Moore Park Gardens Management Pty Ltd v Chief Commissioner of State Revenue - [2006] NSWCA 115

No judgment structure available for this case.

Reported Decision: 62 ATR 628

Court of Appeal

CITATION: Moore Park Gardens Management Pty Ltd v Chief Commissioner of State Revenue [2006] NSWCA 115

HEARING DATE(S): 6 February 2006

JUDGMENT DATE:
15 May 2006

JUDGMENT OF: Handley JA at 1; Santow JA at 2; Bryson JA at 83

DECISION: Appeal dismissed with costs.

CATCHWORDS: TAX ASSESSMENT — Pay-roll tax — Notice of Objection — Challenge by managing agent of a home unit complex to retention of 5% penalty following remittance from 20% — Taxation regime governing employment agency contracts under s3C of Pay-roll Tax Act 1971 (NSW) introduced in 1998 — Necessity for declaration to qualify for its exemption to be given at time employment agency contract entered into — Whether liable as a common law employer in any event – not necessary to decide.

LEGISLATION CITED: Pay-roll Tax Act 1971 (NSW) s3, s3A, s3C, s6, s8
Taxation Administration Act 1996 (NSW) s22, s91, s97

CASES CITED: BBLT Pty Ltd v Chief Commissioner of the Office of State Revenue (2003) ATC 5063
Minister for Immigration, Local Government and Ethnic Affairs v Gray (1994) 50 FCR 189

PARTIES: MOORE PARK GARDENS MANAGEMENT PTY LTD (ACN 069 209 267) (Appellant)
CHIEF COMMISSIONER OF STATE REVENUE (Respondent)

FILE NUMBER(S): CA 40715/04

COUNSEL: D K L RAPHAEL (Appellant)
R HAMILTON/ B L JONES (Respondent)

SOLICITORS: The Hargreaves Practice (Appellant)
State Crown Solicitors Office (Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 2758/03

LOWER COURT JUDICIAL OFFICER: Gzell J

LOWER COURT DATE OF DECISION: 05/19/2004

LOWER COURT MEDIUM NEUTRAL CITATION: [2004] NSWSC 417

CA 40715/04
SC 2758/03

HANDLEY JA
SANTOW JA
BRYSON JA
15 MAY 2006

MOORE PARK GARDENS MANAGEMENT PTY LTD v CHIEF COMMISSIONER OF STATE REVENUE

Judgment

1 HANDLEY JA: I agree with Santow JA.

2 SANTOW JA:

INTRODUCTION

Pay-roll Tax Act

3 The assessment was in respect of wages paid by MPGM for cleaning staff made available to the Owners Corporations within the Moore Park Gardens complex which they subsequently reimbursed. It was accepted that MPGM was the employer of the cleaning staff under the general law.

4 This appeal challenges the decision by Gzell J to confirm the amended assessment which reduced the penalty from 20% to 5%. By the conclusion of argument on the appeal, the appellant accepted that MPGM was in any event liable under s6 of the Act as the common law employer of the relevant cleaning staff. That concession rendered it unnecessary to consider whether the alternative basis of liability adopted by the Commissioner also applied.

5 This turned on whether a specific statutory extension of the definition of “employer” applied to MPGM so as to render the relevant cleaners contract “workers” under an “employment agency contract” and render the amounts paid to them “wages” within s3C. That question depended on whether a declaration had been made which satisfied the conditions for exclusion from s3C in subs (4)(c). However, given the extensive submissions made on this basis and the consideration given to it by Gzell J, I should deal with this question.

6 The challenge focussed on the process of decision-making within the Commissioner’s office. It was twofold. First, MPGM contended that the relevant person who purported to disallow the Notice of Objection lacked delegated authority to do so. Second, it contended that the Commissioner had failed to exercise the discretion to remit the penalty and interest on the unpaid tax, or at least the “premium component”, within the meaning of s22 of the Taxation Administration Act 1996 (NSW) (“TAA”).

SALIENT FACTS

7 The salient facts are not in issue and are as follows.

8 MPGM arranged cleaning services for common property in a number of home unit buildings within the Moore Park Gardens complex.

9 MPGM engaged the cleaners, and acquired and charged each Owners Corporation for cleaning materials. It paid the wages, superannuation and workers compensation insurance premiums in respect of each cleaner and was reimbursed by the Owners Corporations.

