The Association Specialists Pty Ltd v Chief Commissioner of State Revenue

[2025] NSWCATAD 91

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

The Association Specialists Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCATAD 91

Hearing dates:

8 April 2025

Date of orders:

29 April 2025

Decision date:

29 April 2025

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

EA MacIntyre, Senior Member

Decision:

The assessments under review are confirmed.

Catchwords:

REVENUE LAW - State taxes - payroll tax - assessment - objection - appeal

REVENUE LAW - penalties - reasonable care -whether tax default due to matters beyond control of taxpayer - remission - Revenue Ruling PTA 036 - Practice Note CPN 024

ADMINISTRATIVE LAW - reviewable decision - correct and preferable decision - Civil and Administrative Tribunal

Legislation Cited:

Administrative Decisions Review Act 1997 (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Payroll Tax Act 2007 (NSW)

Taxation Administration Act 1996 (NSW)

Cases Cited:

Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] 109 ATR 879

Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126

Commissioner for ACT Revenue v G Kalsbeek Pty Ltd [2015] ACAT 90

Continuum Recruitment Pty Ltd v Chief Commissioner of State Revenue [2024] NSWCATAD 38

Darghaw Pty Ltd & Ors v Chief Commissioner of State Revenue [2024] NSWCATAD 257

Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227

RVO Enterprises Pty Ltd ATF the R M O'Mara Family Trust v Chief Commissioner of State Revenue [2004] NSWADT 64

Tacey v Chief Commissioner of State Revenue [2016] NSWCATAD 255

Texts Cited:

Nil

Category:

Principal judgment

Parties:

The Association Specialists Pty Ltd (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Applicant: Self Represented
Respondent: Crown Solicitor

File Number(s):

2025/00001309

Publication restriction:

None

REASONS FOR DECISION

1. These proceedings arise out of a dispute between The Association Specialists Pty Ltd (“Applicant”) and the Chief Commissioner of State Revenue (“Respondent”) over assessments of penalty tax. The penalty tax was assessed as a result of payroll tax not being paid on time.

2. The Applicant claims that the penalty tax should not be payable.

3. The Respondent, however, says that the Applicant did not take reasonable care. The Respondent also says the circumstances of late payment were not outside the control of the Applicant. For these reasons, the Respondent submits that penalty tax is assessable and maintains that penalty tax is payable.

4. The matter for determination is whether the penalty tax assessed should be determined as not being payable or reduced.

Background

5. The Applicant is an association management and conference management service provider. It employs approximately 40 staff across Australia predominantly based in Sydney.

6. Payroll tax is levied on the wages the staff receive.

7. In May 2024, the Applicant’s financial controller was replaced by a new financial controller. The former financial controller had held that role for nearly 10 years. He gave notice of resignation on 8 April 2024 and notice that his last day would be 7 May 2024.

8. After advertising the position, the Applicant found a new financial controller. The new financial controller commenced work on 6 May 2024. This allowed one day for the former financial controller to hand over to the new financial controller.

9. Following the appointment of the new financial controller, payroll tax for certain months was not paid on time.

10. On 10 May 2024, the Respondent wrote to the Applicant about outstanding amounts of payroll tax for April 2024. On 13 May 2024, the Applicant paid the payroll tax due for April 2024. On 12 June 2024, the Applicant paid the payroll tax due for May 2024.

11. On 12 June 2024, the Respondent again wrote to the Applicant. He advised the Applicant that its annual payroll tax return needed to be lodged by 28 July 2024. On 18 July 2024, the Applicant’s tax agent lodged the Applicant’s annual payroll tax return for the financial year ending 30 June 2024. On 25 July 2024, the Applicant paid the payroll tax due for June 2024.

12. On 12 August 2024, the Respondent wrote to the Applicant about an outstanding payroll tax payment for July 2024. The Applicant’s evidence was that it did not receive this correspondence.

13. On 12 September 2024, the Respondent issued a payroll tax estimate assessment notice to the Applicant for the period 1 to 31 August 2024, including an assessment of penalty tax for $1,743.73. On 19 September 2024, the Applicant paid the amount assessed for August 2024.

14. On 10 October 2024, the Respondent issued a further payroll tax estimate assessment notice to the Applicant for the period 1 to 31 July 2024, including an assessment of penalty tax for $1701.79.

