Nikaed Pty Ltd v Chief Commissioner of State Revenue

[2005] NSWADT 21

CITATION:	Nikaed Pty Ltd v Chief Commissioner of State Revenue [2005] NSWADT 21
DIVISION:	Revenue Division
PARTIES:	APPLICANT Nikaed Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	036001
HEARING DATES:	26/09/2003, 04/02/2004
SUBMISSIONS CLOSED:	02/04/2004
DATE OF DECISION:	02/10/2005
BEFORE:	Hole M - Judicial Member
APPLICATION:	Taxation Administration Act - liability to pay interest - Taxation Administration Act - liability to pay penalty tax
MATTER FOR DECISION:	Principal Matter Clarification of decision dated 18 June 2004
LEGISLATION CITED:	Taxation Administration Act 1996
CASES CITED:	Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21
REPRESENTATION:	APPLICANT S Peters, agent RESPONDENT R Hamilton, barrister
ORDERS:	1. The penalty tax on the assessments should be remitted in accordance with Section 27(3)(a) of the Taxation Administration Act 1996; 2. The interest, other than penalty tax, including the market rate component and the premium component is payable on the assessments subject to the effect of the second paragraph of the Order made on 18 June 2004.

Introduction

1 A decision was given on 18 June 2004 as to matters subject of the application. Attention has been drawn to the items in the application which have not been addressed in that decision. No further evidence has been called for and no further submissions considered other than those submitted prior to 4 February 2004.

2 The application sought a review of the decision of the Chief Commissioner of State revenue made on 9 November 2001 including ‘penalties and interest’ the outstanding items being:

(a) The rate of penalty interest on the assessment.

(b) The rate of interest on the assessment.

3 The Applicant engaged in constructive and prompt co-operation with the Respondent to address the requirements of the Respondent in consideration of a multitude of contracts dating back to 1997. The Applicant had attempted to satisfy all its legislative requirements within an environment of difficult, tortuous and confusing legislative requirements, absent of reasonable direction as to evidence that would need to be retained in event of audit.

4 In the circumstances the Applicant submitted that reasonable steps had been taken to comply with the legislative requirement. Advice had been sought as to its Federal and State taxation liabilities from 1995 to the time of the audit and that Section 27 of the Tax Administration Act 1996 should have applied. Further submissions were made that Section 28 of the Taxation Administration Act should have been applied as the Applicant had provided information to the Respondent on 3 July 2001, prior to the date of the audit and that this constituted disclosure.

5 The Respondent submitted that the disclosure by the Applicant, approximately 2 months before the audit, was insufficient to enable the nature and extent of the tax default to be determined and that Section 28 nor Section 29 of the Tax Administration Act should have applied. It is certainly the situation that the point of time when disclosure was sufficient was after the convoluted exercise undertaken as a result of the negotiated questionnaire and subsequent requisitioning.

6 The steps taken by the Applicant, following advice having been obtained, to put in place an appropriate contractor agreement show that the Applicant was concerned to comply with the taxation law and had taken reasonable steps to comply.

7 In view of:

(i) the substantial attempts of the Applicant to obtain clear evidence at the time of commencement of arrangements between the Applicant, employees and/or contractors;

(ii) the confusing legislation;

(iii) the lack of any helpful guidelines as to evidentiary material required; and

(iv) the co-operative arrangement which evolved to attempt to locate the necessary evidence

it is considered that the Applicant had taken reasonable steps to comply with its liabilities and thus the benefit of Section 27(3)(a) of the Tax Administration Act 1996 should be applied.

8 The Applicant has sought remission of the interest including the market rate component and the premium rate component. There are no exceptional circumstances in this case to justify remission of the market rate component such as those referred to in Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21. Apart from the remission of the interest referred to in Order 2 made on 18 June 2004, the market rate component is correctly imposed as this represents the value to the Applicant of the use of the money represented by the assessed tax and the lack of use of that money by the State.

9 In so far as the premium component is concerned this should only be remitted where circumstances would justify it. The circumstances in this case, as submitted by the Applicant, relate to the attempts by the Applicant to obtain reliable advice, acting on that advice and co-operation with the Respondent to enable the Respondent to determine the liability; these circumstances are insufficient to justify remission of the premium component.

10 Clarification has been sought by the Applicant of reference to the time periods in Section 3A(1)(e)(ii) and/or Section 3A(1)(e)(iii) in Paragraph 31 of the decision dated 18 June 2004. The time of the contract to be determined will vary between the different requirements of Section 3A(1)(e)(ii) and Section 3A(1)(e)(iii) depending upon which is applicable. The financial year is that in which the contract is undertaken.

11 Clarification has also been sought by the Applicant of Paragraph 30 of the reasons given on 18 June 2004, this paragraph relates to the requirement to satisfy the Respondent that the 11 contracts referred to therein were entitled to an exemption pursuant to the legislation.

(a) On analysis of the information provided to the Respondent as to the 11 contracts, the Respondent considered that information (which was sufficient for the purposes of the Respondent to make a decision) and concluded that the contractors were not rendering “services of that kind to the public generally”. The legal grounds for exemption are set out in the Act and rely on the evidentiary situation of each contract. The Respondent reviewed the evidentiary situation of each contract, concluded that as the contractors did not offer their “services of that kind to the public generally” therefore an exemption pursuant to Section 3A(1)(e)(v) was not available.

(b) The material provided to the Tribunal in respect of those 11 contracts does not disclose that the services of the contractors were being offered to the public generally. The onus is on the Applicant to provide the material required to the Respondent and (if an application is lodged then to the Tribunal) to disclose that the services of the contractors were being offered to the public generally or to call the contractors to provide that evidence. This onus was not discharged.

(c) The decision of the Respondent in respect of these contracts is confirmed, the onus on the taxpayer that there was an entitlement for exemption on legal grounds has not been established. The total evidence provided by the Applicant in respect of these 11 contractors did not disclose sufficient information to support the contention that those contractors rendered their services to the public generally.

1. The penalty tax on the assessments should be remitted in accordance with Section 27(3)(a) of the Taxation Administration Act 1996.

2. The interest, other than penalty tax, including the market rate component and the premium component is payable on the assessments subject to the effect of the second paragraph of the Order made on 18 June 2004.