10 A caretaker, likewise engaged by MPGM, was in charge of cleaning within the entire complex. His wages and on-costs (and the wages and on-costs of a central management team) were paid by MPGM and apportioned to each Owners Corporation.

11 MPGM controlled the pay-roll for each cleaner deducting superannuation contributions and tax. Cleaners were entitled to holidays and to sick leave. It was not disputed that each of the cleaners in question was a common law employee of MPGM; see references in the affidavit of Mr Bonenti, a director of MPGM, referred to by the respondent in its written submissions of 2 February 2006 at p8.

12 In October 2002, an employment agency contract declaration form was executed on behalf of each Owners Corporation, being the printed form adopted by the Office of State Revenue; see s3C(4)(c) and s3C(i) of the Act, quoted later under “Relevant Legislative History”. Each declaration stated that it covered the earlier period commencing on 1 January 2000 (that being the date s3C came into force). Each declared that wages payable under contract with MPGM did not attract pay-roll tax because the Owners Corporation was not required to be registered for pay-roll tax purposes.

13 A deponent from each Owners Corporation (for example Mr John Hill, Blue, 20) swore that the intention of the Owners Corporation, at the time of execution of the declaration, was that MPGM was acting as the agent of the Owners Corporation in order to obtain employees to carry out the cleaning duties.

14 The respondent, the Chief Commissioner of State Revenue (“CCSR”), assessed MPGM to pay-roll tax for the years ended 30 June 1998 to 30 June 2002. MPGM objected to the assessments; Blue, 7-9.

15 On 29 December 2000, the respondent delegated his function to allow or disallow an objection to a person of minimum level 5/6.

16 On 10 March 2003, Amy Huynh recommended that the objections be disallowed (Blue, 72). On 11 March 2003, Thelma Tacadena approved the recommendation. Also on 11 March 2003, following Ms Tacadena’s decision to approve the recommendation, Ms Huynh wrote to MPGM stating that the grounds of objection had been reviewed and disallowed them (Blue, 13). She signed the letter above the words “for R G Smith Commissioner of State Revenue”.

The first instance judgment

Submissions

17 MPGM sought to challenge the respondent’s determination of the Notice of Objection on the ground that the person who made that determination did not have delegated authority to do so (Red, 14F-H).

18 In BBLT Pty Ltd v Chief Commissioner of the Office of State Revenue (2003) ATC 5063 at [36]-[37], Gzell J held that s97(1)(a) TAA was not enlivened unless there was an adverse determination upon a notice of objection. Thus, if MPGM’s challenge were successful, there would be no determination and therefore no matter before the court (Red, 14I-M).

19 MPGM therefore sought to rely upon s97(1)(b) in the alternative. It provides that a taxpayer might apply to the court for a review of a decision of the respondent that had been the subject of an objection if 90 days had passed since the taxpayer's objection was served on the respondent and he had not determined the objection. The respondent waived the notice requirement for such applications under s100(1) (Red, 14O-X).

20 Thus MPGM argued that the decision-maker who disallowed its objection lacked delegated authority so that there was no determination and s97(1)(b) TAA was enlivened. If MPGM failed in that argument and there was a determination, it relied on s97(1)(a) (Red, 15D-G).

21 The respondent submitted that it was Ms Tacadena who disallowed the objection. The evidence revealed that objection recommendations had to be approved by Ms Tacadena or a senior officer before a notice of determination of the objection was sent to a taxpayer (Red, 15O-Q).

22 MPGM submitted that Ms Huynh made the determination.

23 The judge noted that it was unfortunate that the letter Ms Huynh wrote to MPGM on 11 March 2003 advising it that the objection had been disallowed was couched in the first person (Red, 16C).

24 Nonetheless he was of the opinion that the determination was made by Ms Tacadena. It was not open to Ms Huynh to make the determination. She did not purport to do so. She made her recommendation to Ms Tacadena and it was only after that recommendation was accepted that she wrote her letter (Red, 16D-G).

25 Ms Tacadena held the position of assistant director, clerk grade 11. That was a grade greater than that required to consider and determine an objection under s91 TAA, under the delegation (Red, 16H-J).

26 The judge concluded that MPGM’s challenge to the making of the determination failed and that s97(1)(b) TAA was not enlivened (Red, 16K).

Findings of Law – Liability to pay-roll tax?

27 Section 3C of the Act provides that under an employment agency contract, the employment agent was taken to be the employer, but the employment agent was not liable to pay-roll tax in certain circumstances. These included the circumstance that the client was not registered or required to be registered as an employer under the Act (Red, 17I-M).

