Rinex Integrated Power Pty Ltd v Chief Commissioner of State Revenue

[2010] NSWADT 148

CITATION:	Rinex Integrated Power Pty Ltd v Chief Commissioner of State Revenue [2010] NSWADT 148
DIVISION:	Revenue Division
PARTIES:	APPLICANT Rinex Integrated Power Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	096118
HEARING DATES:	7 June 2010
SUBMISSIONS CLOSED:	7 June 2010
DATE OF DECISION:	11 June 2010
BEFORE:	Block J - Judicial Member
CATCHWORDS:	Payroll tax – meaning of “paid or payable”- market rate interest
LEGISLATION CITED:	Payroll Tax Act 1971 Payroll Tax Act 2007
CASES CITED:	Roden Security Services Pty Ltd v Chief Commissioner of State Revenue [2010] NSWADTAP Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19 Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 Nikaed Pty Ltd v. Chief Commissioner of State Revenue [2005] NSWADT 21 Downs v Chief Commissioner of State Revenue [2002] NSWADT 51 Macsif Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT
REPRESENTATION:	APPLICANT R Collins, agent RESPONDENT H El Hage, barrister
ORDERS:	The decision under review is affirmed

REASONS FOR DECISION

Part A Preliminary and background.

1 The decision under review is the disallowance by the Respondent (who is usually referred to in these reasons as the "Chief Commissioner") of an objection by the Applicant (which is sometimes referred to in these reasons as the "Company") against an assessment of payroll tax for the year ended 30 June 2007 (referred to in these reasons as the "relevant year ")

2 The Tribunal had before it two sets of documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997; the first set was lodged in December 2009 and a supplementary set was lodged in April 2010. Each set of section 58 documents is divided into sections divided by numbered tabs and sometimes also by lettered tabs. A reference to the first set of section 58 documents is denoted by “T: followed by the relevant tab number; references to the second set of section 58 documents are similarly denoted except that I use“ST” (instead of” “T”) followed by the relevant tab number. The Tribunal also had before it comprehensive written submissions by the Chief Commissioner (referred to as “RS”) and brief submissions by the Applicant (referred to as “AS”). The Tribunal received in addition a large number of documents produced as a result of summonses issued by the Chief Commissioner; none of that material so produced was tendered to the Tribunal or referred to during the course of the hearing and so that it is unnecessary for the Tribunal to refer any of it in these reasons.

3 The Applicant was represented by Mr Richard Collins; he informed the Tribunal that he is the sole director of the Applicant and moreover that for all practical purposes he is its sole shareholder. Mr Collins informed the Tribunal that he was employed by the Company until his employment terminated at the end of June 2007... Assuming that his employment by the Company terminated on 30 June 2007 (and as to whether this is so or not is far from clear) he has from that date remained in sole control of the Company. He said that he hoped that the Company would be ready for sale in about two years...

4 Payroll tax cases usually require oral evidence. In this particular case, Mr Collins did not give oral evidence and nor did anyone else on behalf of the Company. From the bar table Mr Collins made statements and furnished information which might in broad terms, and except that there was no cross-examination, be treated as equivalent to his evidence. Those statements are more fully referred to in part B below.

5 The background facts are undisputed; it is convenient by way of commencement to include the content of RS under the head of "background" and contained in clauses 3 to 14 (but without footnotes) of RS as follows:

3. The basic background to this matter is as follows.
4 . By letter dated 5 February 2009, the Chief Commissioner advised Rinex that a payroll tax investigation will be conducted on the company and any associated businesses. The Chief Commissioner enclosed an "Unregistered Payroll Tax Questionnaire" for Rinex to complete.
5. Rinex, through its director Richard Collins, wrote to the Office of State Revenue ("OSR") on 30 March 2009. Mr Collins informed the OSR that the company had registered for payroll tax. He acknowledged that Rinex had not been registered previously. Mr Collins stated that the company was liable for payroll tax for the "2006/07 year" as a result of a "one-off payment". He enclosed a cheque for $58,442.12 "being the payroll tax due for 2006/07". He requested that no penalties be imposed.
6 Rinex lodged its application to be registered for payroll tax electronically. The primary reason for registration was identified as being "previous correspondence received from OSR". In that application, it was stated that wages paid during the financial year ending 30 June 2007 totalled $1,574,035.00.
7. On 11 May 2010, Rinex lodged a completed "Unregistered Payroll Tax Questionnaire", dated 8 May 2010. 4 In the Questionnaire, it was stated that the business first employed staff in NSW in 1986. Relevantly, in the table under question 32, it was recorded that for the year ended 30 June 2007, salaries totalled $591,426.00 and employer superannuation contributions totalled $1,067,974.00. A total of $65,365.00 was claimed as exempt payments to apprentices.
8. On 2 July 2009, the Chief Commissioner issued a Payroll Tax - Notice of Assessment to Rinex in which he assessed the company as being liable to pay $58,442.10 in payroll tax for the period 1 July 2006-30 June 2007 on the basis that the total amount of wages paid during that financial year was $1,574,035.00.5 Rinex was also required to pay $7,072.13 in interest. Because Rinex had already paid the payroll tax owing, the only amount outstanding was interest.
9. On 27 July 2009, Rinex's accountants, Forrester Korfiatis, wrote to the Chief Commissioner, seeking a remission of the interest payable. In support of the request, the accountants pointed out that, aside from the 2006-2007 financial year, Rinex had never been liable for payroll tax. It was stated that the company had become liable for payroll tax during that financial year because of "a once off superannuation payment in 2007". It was asserted that Rinex had not received proper advice from its previous accountants concerning its liability for payroll tax.
10 Rinex subsequently lodged a formal objection with the Chief Commissioner, dated 1 August 2009. The letter from Forrester Korfiatis dated 27 July 2009 was relied on as the grounds of objection. Thus, the objection was limited to the interest payable.
11. On 2 September 2009, the Chief Commissioner disallowed Rinex's objection. In his reasons for decision, the Chief Commissioner pointed out that only market rate interest had been imposed.
12. The applicant subsequently prepared a document headed "Explanatory Notes to Application for Review of Decision", addressed to the Tribunal and dated 31 October 2009. The purpose of the document is not entirely clear. It appears to contain a number of assertions based on the bundle of documents attached to it. The document and attachments were sent to the Chief Commissioner.
13. On 6 November 2009, the applicant filed an application for review, seeking review of its liability for payroll tax as well as its liability to pay interest. The application was filed beyond the 60-day limitation period stipulated in s. 99(1) of the Taxation Administration Act 1996 (NSW) ("TA Act"). The applicant's unsigned submission to the Tribunal (enclosing a time sheet for Craig Moyce), dated 18 March 2010, seems to contain an application for an extension of time under s. 57(1) of the ADT Act within which to file its application for review. To the extent that such an application is made, the Chief Commissioner neither opposes nor consents to the applicant's request for an extension of time.
14. By s. 100(3) of the TA Act, the onus is on the applicant to prove its case. Of course, in these proceedings, the applicant's case (and that of the respondent) is not limited to the grounds raised on objection: s. 100(2) of the TA Act.

6 As appears from clause 13 of RS the Applicant’s application for review was out of time. The Chief Commissioner neither opposed nor consented to an application which regarded generously, might be treated as an application for an extension of time. The period, in respect of which the application for review was late, was short, and the Tribunal decided to grant the extension of time sought and to treat the application for review as if it had been filed within the statutory time limit.

7 The remainder of this part A is inserted in amplification of the preceding clauses and having regard in particular to documents before the Tribunal. .

8 T1 is a letter dated 30 March 2009 by the Applicant to the Respondent reading as follows:

We have registered the company for payroll tax (lodgement ref: 3552501), as we have just become aware that there is a payroll tax liability for the 2006/07 year.
The company had not previously been liable for payroll tax. In the 2006/07 year, there was a one-off payment that led to there being there being a payroll tax liability.
It was an inadvertent mistake not to register the company earlier as payroll tax had not been an issue for the company.
The company is not liable for payroll tax in any other year.
We enclose a cheque for $58,442.12 being the payroll tax due for the 2006/07. We also request no penalties as it was an inadvertent mistake.
Should you have any queries, please do not hesitate to contact this office.