15. On 10 October 2024, the Respondent issued a further payroll tax estimate assessment notice to the Applicant for the period 1 to 30 September 2024. The assessment included $ 2,073.07 in penalty tax. The amount assessed was paid by the Applicant on 10 October 2024 and a reassessment was issued remitting penalty tax.

16. On 15 October 2024, the Respondent sent a further copy of the assessment for July 2024 to the Applicant by email.

17. On 15 October 2024, the Respondent issued a new payroll tax estimate assessment notice to the Applicant for the period 1 to 30 September 2024 with no penalty tax.

18. On 15 October 2024, the new financial controller was added as a contact for the Applicant within the Respondent’s online system.

19. On 21 October 2024, the Applicant wrote to the Respondent requesting a remission of penalty tax included in the assessment for July 2024. On 31 October 2024, the Applicant paid part of the assessment for July 2024 and the remainder on 13 November 2024.

20. On 11 November 2024, the Respondent wrote to the Applicant advising that the request for the remission of penalty tax had been refused. On 12 November 2024, the Applicant lodged an objection to that decision and again sought a remission of penalty tax. On 19 November 2024, the Respondent disallowed the Applicant’s objection.

21. By Application for Administrative Review filed on 2 January 2025, the Applicant sought administrative review by the Civil and Administrative Tribunal (“Tribunal”) of the decision of the Respondent of 19 November 2024.

22. On 21 January 2025, the Applicant lodged an objection to the imposition of penalty tax in the assessment for August 2024. On 29 January 2025, the Respondent disallowed the Applicant’s objection.

Applicant’s right of review

23. Where tax has been assessed, s 86 of the Taxation Administration Act 1996 (NSW) (“Administration Act”), allows rights of objection to a taxpayer dissatisfied with an assessment. This is an internal review process under which the Chief Commissioner of State Revenue, the Respondent in these proceedings, must consider and determine the objection (s 91 of the Administration Act).

24. A taxpayer who is dissatisfied with the decision made upon the Respondent’s determination of an objection, may apply to the Tribunal for an administrative review under the Administrative Decisions Review Act 1997 (“NSW”) (“ADR Act”)of the decision of the Chief Commissioner of State Revenue.

25. These circumstances have arisen in the present matter as set out in the background above, so bringing the matter within the jurisdiction of the Tribunal.

26. The onus of proving their case lies with the Applicant (s 100(3) of the Administration Act).

27. The Tribunal, dealing with the taxpayer’s application, may do one or more of the following under s 101 of the Administration Act:

“(a) confirm or revoke the assessment or other decision to which the application relates,

(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,

(c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid,

(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,

(e) make any further order as to costs or otherwise as it thinks fit.”

28. The application for review commencing these proceedings was lodged on 2 January 2025. It sought review of the assessment of penalty tax for the month of July 2024.

29. The Applicant’s objection of penalty tax for the month of August 2024 was made later, on 21 January 2025 after the date of the application for review commencing these proceedings. That objection was determined on 29 January 2025.

30. The making of the assessment for August 2024, the objection to that assessment made on 21 January 2025 and its determination on 29 January 2025 bring review of that assessment within the jurisdiction of the Tribunal.

31. On 4 March 2025, the Tribunal allowed for amendment of the administrative review application commencing these proceedings to include the Respondent’s decision to impose penalty tax for August 2024.

Consideration

Liability for payroll tax

32. Under the Payroll Tax Act 2007 (“PTA”), payroll tax is imposed on all “taxable wages” (s 6). Section 7 of the PTA provides that the employer by whom taxable wages are paid or payable is the person liable to pay payroll tax on the wages. The time when payroll tax is payable is set out in s 9. It must be paid within 7 days after the end of the month in which wages are paid or payable other than for the month of June.

33. Section 9 provides as follows:

“9   When must payroll tax be paid

(1)  A person who is liable to pay payroll tax on taxable wages must pay the tax—

(a)  within 7 days after the end of the month in which those wages were paid or payable, other than the month of June, and

(b)  within 28 days after the end of the month of June in relation to taxable wages paid or payable in the month of June”.