28 MPGM relied on s3C(4)(c) of the Act. Since that provision had no operation with respect to the respondent's assessment of the plaintiff for the year ended 30 June 1998 and for the period 1 July 1998 to 31 December 1998 (because the section had not yet taken effect, coming into force on 1 January 1999), the question was whether MPGM or the Owners Corporations were the employer during that period (Red, 18V-Y).

29 Pay-roll tax was payable under s8 of the Act by the employer by whom taxable wages were paid or payable. The employer was defined in s3(1) of the Act to mean the person who paid or was liable to pay the wages. MPGM asserted that the relationship was one of principal and agent and that the owners corporations as principals were liable to pay-roll tax prior to the introduction of s3C of the Act (Red, 19G-L).

30 The judge did not regard the declarations of the representatives of the Owners Corporations (upon executing the employment agency contracts in October 2002) as sufficient to establish an agency relationship at the time when MPGM was engaged in 1996 to provide cleaning services to the first stage of the Moore Park Gardens development.

31 The evidence did not go beyond establishing that wages, superannuation and workers compensation insurance premiums paid by the plaintiff with respect to an individual cleaner were reimbursed by the particular Owners Corporation in whose building that cleaner worked. In the absence of evidence that the caretaker engaged the cleaners on behalf of the Owners Corporations, there was no basis for the application of the doctrine of ratification (Red, 20O-U).

32 The judge found that it follows that in the period from 1 July 1997 to 31 December 1998, MPGM failed to establish that the Owners Corporations were the employers of the cleaners liable to pay tax on the wages paid to them. For that period the assessments were confirmed (Red, 20V-Y).

33 The judge held that s3C of the Act in its original form did not apply to MPGM for two reasons:

(b) Section 3C(4)(c) required a declaration to have been given to MPGM by its clients, the Owners Corporations. The declarations were given in October 2002 and were said to be retrospective in effect to 1 January 2000. The trial judge rejected the submission that a declaration lodged after the event was sufficient. It could not have been the intention of Parliament that a claim to exemption could be established years later. The requirement that the client not be registered or required to be registered applied at the time the employment agency contract was entered into and the trial judge found that the requirement of a declaration applied at that time as well (Red, 21P-Y).

34 The amendment of s3C(4)(c) of the Act and the introduction of ss3C(5)-(8) by the State Revenue Legislation Further Amendment Act 1999 did not affect the construction of the original provision (Red, 22K-P).

35 In the judge’s view, MPGM directed its employees to clean the premises of the various Owners Corporations for a fee that included reimbursement of the wages paid by MPGM to its cleaners. Hence throughout the period covered by the assessments, MPGM was an employer of the cleaners at common law, s3C did not apply to it and it was not entitled to an exemption under s3C(4) (Red, 22Q-U).

Findings of Law – Failure in exercise of discretion?

36 The judge rejected MPGM’s submission that Ms Huynh had slavishly followed an internal guideline and failed to exercise any discretion in remitting the penalty and interest payable by MPGM under the Act. In relation to the decision to reduce the penalty to 5%, Ms Huynh took into account relevant matters in making her recommendation and the trial judge found that these were doubtless considered by Ms Tacadena in making her determination (Red, 23F-N).

37 The judge found that while the recommendation with respect to interest did have the indication of the application of a fetter on the discretion, the correct decision was made (Red, 24C-L).

Overall conclusion

38 The trial judge confirmed the assessments (Red, 24M).

DISPOSITION

39 It was common ground that the review was properly before the trial judge, whether under s97(1)(a) TAA, after the taxpayer’s objection had been determined, or under s97(1)(b).

40 It was then put that it was somehow incumbent on the Chief Commissioner to call for additional facts to those stated in MPGM’s Notice of Objection upon which it relied to ground its objection. The Notice of Objection was drafted so as to delineate the basis of the objection in clear terms including matters pertaining to the interest and penalty charges. Even if such an obligation could exist, there would be no basis for its exercise in the case of this Notice of Objection.

41 It is convenient that I now turn to delegation and the proper exercise of discretion, particularly in relation to interest.