9 T2 is a print-out of the Applicant’s on-line registration for payroll tax purposes. Page 3 of that document sets out that in respect of the relevant year wages amounting to $1,574,035 had been paid.

10 ST2 is a questionnaire completed by the Applicant, dated 8 May 2009 and signed by Mr Collins as a director of the Company and containing information concerning the Company. Question 32 of the questionnaire related to taxable wages paid by the Applicant; that question was answered in respect of the relevant year by the insertion of an amount of $591,426 in respect of salaries, $1,047,974 in respect of employee superannuation contributions and $65,365 in respect of amounts paid to apprentices. Although salaries in respect of the year preceding the relevant year and the year succeeding the relevant year were in approximate terms similar to those referable to the relevant year, the same is not true in respect of superannuation contributions; in respect of the relevant year the amount reflected was vastly in excess of amounts reflected in respect of other years.

11 Based on the Applicant’s own questionnaire an assessment was issued in respect of tax amounting to $58,442.12 and interest amounting to $7,072.30.

12 After the assessment referred to in the preceding clause was issued Forrester Kerfiatis, the Applicant’s accountants, (and who are referred to in these reasons as "the accountants") wrote to the Respondent (T4) on 27 July 2009 as follows: -

We request remission of general interest charged for the abovenamed client in regard to payroll tax for the year ended 30 June 2007.
The Company was incorporated in 1986, and had never previously been over the threshold for payroll tax.
Our role as accountants for the Company commenced December 2007. The advice provided by the Company's previous accountants proved to be less than satisfactory on several items and the Company transferred the responsibility of accounting to our firm. Regrettably one of the items which received deficient advice was the Company's liability for Payroll Tax. We note that no advice was received from the previous accountant either on any possible liability or indeed any concern for the requirements of payroll tax.
Accordingly, the question is, would a fair person be expected to know that payroll tax was due. Our view is that a reasonable person, the company directors being engineers and totally involved in the operation of the business, would not realise that payroll tax was either applicable to the Company or had become a liability of the Company under these unique circumstances of 2007.
The Company had never previously been liable for payroll tax, and the only reason it was now liable in the 2007 year was as a result of a once off superannuation payment in 2007. Once the directors of the Company became aware of the payroll tax liability, the correct amount of $ 58,442.12 was fully paid.
We respectfully request that no general interest charge be issued to the Company as the 2007 payroll tax liability was incurred for the first time in 21 years of business, and the amount was paid in full once the liability was realized.
Should you have any queries, please do not hesitate to contact this office.

13 The objection appears at T5; it indicates that the Applicant sought only the remission of interest; it was based entirely on the letter by the accountants referred to in the preceding clause, and in which the Applicant sought only the remission of interest...

14 The objection having been disallowed (T7) the Applicant submitted a bundle of documents together with brief submissions. T8f indicates that in respect of the relevant year the Company paid wages of $591,425.90 and superannuation of $1,047,974 and thus in conformity with the answers to question 32 of the questionnaire previously referred to in these reasons.

15 The Applicant’s application for review was received in the Tribunal on 8 November 2009; pursuant to that application, the Applicant asked that interest be reduced to nil and it also contended that payroll tax had been calculated incorrectly. It will be remembered that payroll tax had been assessed and, as appears from RS, paid, and the Applicant had previously sought only to obtain a reduction in respect of interest.

16 In respect of the Applicants submissions I include its content under the headings "Assessed amount – Point 1 and "Assessed amount - Point.2” as follows