34. Section 87 of the PTA provides for the lodgement of periodic returns for payroll tax. Returns must be lodged within 7 days after the end of each month, except June. They must be lodged within 28 days after the end of June in each year. The return for June must both deal with payroll tax for the month of June and also make any adjustments of payroll tax paid or payable by the employer during the financial year ending on the close of that month.

35. The amount of payroll tax assessed by the Respondent is not in dispute. What is in dispute is the penalty tax levied for amounts of payroll tax the Applicant has paid after the due date required under the PTA.

Penalty tax

36. Provisions dealing with penalty tax are set out in the Administration Act. Section 27(1) of the Administration Act prescribes the default rate of penalty tax. It provides as follows:

“27   Amount of penalty tax

(1)  The amount of penalty payable for a tax default is, subject to this Division—

(a)  25% of the amount of tax unpaid, or

(b)  if the taxpayer is a significant global entity within the meaning of the Income Tax Assessment Act 1997 of the Commonwealth—50% of the amount of tax unpaid”.

37. Penalty tax was assessed at 25% for July and August 2024, as the Applicant did not make payment of payroll tax within the time allowed.

No penalty tax

38. Sections 27(2) and (3), 28, 29 and 30 provide for certain circumstances where the default rate of penalty tax of 25% set out in s 27(1) can be reduced or increased, depending on the application of various considerations set out in those provisions.

39. If the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with a taxation law, s 27(3)(a) allows for a determination that no penalty tax applies. Grounds for such a determination may also arise if a tax default occurred solely because of circumstances beyond the taxpayer’s control (s 27(3)(b)).

40. Section 33 contains provision for the remission of penalty tax. Section 33, as it applies from 1 February 2024, provides as follows:

“33   Remission of penalty tax

(1)  The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount.

(2)  The imposition or remission of interest is not relevant to the imposition or remission of penalty tax”.

41. The Respondent justifies the assessments of penalty tax on the basis that, in his submission, the tax defaults in question occurred because the Applicant did not take reasonable care. He also says that the tax defaults did not occur because of circumstances outside the control of the Applicant. The Respondent further says that the assessments of penalty tax were made in accordance with his practices set out in Revenue Ruling PTA 036 (version 3). The Applicant disagrees with these submissions.

42. The Applicant’s case for a finding that no penalty tax should have been assessed was, firstly, that the Applicant took reasonable care. The Applicant also submits that the relevant tax default was due to circumstances outside its control, in particular the change of the Applicant’s financial controller. In these circumstances, the Applicant says that penalty tax should not have been assessed.

43. Secondly, the Applicant submitted that the Respondent had failed to follow his published “commitments” to taxpayers when imposing penalty tax. The Applicant also takes issue with other matters concerning the Respondent’s conduct.

44. Thirdly, the Applicant submitted that there were “incorrect and misleading conclusions” in the objection determination. In the Applicant’s submission, these conclusions, among other things, raised questions as to the honesty of the Applicant and were without foundation.

Did the Applicant take reasonable care?

45. The first question for determination is whether the Applicant took reasonable care in dealing with its payroll tax obligations for the periods in question. Where reasonable care has been taken, s 27(3)(a) of the Administration Act may allow for a determination that penalty tax is not payable. It provides as follows:

“(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 a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law”.

46. What is “reasonable care” to comply with taxation obligations has been described as follows in Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227, following RVO Enterprises Pty Ltd ATF the R M O'Mara Family Trust v Chief Commissioner of State Revenue [2004] NSWADT 64, at [95]:

"In each case, it is essentially a question of fact whether the taxpayer has taken reasonable care in attending to its tax obligations. Factors that would indicate that a taxpayer took reasonable care include reasonable attempts to comply with the tax law, reasonable professional and other enquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law."

47. The Applicant said that it took reasonable care. It says it made arrangements to appoint a new financial controller following receipt of notice of the resignation of the former financial controller. The Applicant also gave evidence about the arrangements for handover to the new financial controller. The former financial controller had been in that role for nearly 10 years. He gave notice of his resignation on 8 April 2024 and left on 7 May 2024. He was replaced by the new financial controller who commenced work on 6 May 2024. This allowed for a hand over period of 1 day on 6 May 2024.

