Civil and Administrative Tribunal
New South Wales
Case Title: Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue Medium Neutral Citation: [2014] NSWCATAD 227 Hearing Date(s): 30 September and 1 October 2014 Decision Date: 22 December 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: R Deutsch, Senior Member Decision: The decision under review is affirmed
Catchwords: Employment agency contracts, payroll tax, procure, wages, penalties, reasonable care Legislation Cited: Payroll Tax Act 2007
Taxation Administration Act 1996Cases Cited: CXC Consulting Pty Ltd v Commissioner of State Revenue (2013) VSC 492
Freelance Global Ltd v Chief Commissioner of State Revenue (2014) NSWSC 127
On Call Interpreters & Translators Agency Pty Ltd v Commissioner of Taxation (No 3) (2011) FCA 366
RVO Enterprises Pty Ltd ATF the R M O'Mara Family Trust v Chief Commissioner of State Revenue (2004) NSW ADT 64
Taneja v Commissioner of Taxation (2009) AATA 87
Value Engineering (Australasia) Pty Ltd v Commissioner of State Taxation (WA) (1985)Category: Principal judgment Parties: Qualweld Australia Pty Ltd (Applicant)
Chief Commissioner of State Revenue (Respondent)Representation - Solicitors: Qualweld Australia Pty Ltd (Applicant in person) File Number(s): 1410067
REASONS FOR DECISION
INTRODUCTION - WHAT THIS CASE IS ALL ABOUT!
This case concerns an application by the Applicant under s 96 of the Taxation Administration Act 1996 (NSW) (the TA Act) for a review of an assessment for payroll tax for the years ended 30 June 2009 to 30 June 2012 (the relevant period).
The Applicant is involved in the welding industry. In this case, the issue that arises is whether amounts paid to welders who the Applicant uses on certain projects count as wages or salary paid to employees for the purposes of the Payroll Tax Act 2007 (the Payroll Tax Act).
The welders are not employees of the Applicant at general law and therefore the amounts paid to them are not ordinarily wages or salary. However, the welders may nonetheless be treated as employees and the amounts paid to them as wages or salary under certain extended concepts covered by the Payroll Tax Act. There are two such possibilities - Division 8 and Division 7 of that Act
The primary issue (the Employment Agency Issue) concerns the application of Division 8 of the Payroll Tax Act 2007 ( the Payroll Tax Act) and specifically whether payments made by the Applicant to its contractors during the relevant period were paid pursuant to "employment agency contracts " as defined in s 37 of the Act. The Applicant asserts that the payments were not so paid; the Respondent asserts they were.
If the primary issue is resolved in favour of the Applicant, there remains a further issue (the Relevant Contracts Issue) as to whether Division 7 of the Payroll Tax Act and specifically whether payments made by the Applicant to its contractors during the relevant period were paid pursuant to "relevant contracts" as defined in s 32 of the Act. Again the Applicant asserts that they were…
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- AGLC
- Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227
- Case
- [2014] NSWCATAD 227
- Decision Date
CaseChat Overview and Summary
The central legal issues before the court were whether Qualweld had procured the services of the welder for the client by entering into the contract with the interposed entity, and the meaning of the term "procure" within this context. The court examined relevant precedents, such as Value Engineering (Australasia) Pty Ltd v Commissioner of State Taxation (WA), CXC Consulting Pty Ltd v Commissioner of State Revenue, and Freelance Global Ltd v Chief Commissioner of State Revenue, to understand how "procure" had been interpreted in similar cases. These precedents provided insight into the court's approach to determining whether Qualweld had indeed procured the services of the welder.
The court found that the applicant had not procured the services of the welder for the client. The reasoning was based on the specific terms of the contract between Qualweld and the interposed entity and the nature of the work performed. The court concluded that the contract did not result in Qualweld procuring the services of the welder for the client as required by the Act. Consequently, the court affirmed the decision under review, upholding the lower court's findings and dismissing the appeal.
Orders
Orders of the court
The decision under review is affirmed
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The Penalty Issue arises from the application of the Taxation Administration Act 1996 (NSW) in particular sections 26 and 27Section 26(1) provides that"If a tax default occurs, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid. '39 Relevantly, sub-sections 27 (1) and (3) provide that "(1)The amount of penalty tax payable in respect of a tax default is 25% of the amount of tax unpaid, subject to this Division."(3)The Chief Commissioner may determine that no penalty tax is payable in respect of a tax default if the Chief Commissioner is satisfied that:(a)the taxpayer(or the person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law; or............................................" Before the employment agency provisions can apply, the following elements must be satisfied:·there must be a contract;under that contract, the services of the Worker must be procured by the Applicant;the procurement of those services by the Applicant must be "for a client of" the Applicant;the contract must not be a contract of employment between the worker and the client.the contract must not result in the creation of a contract of employment between the welder/worker and the client The first, fourth and fifth of these elements are clearly satisfied. There is a contract in existence between the Applicant and the Interposed Entity but that contract is neither a contract of employment between the Worker and the Client nor could it result in the creation of such a contract. The two issues that lie at the heart of this case are the second and third elements, which together call for conclusions to be reached as to whether the Applicant has procured the services of the Worker for the Client by entering into the contract with the Interposed Entity. All this puts considerable emphasis on the word "procure" as the interpretation of the meaning of that word and its application to the facts at hand will, to a large degree, determine the outcome of this case. The meaning of the word 'procure" has been considered in a number of pay-roll tax cases, most particularly in :- ·Value Engineering (Australasia) Pty Ltd v Commissioner of State Taxation (WA) (1985) 16 ATR 296 (Value Engineering);·CXC Consulting Pty Ltd v Commissioner of State Revenue 2013 VSC 492 (CXC); ·Freelance Global Ltd v Chief Commissioner of State Revenue 2013 NSWSC 127 (Freelance). In Value Engineering, the Western Australian Court of Appeal considered a case in which the taxpayer entered into a series of contracts with its clients to supply the services of engineers, draftsmen and similar personnel. In doing so, Value Engine contracted with various entities which employed the engineers, draftsmen and similar personnel in question. The work was carried out physically by the personnel who generally speaking were employees of the interposed subcontractors but at no time were they employees of either Value Engineering or its clients. The principal business activity conducted by Value Engineering in that case was agreed to be to provide engineering and related services to other businesses.