Evidence and Submission
a) Assessed Amount — Point 1
1) Richard Collins received his final once-of payment of $ 1,000,000 upon his formal departure from Rinex employment in June 2007.
2) Upon request, we were directed by OSR to "FACTSHEET / NSW Payroll Tax Information for Employees / June 2008" and we refer to Page 2 of 5:-
employment termination payment (ETP) when paid to employees, and former employees and similar payments to directors, former directors, members of a governing body, former members of a governing body or deemed employees under a relevant contract. The amount of the ETP or similar payment that is subject to payroll tax is the amount that would be liable to income tax in the hands of the employee.
3) We enclose advice from Forrester Korfiatis Accountants that the once-of payment was NOT included in the taxable income of Richard Collins and was therefore not to be subjected to payroll tax.
The Australian Tax Office has fully agreed with this submitted return and also agreed that there was no tax due and payable on this payment. (Richard Collins ATO Tax Return available for the Determination)
Result We therefore submit that, as detailed in the OSR document that this once-of payment is to be excluded from any amount to be assessed for payroll tax
We would therefore request a Determination that OSR remit the funds to Rinex together with any interest due on the funds previously paid to OSR.
a) Assessed Amount — Point 2
1) Richard Collins received his final once-of payment of $ 1,000,000 upon his formal departure from Rinex employment in June 2007.
2) Richard Collins
Became self-employed in 1980
Registered Rinex Australia Pty. Ltd in October 1981.
(to act as a company for his work and 4 employees) registered Rinex Diesel Pty. Ltd in May 1986
(to act as a company for new Diesel Generator work) registered Rinex Integrated power in July 2006
(to act as a company for its power control work)
3) Richard Collins has continual and only employment in these enterprises continuous director of these companies
continuous major share-holder of these companies
continuous nominated License Holder of these companies (electrical / air conditioning / refrigeration)
(without the license the business cannot operate legally)
4) Richard Collins has not taken any holidays / long service leave during his tenure at these enterprises with the exception of: -
only statuary public holidays
5) The payment effected in June 2007 was for these previously forgone payments for the statuary holidays and long service.
6) The full amount of the payment to Richard Collins is correctly listed as `wages" in the Rinex accounts
(Rinex ATO Tax Return available for the Determination)
7)OSR Revenue Ruling PT 40 — Accrued Leave Paid on Termination
Calculation of Taxable Proportion
"payroll tax is payable only from that portion of the accrued leave after 1st
January 1990"
8)Calculation reveals that 38% of the amount assessed amount is accrued before 1st January 1990.
9) Total amount over-paid to OSR $ 22,208.00

17 Result We therefore submit that this over-payment of the payroll tax amount be repaid to Rinex.

18 At the hearing, the argument under .Point 1 was abandoned leaving only, as regards the tax assessment, the argument under Point 2.

19 The Applicant's submissions include a copy of Revenue Ruling No PT 40 ("the Ruling'). The Ruling in its terms was of effect only for the period 1 May 1990 to 30 June 2003 and is noted as being obsolete. It was thus of no relevance to this application.

Part B Statements by Mr Collins from the bar table.

20 Mr. Collins said as regards Point 1 of the Applicant’s submissions that it could be ignored.. The Tribunal does not consider that it was irrelevant; that content demonstrates in clear terms that the payment of $1m was tax related and more particularly a superannuation payment. As appears from Point 1 Mr. Collins emphasised that the payment was free of tax in his hands as a payment of superannuation. and offered to produce the relevant tax return.

21 Mr Collins claimed that the amount of $1 million paid to him by the Company as a termination payment on 30 June 2007 was not, as had been stated and claimed previously, a payment of superannuation but was rather the payment of his entitlement to leave pay and long service leave accumulated over 30 years. This drastic change in the Applicant's case is referred to in these reasons as the "specified change".

22 Mr Collins was asked how the amount of $1 million paid on 30 June 2007 was calculated. He said that it was the amount arrived at after consultation with the Australian Taxation Office ("ATO") and after advice from the ATO as to the amount which could be paid in respect of superannuation by the Company to him. Mr Collins said also that the amount of $1 million was paid to him by the Company in his capacity as the trustee of a superannuation fund established for his benefit and the benefit of his family.

23 There was some discussion during the hearing as to whether it was necessary or desirable for Mr. Collins to give evidence in a formal sense and subject himself to cross-examination. Mr. El-Hage indicated that he did not think it necessary to cross-examine Mr Collins since the payment would be caught for payroll tax if it was a superannuation payment or if it was a payment in lieu of accumulated leave.