48. The evidence given on behalf of the Applicant was that the new financial controller had previous experience of two years in payroll tax compliance. Its evidence was that after he began working for the Applicant, the new financial controller had a significant workload familiarising himself with the Applicant’s systems.

49. The Applicant’s submission was that the circumstances of the handover from the previous financial controller to the new financial controller set out above including his workload during the transitional period, resulted in the relevant tax defaults. The Applicant says that this occurred despite having taken reasonable care.

50. The Applicant’s evidence was also that its system for calculating and returning payroll tax was not automated and required manual intervention to process returns and payment of payroll tax. In other words, the discharge of payroll tax obligations depended on the persons responsible for compliance performing their functions. There was no automated process that the Applicant could rely on.

51. In the Respondent’s submission, the Applicant had provided no evidence that it maintained adequate systems or processes or took steps a person in the Applicant’s position might reasonably have taken if an employee left the organisation, to enable it to comply with its payroll tax obligations. The Respondent, in particular, submitted that there was no evidence as to why arrangements could not have been made for another employee to assist with lodging payroll tax returns, in circumstances where there were six accountants who reported to the financial controller.

52. I am of the opinion that the Applicant has not provided sufficient evidence to show that reasonable care had been taken. There was no evidence of particular steps taken to effect the handover of payroll tax administration to the new financial controller, such as evidence of any briefing of the new financial controller setting out what his responsibilities were as regards payroll tax. Handover notes or other documents setting out what he needed to do, were not in evidence. There was also no evidence as to what was otherwise done specifically to ensure continuity in payroll tax compliance, such as evidence as to whether or not a particular employee was charged with carriage of compliance during the transition of the new financial controller into his role.

53. No evidence was given by the new financial controller himself as a witness at the hearing explaining why the relevant tax defaults had occurred. However, the evidence included an email from him to the Respondent dated 21 October 2024 apologising for the non-payment of payroll tax on time. That email said that there was “no handover” and that he had to attend to compliance “with little knowledge about the company”.

54. Where key personnel responsible for tax compliance change, reasonable care requires that at least some steps be taken to provide for a handover, such as a briefing of the new employee as to their responsibilities or making arrangements for someone else to attend to compliance while the new employee transitions into their role. There was no evidence of any briefing of the new financial controller. There was also no evidence of arrangements for other personnel, such as the six accountants whose services were available to the Applicant, to attend to or facilitate compliance.

55. For the reasons set out above and having regard to the Applicant’s particular circumstances including the accounting resources available to it, the Applicant has not shown that reasonable care was taken.

56. Payroll tax was returned for May and June 2024 after the new financial controller had commenced working for the Applicant. Tax defaults arose subsequently for the months of July and August 2024. The Applicant’s explanation was that the steps required to lodge returns for May and June had already been put into place before the new financial controller had commenced employment with the Applicant.

57. Nevertheless, the Applicant’s system for returning payroll tax continued to operate for two months after the new financial controller assumed the role. These circumstances do not assist the Applicant in sustaining the argument that the time required for the transition of the new financial controller into his role is a sufficient explanation for the tax defaults occurring after these two months.

Were the tax defaults beyond the control of the Applicant?

58. The second question for consideration by the Tribunal is whether circumstances outside the control of the Applicant resulted in the relevant tax defaults. Section 27(3)(b) of the Administration Act may, in this case, allow for a determination that no penalty tax is payable. It provides as follows:

“(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—

……….

(b)  the tax default occurred solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity”.

59. The Tribunal in Tacey v Chief Commissioner of State Revenue [2016] NSWCATAD 255 described when circumstances beyond the control of a party could arise, referring to the Respondent’s Revenue Ruling PTA 036. The Tribunal said, at [57];

“ … the statutory provision is, under s 64(3) of the ADR Act, to be applied in light of Revenue Ruling PTA 036, version 2, which relevantly states, “Interest may be fully remitted for a late payment tax default if the Chief Commissioner is satisfied that the late payment occurred as a result of circumstances beyond the control of the taxpayer. Examples of circumstances when interest may be remitted in full include, but are not limited to:

• official postal and DX delays

• natural disasters such as a fire or flood”.