42 Ms Tacadena in her affidavit of 11 May 2004 (Blue, 67) sets out her status and grading at the time she approved the recommendation by Ms Huynh to disallow MPGM’s objection on 11 March 2003. At paragraph 4 of that affidavit she states:

“4. It is the practice of the office for officers in my branch to make recommendations on objections which must be approved by myself or a senior officer before a notice of determination of the objection is sent to the taxpayer in accordance with my approval or the approval of another senior officer of the recommendation (including any amendments considered necessary). That practice is in accordance with the authority contained in the Instrument of Delegation of the Chief Commissioner of State Revenue. Annexed and marked “F” is an Instrument of Delegation, dated 29 December 2000.”

43 There could be no valid dispute that Ms Tacadena approved the recommendation of Ms Huynh (under this policy). But the point was taken that in the letter disallowing the objection, Ms Huynh wrote in the first person and therefore she must have made the decision herself. Her letter was as follows:

“11 March 2003

Attention: John Afford
PKF Chartered Accountants & Business Advisers
DX 10173
Sydney Stock Exchange

Dear Mr Afford,

Re: Moore Park Management Pty Ltd – Client no. 85662270

I refer to your letter dated 25 October 2002 objecting to the pay-roll tax assessments issued on 24 August 2002.

I have reviewed the grounds outlined in your letter of objection. My determination is that your objection to the inclusion of the cleaners’ wages in the pay-roll tax calculation is disallowed. I consider that Section 3C of the Pay-roll Tax Act 1971 is not applicable in these circumstances as the cleaners are employees of the Moore Park Management Pty Ltd.

In respect to the penalty tax, I consider that although your clients had no intentional disregard of the law, they failed to take reasonable care. Consequently, I have decided to reduce the amount imposed to 5%. Interest will remain as assessed. Amended assessments reflecting this decision will issue shortly.

If you are not satisfied with our decision, you can ask the Administrative Decisions Tribunal or the Supreme Court to review it. The enclosed Objections and Reviews Factsheet explains this process. The Registrars of the Tribunal or the court can advise you further. You can contact the Tribunal on (02) 9223 4677, and the Supreme Court on (02) 9230 3111.

Yours sincerely,

44 In my view there is no substance to this objection. An officer may write on behalf of the Commissioner of State Revenue in the first person without necessarily asserting that the decisions referred to in the letter were made by her on her own authority.

45 It was also contended that the decision-maker, by slavishly following an internal guideline, had failed to exercise the discretion to remit the penalty and more particularly the interest.

46 In making her written recommendations on 10 March 2003 concerning penalty tax and interest, Ms Huynh stated (Blue, 73):

“In respect to the interest and penalties, I am of the opinion that the penalty tax should be reduced. I consider that non-compliance was the result of confusion over the legislation. Due to the complex arrangement between the body corporates and client, the status of the cleaners only became clear during the audit. For the years ended 30 June 1998-2001, the client was captured by the grouping provision and found liable for pay-roll tax. After consultation with Frank Abela, it was agreed that a reduction of penalty tax to 5% is warranted.

47 Business Rule 5.2.2 was not before the trial judge nor this Court.

48 Each assessment included interest at 12.84% comprising “the market rate component” based on the bank bill rate, plus a premium component of 8% per annum. The relevant provisions of the Act are set out below:

21 Interest in respect of tax defaults

22 Interest rate

The market rate component is

The premium component is 8% per annum

Bank Accepted Bill rate

49 The taxpayer’s grounds of objection included:

“3(c) Like most small businesses, the Taxpayer is currently experiencing cash-flow difficulties caused by its GST obligations.”

50 Paragraph 4 stated:

“4. The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount. To the extent that the Chief Commissioner failed to consider the remission he has acted in accordance with wrong considerations and/or irrelevant matters and exercised his discretion arbitrarily and capriciously and contrary to law and fact such that he did not exercise his discretion properly or at all.”

51 The essence of MPGM’s complaint was that the decision-maker had simply applied the business rule and there had been no proper exercise of the discretion to consider whether, in particular, the premium component at least should not have been charged. MPGM sought to obtain additional plausibility for that contention in the fact that the judge (Red, 24 at [47]) disposed of this argument by stating that the Revenue was out of the money that should have been paid in the years in question, which was compensated fully by the market rate component.

52 MPGM then sought to argue that the premium component would necessarily represent a profit to the Revenue, the implication being that this undermined the decision as a valid exercise of discretion.