24 Mr. Collins described the business of the Applicant as referable to the care of diesel generators in large buildings. He said that the business commenced in 1980 and that it was thereafter incorporated in 1986. Clause 16 above, and in relation to Point 2 indicates that a number of companies using the Rinex name were incorporated. When Mr. Collins referred to the incorporation of the business in 1986 he was presumably referring to Rinex Diesel Pty Ltd which was incorporated in May 1986. However the Applicant in this matter is Rinex Integrated Power Pty Ltd which was per Point 2 incorporated in July 2006 and thus at the beginning of the relevant year, but long after 1990 and 2003 both of which are years which are relevant, at least to some (limited) extent...

25 Following the specified change the Applicant claimed that of the amount of $58482.10 assessed and paid $22208 constituted an overpayment. Mr. Collins said that this was so in that payments in respect of leave were (pursuant to the Ruling) exempt to the extent that leave accrued prior to January 1990. As has been demonstrated the Ruling was obsolete prior to the relevant year.

26 Asked how the amount of $22208 was calculated Mr. Collins replied that it was simply a proportion of $1m and based on the number of years of service prior to 1990 as a proportion of the number of years of service altogether up to and including the relevant year. There was no explanation of any kind as to how the amount of $1m is arrived at in the context of leave of any kind.

27 There are a number of fundamental difficulties in respect of the contentions arising from the specified change. The Tribunal is asked in the first instance to accept that $1m was in fact the amount calculated for accumulated leave in respect of the services of Mr. Collins to the Company. As Point 1 so clearly demonstrates $1m was the amount which the ATO was prepared to accept as a tax free superannuation payment to Mr. Collins and so that it is not possible to accept that it was a payment for leave. There was, as set out previously, no evidence before the Tribunal of any calculations of the alleged leave pay amount. There was also no evidence before the Tribunal as to when during the period of 30 years leave was taken as opposed to being accumulated. It must be noted also that Mr Collins said that he received a salary of $100 per week from the Company until 1990 and thereafter received a salary of $300 per week. It cannot be the Company which paid him salary prior to 2006 since the Company was incorporated only in July 2006. In any event and on any basis and assuming that the reference to 30 years can be taken seriously (which is doubtful in the extreme) it is not possible to arrive, on that salary level at an amount of $1m. A proper calculation would in any event (and leaving aside for the moment all other considerations) not have the result that the overall leave pay amount was exactly and precisely $1m. There is yet another difficulty and which has been adverted to previously. If the Applicant in this case was incorporated in July 2006 and if it (as appears to be the case) paid the amount of $1m at the end of the relevant year, the leave pay entitlement (if anything at all) of Mr Collins for so short a period would have amounted to a very small sum. Put in overall terms there was no evidence before the Tribunal which indicated that Mr Collins was entitled to any amount at all in respect of leave pay. It is unnecessary for me to deal in detail with the complexities arising from long service leave legislation in New South Wales but it can be noted that an entitlement in absolute terms arises only after a specified period of service, and if the Applicant was incorporated as claimed in 2006 there could not have been any long service leave entitlement. All of these allegations by the Applicant are entirely without substance and must be dismissed. Prior to the specified change the Applicant claimed that the amount was paid in respect of superannuation and Point 1 above demonstrates that this must have been the case. If only for the sake of completeness it may be said that the Applicant did not discharge the onus and in fact made little or no effort to do so, and very probably because it was not possible for the Applicant to do so.

28 Although all of the evidence before the Tribunal demonstrates in the clearest possible terms that $1m was paid in respect of superannuation I propose in the interests of completeness to refer in Part C and under the head of "Legislation" to the legislative regime and including the provisions of the Payroll Tax Legislation Amendment (Avoidance) Act 2002 (referred to in these reasons as the "Amending Act")

29 At the outset of the hearing Mr Collins was asked whether the Applicant would be represented and in particular by the accountants. He referred to them in unflattering terms and indicated that it was their bad advice which had resulted in the Applicant being before the Tribunal. It is not necessary for the Tribunal to express any view as to these remarks but it might note that the specified change appears to have been authored by the Applicant and Mr. Collins.