60. The Respondent’s Practice Note CPN 024 sets out further examples of circumstances over which the taxpayer has no control, including:

“Events over which a taxpayer has no control include but are not limited to:

a. natural disasters such as fire or flood

b. computer system breakdowns including third party systems such as electronic funds transfer systems

c. illness or death of a principal taxpayer

d. Revenue NSW fault affecting receipt of payment, including processing problems

e. circumstances where it is impossible to lodge or pay on time (excluding financial incapacity including hardship)”.

61. Section 27(3)(b) applies only where the relevant tax default occurs “solely” because of circumstances beyond the taxpayer’s control. A similar provision fell for consideration in Commissioner for ACT Revenue v G Kalsbeek Pty Ltd [2015] ACAT 90. The ACT Administrative Tribunal said, at [35]:

“In order for the provisions of section 31(6)(b) to operate to avoid penalty tax, the cause of that failure to pay tax must first be identified. An outcome (the failure to pay tax) may have several causes, depending on the length of time of the obligation. This appeal tribunal must then be satisfied that the identified cause (or causes, where there are more than one) is the ‘sole’ cause of the failure. Unless all of the causes of the failure are identified and (in the case of a single cause), it is beyond the taxpayers control, or (in the case of multiple causes), all are beyond the taxpayers control the relief under section 31(6)(b) is not available. This necessarily involves consideration of all of the factors which the evidence shows contributed to the issue of the failure to pay payroll tax”.

62. The Tribunal in Continuum Recruitment Pty Ltd v Chief Commissioner of State Revenue [2024] NSWCATAD 38, in considering whether medical problems and workload issues “solely” caused a tax default, said, at [52]:

“While the Tribunal accepts Mr Doyle’s evidence that his daughters suffered from a medical condition which placed financial and emotional strain on the family, there is no evidence as to the nature or timing of their illnesses or how this impacted Mr Doyle’s ability to comply with the Applicant’s obligations. Nor is there any evidence as to the nature or extent of Mr Doyle’s own illness or how that may have affected his ability to meet his obligations. On the state of the evidence the Tribunal simply cannot be satisfied that these factors together with Mr Doyle’s increased workload as a result of the pandemic, which the Tribunal accepts were circumstances beyond the Applicant’s control, solely caused the Applicant’s tax default. By Mr Doyle’s admission, he “wrongly prioritised” his obligations and should have engaged someone to assist the Applicant meet its obligations. As the ACT Civil and Administrative Tribunal said in Commissioner for ACT Revenue v G Kalsbeek Pty Ltd [2015] ACAT 90 at [42], factors such as those are clearly part of the cause for the Applicant’s failure to comply with its obligations and cannot be regarded as being beyond the control of the Applicant though its director”.

63. I accept that when a key employee resigns requiring their replacement by someone else having the necessary skills, the resignation of the employee may not be a matter within the control of the taxpayer. On the evidence before the Tribunal, the resignation of the Applicant’s longstanding financial controller was not a matter within the Applicant’s control. However, I am unable to find on the evidence that this was “solely” the cause of the tax defaults in question.

64. The tax defaults in issue arose during the period of transition when the new financial controller was taking over the responsibilities of the former financial controller. The Applicant sought to explain the tax defaults occurring as being the result of the workload of the new financial controller while he familiarised himself with the Applicant’s system.

65. There were, however, a number of accountants who reported to the financial controller. There was no evidence as to what steps the Applicant took during the period to utilise the accountants, so as to ensure that its system continued to operate to allow for the discharge of tax obligations. There was also no evidence of any briefing of the new financial controller as to what his responsibilities were.

66. It cannot, in these circumstances, be said that the tax defaults in question occurred solely because of circumstances outside the control of the Applicant, namely the departure of the former financial controller. These tax defaults also occurred because the Applicant did not take steps to ensure continuity in tax compliance, including deployment of the accounting resources available to it. These were matters within its control.

67. For the above reasons, I cannot be satisfied that the Applicant’s tax defaults occurred solely because of circumstances outside its control. Accordingly, I do not see any basis for a determination under s 27(3)(b) that no penalty tax is payable.

Remission under s 33 of the Administration Act

68. Section 33 of the Administration Act contains a broad discretion to remit penalty tax. The discretion allowed under that provision is not subject to the limits set out in s 27 (Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126). Nevertheless, that discretion cannot be exercised in a way that defeats the fundamental legislative objectives of the penalty scheme. Except in “special circumstances”, the general discretion under s 33 should not be exercised beyond the limits in ss 27(3) and 29 when the circumstances giving rise to a remission under s 27(3) of the Administration Act have not been made out (Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] 109 ATR 879).

