of operating a business including ABN and GST registration: AB 4181

3. entered into a Licence Agreement with Home789 Resources on 27 February 2017 (AB 4183)which had the same terms as the agreement entered into by Mr Hao Wang (No. 9 above).

254. Although there are some aspects of Ms Jia’s position for FY 2017 which are missing or unclear, upon consideration I have concluded that the Applicants have established on the balance of probabilities that her engagement by Home789 Resources in that financial year was not such as to attract the operation of section 6 of the PT Act and the payments to her in that financial year are not properly treated as taxable wages for the purposes of that Act. I find accordingly.

29. Yongmei Ye (Category 3 for FY 2017)

255. Mr Yongmei Ye made a statutory declaration [AB Vol4 4706] for the purposes of these proceedings in support of the Applicants’ case. The Chief Commissioner gave notice that he was required to attend the hearing for cross-examination on that declaration. He failed to do so and no reason was given for his failure. in accordance with my observations at [116](4) above as applied to other deponents of declarations who did not appear, I have had regard to Mr Ye’s statutory declaration for context only and I give it no weight.

256. The Chief Commissioner’s case is as follows:

1. There are no documents produced which establish any independent business activities for Mr Ye in FY 2017.

2. He declared $36,455 in business income for FY 2017 (AB 4715) but it is clear that Home789 Resources made a payment to him well in excess of that: $61,545.

3. No evidence has been tendered on behalf of Mr Ye to establish that he conducted an independent business in FY 2017.

4. Similarly, no evidence has been tendered on behalf of Mr Ye to establish that in that financial year he provided any real estate services to the public generally in that financial year.

257. Mr Ye’s position was not addressed in the Applicants’ initial written submissions of 17 June 2022 nor in their extensive written submissions which were handed up on the last day of the hearing (18 May 2023) nor in Counsel’s summation of the Applicants’ case on that day.

258. On that basis I conclude that:

1. the Applicants have failed to discharge the burden of proof they bear in relation to Mr Yi’s position;

2. the payments made to him for FY 2017 are correctly considered as taxable wages and the Chief Commissioner’s assessment must be upheld.

30. Zhen Lei (Category 2 for FYs 2013, 2014, Category 1 for FYs 2015 , 2016)

259. The Chief Commissioner’s case is as follows:

1. In respect of FYs 2013 and 2014 the Applicants have not established that Mr Lei was carrying out an independent business providing real estate services to the public.

2. Although he did obtain a real estate licence, the licence did not have effect on 25 January 2017.

3. In respect of FYs 2015 and 2016, Mr Lei was an employee of Home789 Resources in those financial years, as is clear from the relevant PAYG Summary and employee list (s58, p65);

4. He signed a casual employment agreement with Home789 Resources on 20 August 2014 (s58, p322)

5. Mr Lei described his role as casual staff for office display (s58,p236).

260. The Applicants did not comment on Mr Lei’s position in their initial written submissions of 17 June 2022. In their written submissions written submissions which were handed up on the last day of the hearing (18 May 2023), the Applicants addressed Mr Lei’s position (for example his obtaining of a “special qualification as a licensed real estate agent in January 2017) by reference to events and documents the dates of which fell outside the financial years under consideration and Counsel’s opening address covered Mr Lei’s position by reference to the same events and documents.

261. On that basis I conclude that:

1. the Applicants have failed to discharge the burden of proof they bear in relation to Mr Lei’s position;

2. the payments made to him for FYs 2013, 2014 , 2015 and 2016 are correctly considered as taxable wages and the Chief Commissioner’s assessment must be upheld.

31. Zhen Shang (Category 1 for FYs 2015,2016; Category 2 for FYs 2013, 2014)

262. The Chief Commissioner’s case is as follows:

1. Mr Shang was an employee of Home789 in FYs 2015 and 2016. He is so shown in the relevant PAYG Summary and employee list for those financial years (s58, p65).

2. Mr Shang signed a casual employment agreement with Home789 Resources, during FY 2014, on 17 March 2014 (s58, p322)

3. The Applicants describe his role as Business Development Manager (at s58, p236) which appears to be a description for FY 2015 only.