Part C. Relevant legislation

30 Although the Payroll Tax Act 1971 (“the Act”) was repealed and replaced by the Payroll Tax Act 2007 (the "2007 Act"), the 2007 Act applies to taxable wages paid or payable after 1 July 2007. The Act continues to apply to taxable wages paid or payable before that date.. It follows that the Act applies to the taxable wages paid by the Applicant in respect of the relevant year.: see, by way of example, Roden Security Services Pty Ltd v Chief Commissioner of State Revenue [2010] NSWADTAP

31 Section 7 of the Act (and I refer to the version applicable in respect of the relevant year) provided, inter alia, for the levy and collection of payroll tax on "taxable wages", ascertained (relevantly) in accordance with Sch. 4 to the Act.

Schedule 4 to the Act provided for the calculation of payroll tax liability for the financial year commencing 1 July 2001 and subsequent financial years, and including the relevant year; in respect of the relevant year the tax free threshold was $600000 and so that tax was payable only on the excess above that amount.

32 The expression "taxable wages" was defined in s. 3(1) of the Act to mean "wages which, under section 6, are liable for pay-roll tax". Section 6(1) of the Act provided that "wages liable for pay-roll tax under this Act are wages which are paid or payable by an employer for services performed or rendered during a month or part of a month..." in New South Wales.

33 The term "wages" was defined in s. 3AA of the Act relevantly as follows:

(1) In this Act, wages means (subject to this section) any wages, salary, commission, bonuses or allowances paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to an employee as such.
(2)Wages include:
……………………….
(c) any amount paid or payable by a Company by way of remuneration…to a director or member of the governing body of the Company;
………………….
(e) any amount deemed by or under a provision of this Act to be wages.
……………….
(5) Wages includes a payment made in consequence of the retirement from, or termination of, any office or employment of an employee, being:
(a)a lump sum payment paid before or after that retirement or termination in respect of unused annual leave, or unused annual leave and a bonus, loading or other additional payment relating to that leave, or
(b)an amount paid in respect of unused long service leave, or
(c )an amount paid in respect of unused sick leave.
……………………….
(6A)Wages includes a superannuation benefit, other than one paid or payable in respect of services rendered by an employee before 1 July 1996.
(6B)Wages includes so much of any eligible termination payment (within the meaning of section 27A of the Income Tax Assessment Act 1936 of the Commonwealth) paid or payable by an employer, whether or not paid to the employee or to any other person or body, that would be included in the assessable income of an employee under Subdivision AA of Division 2 of Part III of that Act if the whole of the eligible termination payment had been paid to the employee.
(6BA)Wages includes an amount paid or payable by a Company as a consequence of the termination of the services or office of a director or member of the governing body of the Company, whether or not paid to the director or member or to any other person or body, that would be an eligible termination payment (within the meaning of section 27A of the Income Tax Assessment Act 1936 of the Commonwealth) if the amount had been paid or payable as a consequence of termination of employment.
(6BB)Wages include an amount paid or payable by a person who is an employer under a relevant contract (within the meaning of section 3A) as a consequence of the termination of the supply of the services of an employee under the contract, whether or not paid to the employee or to any other person, if the amount would be an eligible termination payment (within the meaning of section 27A of the Income Tax Assessment Act 1936 of the Commonwealth) if the amount had been paid or payable as a consequence of termination of employment.
…………………
In this section:
annual leave has the same meaning as in section 26AC of the Income Tax Assessment Act 1936 of the Commonwealth.
long service leave has the same meaning as in section 26AD of the Income Tax Assessment Act 1936 of the Commonwealth.
(9A) A reference in this section to a director or member of the governing body of a Company includes a reference to a former director or former member of the governing body of a Company.
Money paid or payable that constitutes or is taken to be wages by virtue of more than one provision of this Act is taxable once only.

34 It can be seen that the amount of $1m is caught under either subsection (5) or subsection (6A). It will be noted also that the definition of "wages" quoted in the preceding clause does not include a subclause numbered (6); subsection (6) prior to its repeal pursuant to the Amending Act read as follows: (6) Wages includes any contribution to a redundancy benefit scheme or to a portable long service leave fund that constitutes wages under section 3A.