69. The Respondent's submission was that there were no special circumstances warranting a remission of the penalty tax. Where the Applicant had not taken reasonable care and had not provided any valid basis for failing to comply with its payroll tax obligations, the Respondent’s submission was that it would not be consistent with the objective of the penalty regime in the Administration Act for penalty tax to be remitted.

70. In Darghaw Pty Ltd & Ors v Chief Commissioner of State Revenue [2024] NSWCATAD 257, the Tribunal said, at [80]:

“I agree with the submission made by the Applicants that the discretionary powers set out in s 33 remain broad and unfettered. I also find myself in agreement with the proposition that in light of the broad and unfettered character of the discretion, no fixed rule can be brought to bear precluding an exercise of discretion in all circumstances where there has been an absence of reasonable care. However, in the circumstances of the matter, I do not consider that a full or partial remission of penalty tax under s 33 ought to be made. The absence of reasonable care on the part of the Applicants, though not determinative, remains relevant and persuasive”.

71. I accept the Respondent’s submission that there are no special circumstances to warrant a remission of penalty tax under s 33. The absence of reasonable care on the part of the Applicant, though not determinative, is a relevant matter going against the exercise of discretion under s 33. Further, remission of penalty tax would not be consistent with the legislative purpose. That purpose is to allow for the remission of penalty tax where reasonable care has been taken or where a tax default occurred because of circumstances outside the control of the taxpayer.

Respondent’s conduct

72. The Applicant complains that the Respondent in his published “commitments” said that he would act “with empathy” but had not done so. The Respondent, however, submits that the “commitments” published by the Respondent have no force of law.

73. The “commitments” in question are set out in a document titled “Revenue NSW Customer Strategy 2022-2032”. The “commitments” do not take effect as regulations or some other kind of delegated legislation. However, published statements by the Respondent as to how he will administer revenue laws, including rulings and practice notes, can be taken into account in determining when and how discretions should be exercised.

74. Nevertheless, in circumstances where the Applicant has not taken reasonable care and the tax defaults in issue did not occur due to circumstances outside the control of the Applicant, I do not see any reason for overturning the Respondent’s decisions assessing penalty tax on the basis of alleged non-compliance with his “commitments”. Those decisions represent an outcome reached by applying the law in accordance with its terms, having duly considered the discretions set out above. Even if the Applicant remains remain dissatisfied with that outcome, there was no evidence of particular matters of fact that support the claims of the Applicant as to non-compliance with the Respondent’s “commitments”, such as particular conduct that amounted to an absence of “empathy”.

75. The Applicant also complains that no effort was made by the Respondent to either enquire if there was a problem with lodging returns on time or to help resolve the problem if there was one. The Applicant says that the first correspondence received by it concerning payroll tax compliance reached it on 10 October 2024. The Applicant says that earlier correspondence of 12 August 2024 relating to the payroll tax due for the month of July 2024 was not received by it. The Respondent on the other hand gave evidence that the relevant correspondence had been sent on 12 August 2024 by mail.

76. Regardless of when correspondence was sent or received, the Respondent says that he has no obligation to proactively engage with the taxpayer when tax defaults occur or assist the taxpayer rectify the default.

77. Neither the PTA nor the Administration Act impose obligations on the Respondent of the kind asserted by the Applicant to engage with the Applicant in order to prompt the Applicant to comply with its obligations. The timing of the Respondent’s correspondence or the extent of his engagement with the Applicant, do not, in these circumstances, have a bearing on the decisions to assess penalty tax. There statutory obligations under the PTA are for the Applicant to discharge its obligations to pay payroll tax when due.

78. Where a tax default occurs as a result of fault on the part of the Respondent, grounds may arise for remission of penalty tax. However, I do not find any fault on the part of Respondent arising out of the dealings between the Respondent and the Applicant that is of a kind that could allow for a remission of penalty tax.

79. The Applicant gave evidence that in one instance in the past, penalty tax had not been imposed for late payment. In the Applicant’s submission, that past practice supported the submission that penalty tax should not be assessed in the present instance.