4. In respect of FYs 2013 and 2014, the Applicants have not, by probative evidence, established that Mr Shang was carrying out a business of providing real estate services to the public.

263. The Applicants contend that Mr Shang obtained a “special qualification as a licensed real estate agent” on 25 January 2014 (AB 4464) and earned income of $198,491 from his real estate activities in FY2016 (AB 134) of which $147,422.76 (74.2%) was received form the Applicants.

264. Having examined the documentation referred to by the parties I conclude that the Applicants have failed to discharge the burden of proof they bear in relation to Mr Shang’s position and that the payments made to him for FYs 2013, 2014 , 2015 and 2016 are all correctly considered as taxable wages.

265. Accordingly, the Chief Commissioner’s assessment must be upheld.

Conclusion

266. For those reasons, the Tribunal’s orders are as follows.

Orders

1. In respect of applications 2020/287512; 2020/287521; 2020/287537 and 2020/287546, the applications are dismissed under section 55 (1) (a) of the Civil and Administrative Tribunal Act 2013 on the basis that the applications have been withdrawn. The Tribunal notes that those applications were withdrawal on the basis of agreement between the relevant parties that:

1. the issue of the amount of payroll tax payable by the Applicants for the period 1 July 2019 to 31 January 2020 is remitted to the Respondent to consider, and if he deems necessary, to issue a re-assessment following publication of the decision by the Tribunal in applications 2020/5300; 2020/5302; 2020/5305 and 2020/5306; and

2. the Respondent undertakes not to take enforcement action against the Applicants in respect of any amount of payroll tax owing by the Applicants in respect the period 1 July 2019- 31 January 2020 whilst proceedings 2020/5300; 2020/5302; 2020/5305 and 2020/5306 remain on foot, without giving 21 days’ prior notice before doing so.

2. The decision of the Chief Commissioner on 15 March 2019 to group Home 789 Resources Pty Ltd with the other applicants and with Bright Austina Pty Ltd, SWASW Wealth Pty Ltd as trustee for the CJ Family Trust, and UFN A Epping Pty Limited as trustee for the UFN A Epping Unit Trust, (“the group”) is affirmed.

3. The decision of the Chief Commissioner on 15 March 2019 to disallow an application for exclusion from the group is affirmed.

4. With the exception of the payroll tax assessments for Daegeun Hwang (No.6 in the Tribunal’s reasons for decision); Hao Wang (No.12 in the Tribunal’s reasons for decision) and Yong Fang Chia (No 28 in the Tribunal’s reasons for decision), which are varied in accordance with the Tribunal’s reasons for decision, each of the payroll tax assessments issued to the Applicants for the tax years ended on 30 June 2013, 30 June 2014, 30 June 2015 and 30 June 2016 is confirmed.

5. In respect of the tax years ended on 30 June 2017, 30 June 2018 and 30 June 2019, by consent, the assessment of the Applicants’ respective liability for payroll tax is remitted to the Chief Commissioner for reassessment in accordance with the assessments previously issued which are the subject of review, including in respect of interest and penalty tax, subject to the following adjustments:

In respect of Home789 Resources Pty Ltd:

1. for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $13,838.82 (not including penalty tax or interest);

2. for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $15,471.01(not including penalty tax or interest); and

3. for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $10,024.37 (not including penalty tax or interest).

In respect of Great Fortune Investment Pty Ltd:

4. for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $30.12 (not including penalty tax or interest);

5. for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $38.74 (not including penalty tax or interest); and

6. for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Limited by $25.10 (not including penalty tax or interest).

6. The parties are directed to bring in short minutes of orders, which reflect the findings in this decision, including particulars of the variations to payroll tax assessment for the matters referred to in Order 4 and the matters agreed upon as described in Orders 1 and 5, within 28 days of publication of these orders.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Amendments

23 November 2023 - Typographical errors amended in paragraph [42], [44], [45], [118] & [180].

Decision last updated: 23 November 2023