53 The relevant paragraph from the judgment reads:

“47 While the recommendation with respect to interest does have the indication of the application of a fetter on the discretion, I am of the view that the correct decision was made. Cashflow problems would not cause me to remit the interest component. The Revenue was out of the money that should have been paid to it with respect to the years in question. It lost the use of the funds. The statute made it clear that in the event of a tax default the taxpayer was liable to pay interest. Mere inability of a taxpayer to raise the amount of the interest is insufficient reason, in my view, for the defendant to remit any amount.”

54 It is clear from the final paragraph of the judgment where the judge confirmed the assessments, that he did not himself exercise the discretion. Moreover, the “out of the money” argument does not establish that interest as compensation precludes a margin or premium.

55 A decision-maker is entitled to have resort to rules which “guide” the exercise of discretionary powers, as here. There is nothing in the legislation which makes the business rule inconsistent with its subject matter, scope or purpose; see “Judicial Review of Administration Action” by Aronson, Dyer and Groves LBC 2004 at 280. A revenue Act would not be expected to excuse the payment of interest or penalty tax by reference to cash-flow problems when it must be the taxpayer’s responsibility so to order his or her affairs as to be able to meet the relevant obligations.

56 Indeed in Minister for Immigration, Local Government and Ethnic Affairs v Gray (1994) 50 FCR 189 at 206 French and Drummond JJ pointed out that some Acts contemplate that the wide discretions they confer will be followed up with

“policies or guidelines [which] will be developed by the Executive at either or both Ministerial or Departmental levels to govern [their application].

Conclusion

57 I do not consider that the grounds of appeal based on the absence of delegated authority or a failure to exercise the discretion have any basis.

Liability to pay pay-roll tax

58 MPGM claimed to be exempt from liability for pay-roll tax by s3C of the Act, quoted below. It contended that when it engaged cleaners and associated staff to clean strata unit buildings pursuant to contracts with the Owners Corporations, it was an “Employment Agent”; that is to say, it had secured the services of the relevant cleaning staff for its clients by a means other than a contract of employment between the relevant contract worker and the client, but had qualified for exemption from s3C under the terms of s3C(4)(c). The dispute centred upon whether it had received within the time required by the Act declarations in terms of s3C(4)(c) from each of the clients. It received the declarations in October 2002 but they purported to cover the period commencing on 1 January 2000 when the requirement for such a declaration came into effect.

Relevant legislative history

59 Section 3C in its original form commenced operation on 1 January 1999. There was a transitional provision which allowed the pre-existing law to apply to contracts entered into prior to the commencement date until 30 June 1999. (Schedule 6 Pt 4 cl 6 provides that amounts paid under an employment agency contract on or after 1 July 1999, where the contract was entered into before the date of commencement of s3C, are liable to pay-roll tax subject to s3C(4).)

60 The position prior to 1 January 1999 was that, in a true employment agency arrangement (i.e. where the agent arranged for worker and client to enter into a contract of employment), the client was liable for any pay-roll tax under the basal provisions of the Act. Section 6 in essence renders wages liable to pay-roll tax that are paid or payable by an employer for services performed or rendered in New South Wales.

61 There was an administrative arrangement in place which allowed employment agents to “take care of” the pay-roll tax liability. This administrative arrangement was expressed in Revenue Ruling Pt 16. Broadly, Pt 16 provided that, where the employment agent and the client agreed and the invoice was appropriately drafted, the agent could include the wages of a “temporary worker” in the agent’s pay-roll tax return.

62 The respondent submits that none of this is relevant to the present circumstances. It submits that throughout the relevant period the appellant was the common law employer of the cleaners, liable as such under s6 without need to resort to any statutory extension. I shall return to that issue when dealing with that alternative basis for the trial judge’s decision and adopted by him. It presupposes that s3C does not constitute an exclusive code with respect to the liability of employment agents. That is to say, if employment agents qualify for exemption under s3C(4), they are still capable of being rendered liable under s6 as common law employers, a proposition accepted by the judge.

63 Section 3C had no application to the period 1 July 1997 to 31 December 1998 prior to its commencement.

64 Section 3C was originally introduced to the Pay-roll Tax Act in 1998 by the State Revenue Legislation (Miscellaneous Amendments) Act No. 104 of 1998, which commenced on 1 January 1999 and provided:

3C. Employment agents

employment agency contract

employment agent

contract worker

at the time the employment agency contract is entered into and a declaration to that effect has been given by the client to the employment agent

65 It was submitted by the respondent that the clear implication of s3C(4)(c) as it formerly stood is that a declaration must be given at the time the employment agency contract is entered into.