80. The correspondence disclosed an instance of a determination not to levy penalty tax for late payment. That determination was described by the Respondent in his correspondence at the time as a “one off”.

81. Evidence of regular practices of the Respondent may be evidence relevant to making a determination as how the discretions not to assess penalty tax or to remit penalty tax should be exercised. A “one off” example, however, does not sufficiently evidence what the Respondent’s past practices may have been. There is insufficient evidence before the Tribunal as to whether or the extent to which the Respondent has exercised discretions in respect of penalty tax in ways that are different to the practices set out in his published ruling PTA 036 and practice note CPN 024. In these circumstances, the Tribunal is unable to have regard to any practices of the Respondent other than those he has published.

Conduct of Applicant

82. The Applicant submitted that it had always been honest and forthright in its dealings with the Respondent and cooperated with the Respondent at all times. I accept that there is nothing in the evidence to indicate that the Applicant has acted dishonestly. I also accept that the Applicant has acted cooperatively with the Respondent.

83. The kinds of tax defaults that may lead to the imposition of a penalty tax, however, are not limited to circumstances that involve dishonesty or a lack of cooperation on the part of the taxpayer. In the present case, the tax defaults in issue arose because of a failure to take adequate steps to ensure that compliance with payroll tax obligations would occur during the period of transition from the former financial controller to the new financial controller. I have found that these were circumstances where the evidence was not sufficient to allow for a conclusion that reasonable care was taken and that the tax defaults occurred due to circumstances outside the control of the Applicant. These are circumstances which allow for the imposition of penalty tax, even if there has been no dishonesty.

84. Dishonesty, for example involving wilful non-compliance, may allow for penalty tax to be levied at a higher rate than the rate at which penalty tax has been levied.

85. The Applicant also contested the proposition that remittance of penalty tax would be unfair to other taxpayers who pay tax on time. I understood the Respondent’s submission to be that placing a taxpayer who pays tax on time on the same footing as someone who does not, would not be fair to the taxpayer who paid tax on time. I accept this submission. The taxpayer who did not pay on time would have had the use of the relevant money for the period of non- payment in circumstances where the other taxpayer would not have had the same benefit.

Rate of penalty tax

86. The rate at which penalty tax has been assessed is 25%. This is the default rate set out in s 27 of the Administration Act. That rate can be varied upwards or downwards in particular circumstances. Where disclosure of a tax default has been made before commencement of an investigation, this is a circumstance where a reduction in the rate of penalty tax can be made.

87. The Applicant indicates that it was unsure if an investigation had commenced. If it was, they say they were not informed. The evidence, however, is that the tax defaults in question were brought to the attention of the Applicant by the Respondent. This occurred by means of the correspondence in evidence dated 12 September 2024 and 10 October 2024. That correspondence evidences action on the part of the Respondent to ensure compliance, having become aware of the tax defaults in question. These circumstances evidence an investigation having commenced before voluntary disclosure. It follows that there are no grounds for a reduction in the rate of penalty tax to that applicable where voluntary disclosure is made before an investigation commences.

Timing for payment of payroll tax

88. The Applicant makes the further submission that the payment of payroll tax within seven days of the end of a month is the least time provided to pay any tax compared with other taxes, in circumstances where it is not a “simple tax”. In the Applicant’s submission, small businesses find this time frame challenging.

89. However, the time frame for payment of payroll tax is prescribed by statute and is not, in the case at hand, within the discretion of the Respondent to waive or extend.

90. I accept that the determination of whether reasonable care has been taken to comply with payroll tax obligations may have regard to the particular circumstances of the taxpayer. However, even having taken into account those circumstances, the evidence does not allow me to conclude that reasonable care was taken and that the tax default in issue arose because of circumstances outside the control of the Applicant.

Conclusions

91. The onus is on the Applicant to show on the balance of probabilities that the evidence allows for a finding that it took reasonable care or that the tax defaults in question occurred because of circumstances outside its control. It has not done so. For the reasons set out at [54]-[55], [66]-[67] and [71] above, the Respondent’s assessments under review are confirmed.

Orders

1. The assessments under review are confirmed.

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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

Decision last updated: 29 April 2025