35 In accordance with the Amending Act subsection (6) was, as set out previously, repealed. The Amending Act contained a clause numbered 13 reading as follows: "The repeal of section 3AA (6) by the Payroll Tax Legislation Amendment (Avoidance) Act 2002 does not apply in respect of a payment referred to in section 3AA (5) or (6B) that it paid or payable in a financial year (or any part of a financial year) that commenced before 1 July 2003.

36 Towards the end of the hearing Mr. Collins contended in relation to Clause 13 that the Applicant could rely on the words "paid or payable". Put in other words he contended that leave pay, although not paid prior to 1 July 2003, was payable and so that the Applicant was entitled to a statutory exemption of some part of the amount alleged to have been paid in respect of leave. This of course requires the Tribunal to accept that the amount of $1m was paid in respect of leave and the Tribunal cannot do so. But in any event the term "paid or payable" regarded in context must relate to an amount which was either paid prior to the date specified or became payable prior to that date in the sense that it had accrued but had not been paid. It is not possible to say that any amount had accrued in the requisite sense. It could not at any time prior to the 30 June 2007 (when the payment was made) be known what part of any leave entitlements would be taken as leave and not through a payment in lieu and in any event the payment in question was paid only at the end of the relevant year and long after 1 July 2003. It could not have been known at that date that it would be paid and in fact it was paid (and calculated) with ATO assistance. There was thus no amount "payable" within clause 13 at any time prior to 30 June 2007. There is another (in superable) difficulty and that is that the Applicant did not exist prior to its incorporation in 2006 , and this being so there could not on any basis be any payment falling within clause 13..

Part D Interest

37 The Applicant committed a tax default by failing to pay its tax liability within the requirements and time stipulated in ss. 12, 13 and 17 of the Act. The Chief Commissioner imposed interest in respect of the unpaid payroll tax from the date the payroll tax was due to be paid (i.e., 21 July 2007: see s. 13(1)(b)) until it was paid. The interest charged payable consists of the market rate component only.

38 The relevant principles governing the imposition and remission of interest were considered in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Amor [2004] NSWADTAP 19 ("Incise Technologies") at [60]-[63] as follows:

60 In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation.
61 On the other hand, the premium rate is a form of penalty. Its purpose, as we see it, is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time. The 'market rate' component approximates ordinary lending interest rates. Taxpayers may withhold tax simply to invest the money in schemes and projects that have higher potential earnings; and may be content to carry the late payment surcharge were it only at the market rate. The 'premium rate' is intended as we see it to operate as the key disincentive to delaying tax payments. For that reason, the TA Act imposes both the market rate component and the premium rate component in respect of late payment. The Commissioner is then given discretion to remit the market rate component or the premium rate component or both by any amount (s 25). (Emphasis added)

39 In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21, Verick JM said (at [25] & [27]):

25 The market rate component would reflect the use by the party in question of the relevant amount of money on one hand, and the lack of use of the relevant funds by the state on the other. But the fixed premium rate component is a rate imposed by way of a penalty for the "tax default" in question. A premium rate of interest is imposed where a "tax default" is a result of some culpable conduct on the part of the taxpayer. The Chief Commissioner can also impose a penalty tax under s 26 of the TA Act in cases where more serious tax defaults occur due to deliberate conduct of taxpayers.
27 In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the "tax default" is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes).

40 See also Nikaed Pty Ltd v. Chief Commissioner of State Revenue [2005] NSWADT 21, at [8], Downs v Chief Commissioner of State Revenue [2002] NSWADT 51, at [30] and Macsif Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 116, at [22] ff, particularly in relation to the principle that "exceptional circumstances" will be required to justify a remission of market rate interest.

41 There are no exceptional circumstances in this case which would justify the remission of interest at the market rate and so that the Chief Commissioner's refusal to remit market rate interest was correct. Mr. Collins at the hearing admitted that the Chief Commissioner was in no way at fault

Part E Conclusion

42 It is altogether clear that the specified change was made at the instance of the Applicant and Mr. Collins and that the contentions by the Applicant in this regard are entirely without foundation; and that the specified change had no prospect whatever of success.

43 The decision under review both as to the tax assessed (and paid) and also as to the interest assessed (and there is no basis for a remission of such interest) must be affirmed.