January 31, 2023


Earn Nicely, Spend Wisely

Payroll tax (NSW): work agency deal take a look at upheld

3 min read

The NSW Court docket of Charm has dominated that there was no persuasive purpose to depart from the “employment company contract” check set out in UNSW Worldwide Pty Ltd v Main Commissioner of Condition Earnings (NSW) 2016 ATC ¶20-599 [2016] NSWSC 1852 (UNSW World-wide).


The taxpayer was the primary working enterprise in a corporation group that delivered protection services to its consumers. Following an audit, the Commissioner assessed the taxpayer to payroll tax for the many years finished 30 June 2016 to 2018. The assessments similar to payroll tax in regard of wages of protection guards whose products and services had been sub-contracted from 3rd get-togethers.

At difficulty was irrespective of whether the preparations concerning the taxpayer and its clientele (or, alternatively, the arrangements in between the taxpayer and its wholly-owned subsidiaries) had been “employment agency contracts” as outlined in s 37 of the Payroll Tax Act 2007 (NSW).

At very first occasion, Ward CJ held (at 2021 ATC ¶20-800 [2021] NSWSC 1190) that the preparations by which the taxpayer offered stability guard expert services to shoppers did not constitute employment agency contracts and did not give rise to payroll tax liability. It was typical floor prior to the key decide that the definition of “employment agency agreement” in s 37 was to be construed in accordance with the reasoning in UNSW World wide at [62], specifically that an work company deal was a deal underneath which “a particular person procures the products and services of yet another human being in and for the perform of the business of the employment agent’s client”.

The Commissioner appealed from the very first instance final decision. Nevertheless, prior to the hearing of the attraction it was recommended in Bonner & Anor v Chief Commissioner of Point out Profits (NSW) 2022 ATC ¶20-826 [2022] NSWSC 441 that the building in UNSW International was faulty and warranted appellate evaluation. The Commissioner amended his discover of attraction to consist of a reconsideration of the current circumstance regulation.

The Commissioner’s principal submission was that the UNSW World wide building imposed an unwarranted gloss upon the definition of employment company agreement, thus departing from and narrowing the statutory text, contrary to normal principles of statutory development. More, the construction experienced adverse simple outcomes for the operation of the legislation (these as excluding from the scope of the legislation circumstances exactly where entities brought on services to be offered domestically).

Final decision

In accordance to the NSW Court of Enchantment, there was a impressive inference that the legislature was to be taken to have endorsed the building in UNSW World-wide in instances wherever the Commissioner experienced consistently commenced and defended legislation dependent on the employment company contract deeming provisions, experienced consistently propounded the check initially proposed by him in 2016, and wherever the laws experienced been reviewed very on a regular basis.

The court claimed that the design in UNSW Global reflected a not unnatural meaning of the statutory terms “procures the services of a different human being for a customer of the employment agent” and accorded with the reason of the Payroll Tax Act by having relationships that tumble small of standard employer/employee associations and deeming them to be such. Appropriately, there was no persuasive rationale to depart from the UNSW Global examination.

Resource: Chief Commissioner of State Income (NSW) v E Group Safety Pty Ltd 2022 ATC ¶20-833 [2022] NSWCA 115, 6 July 2022.

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