66 At the time of the introduction of the 1998 legislation, an amendment was made to the “relevant contract” provisions in s3A of the Act. Sub-section 3A(1B) excludes employment agency arrangements within the meaning of s3C from s3A. Section 3A also excluded “contract of service” from its coverage (s3A(1)).

67 The section was amended in 1999 by the State Revenue Legislation Further Amendment Act; No. 60 of 1999, which resulted in the section reading as follows, marked up to show changes:

3C. Employment agents

employment agency contract

employment agent

contract worker

and a declaration to that effect has been given by the contract worker to the employment agent

(c) if the client of the employment agent is not registered or required to be registered as an employer under this Act at the time the employment agency contract is entered into and a declaration to that effect has been given by the client to the employment agent.

(c) if the client of the employment agent

is not registered or required to be registered as an employer under this Act, and

would not be required to be registered as an employer under this Act if the client were the employer in respect of the wages paid or payable under all the employment agency contracts to which the client is a party

and a declaration to that effect has been given by the client to the employment agent

(5) If, after a client gives a declaration referred to in subsection (4)(c) to an employment agent, the client becomes registered or is required to be registered as an employer under this Act, the client is liable to pay pay-roll tax in respect of the wages paid under the employment agency contract during each financial year in which the client is registered or is required to be registered

If a contract worker gives a declaration to an employment agent under subsection (4)(a), and that paragraph does not apply or at any time ceases to apply to the contract worker, the employment agent is liable to pay pay-roll tax in respect of the wages paid or payable under the employment agency contract during any period in which the paragraph does not apply

If a client of an employment agent gives a declaration to the employment agent under subsection (4)(b), and that paragraph does not apply or at any time ceases to apply in respect of the wages paid or payable under the employment agency contract, the client, and not the employment agent, is liable to pay pay-roll tax in respect of the wages paid or payable under the employment agency contract during any period in which the paragraph does not apply

If a client of an employment agent gives a declaration to the employment agent under subsection (4)(c) and that paragraph does not apply or at any time ceases to apply to the client, the client, and not the employment agent, is liable to pay pay-roll tax in respect of the wages paid or payable under the employment agency contract during any period in which the paragraph does not apply

A declaration under subsection (4) is to be in a form approved by the Chief Commissioner

68 These amendments to s3C commenced on 1 January 2000 (s2(1) Act No. 60 of 1999). Thus the new declaration procedure could not be effective before 1 January 2000 in any case.

69 When the section was first introduced in 1998, the relevant Minister stated in the Second Reading speech:

70 The Explanatory Memorandum circulated at the time stated as follows:

· The contract worker is liable for pay-roll tax in respect of the wages paid for provision of the services, or

· The wages paid to the contract worker will be exempt from tax if they had been paid to the contract worker by the end user of the services, or

· The end user of the services is not liable to pay pay-roll tax.

71 When the provision was amended in 1999 the relevant Minister stated in his Second Reading speech:

The second new provision closes a potential loophole in the pay-roll tax exemptions for employment agents. Employment agents are liable for pay-roll tax on wages paid to contract workers who are provided to a client under an employment agency contract. An exemption applies if the client is not liable for pay-roll tax because total wages do not exceed the registration threshold. This exemption was introduced following submissions from small business. There is evidence to show, however, that employers and agents are abusing the threshold exemption by entering into arrangements whereby the employer’s total wages are maintained below the registration threshold, and additional workers are provided under one or more agency contracts.

72 The Explanatory Memorandum circulated at the time of the 1999 amendment stated as follows:

73 The critical question for purposes of the application of the exemption in s3C(4)(c) is whether, under either version, the declarations referred to can be given not only after the relevant employment agency contract has been entered into but after the relevant tax liability has accrued, month by month.

74 For s3C to apply at all there must be an “employment agency contract” within the definition in s3C(1). That definition presupposes that the relevant contract workers, here the cleaning staff, have their services procured by MPGM for the Owners Corporations, importantly by a means “other than a contract of employment between the contract worker and the client”.

75 I am satisfied that there is nothing in the evidence which indicates that the cleaners were employees of the Owners Corporations and that MPGM merely acted as their agent. All that appears is that their costs were reimbursed. MPGM recruits, instructs, pays, insures and provides for the superannuation and leave entitlements of the cleaners. The modest equipment required (buckets, mops, detergents, etc.) is provided by the Owners Corporations (Black, 5L-Q).

76 In those circumstances, the threshold requirements of s3C are satisfied. Hence, the section applies with these consequences:

(b) the contract worker under the employment agency agreement is to be taken to be the employee of MPGM,

(c) the amounts paid or payable to the cleaning staff, though reimbursed to MPGM, must be taken to be wages paid or payable by MPGM so as to render MPGM subject to pay-roll tax unless,

(d) MPGM was potentially entitled to the exemption in s3C(4)(c).

77 I agree with the submission of the respondent that it is not possible for the client of an employment agency to provide a s3C(4)(c) declaration on a retrospective basis. There is no express provision as to when the declaration must be given. Properly construed, I consider that the declaration under either version of the section must be given at or before the time that the client’s liability to pay-roll tax arises.

78 It follows that the declaration given in October 2002 failed to satisfy the exemption in either version of s3C(4)(c) in respect of any of the tax years for which the exemption was claimed, namely the period on and from 1 January 2000, as the declaration was too late. For those years, the appellant remained liable as a common law employer under the general provisions of the Act.

The alternative basis for liability to pay-roll tax

79 In view of the conclusion I have reached above, it is not necessary for me to determine whether, were the exemption in s3C(4)(c) applicable, the appellant would nonetheless be liable as a common law employer pursuant to s6. That must depend on whether s3C constitutes an exclusive regime for determining the liability of an employment agent who procures the services of contract workers for a client or whether it is simply an extension of the general liability to the tax with an exemption applicable only to that extension.

80 The rationale for this regime is set out by the Minister in the earlier second reading speech. The regime regulates in detail the common situation of managing agents making available contract workers to a client under an employment agency contract such that, even if the contract of employment technically resides with the employment agent, nonetheless the contract workers are doing the work for the client who is reimbursing the managing agent.

81 Thus I incline to the view that s3C is a self-contained regime exhaustively governing the liability to pay-roll tax of employment agents where there is no contract of employment between contract worker and client. However, I do not need to express a concluded view on that question.

OVERALL CONCLUSION

82 In my opinion, none of the grounds of appeal succeed. I propose orders as follows:

(2) Appellant to pay the respondent’s costs of the appeal.

83 BRYSON JA: With one qualification I agree with the judgment of Santow JA. I agree with the orders which his Honour proposes.

84 I do not join in the view that s.3C(4) operates only within the areas of deemed liability created by other provisions of s.3C, most significantly s.3C(2). I prefer not to make any observation on the subject with which Santow JA deals at paras [79] to [81]. The appeal can be properly disposed of without addressing that subject.

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CITATION:	Moore Park Gardens Management Pty Ltd v Chief Commissioner of State Revenue [2006] NSWCA 115
HEARING DATE(S):	6 February 2006
JUDGMENT DATE:	15 May 2006
JUDGMENT OF:	Handley JA at 1; Santow JA at 2; Bryson JA at 83
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	TAX ASSESSMENT — Pay-roll tax — Notice of Objection — Challenge by managing agent of a home unit complex to retention of 5% penalty following remittance from 20% — Taxation regime governing employment agency contracts under s3C of Pay-roll Tax Act 1971 (NSW) introduced in 1998 — Necessity for declaration to qualify for its exemption to be given at time employment agency contract entered into — Whether liable as a common law employer in any event – not necessary to decide.
LEGISLATION CITED:	Pay-roll Tax Act 1971 (NSW) s3, s3A, s3C, s6, s8 Taxation Administration Act 1996 (NSW) s22, s91, s97
CASES CITED:	BBLT Pty Ltd v Chief Commissioner of the Office of State Revenue (2003) ATC 5063 Minister for Immigration, Local Government and Ethnic Affairs v Gray (1994) 50 FCR 189
PARTIES:	MOORE PARK GARDENS MANAGEMENT PTY LTD (ACN 069 209 267) (Appellant) CHIEF COMMISSIONER OF STATE REVENUE (Respondent)
FILE NUMBER(S):	CA 40715/04
COUNSEL:	D K L RAPHAEL (Appellant) R HAMILTON/ B L JONES (Respondent)
SOLICITORS:	The Hargreaves Practice (Appellant) State Crown Solicitors Office (Respondent)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 2758/03
LOWER COURT JUDICIAL OFFICER:	Gzell J
LOWER COURT DATE OF DECISION:	05/19/2004
LOWER COURT MEDIUM NEUTRAL CITATION:	[2004] NSWSC 417