Civil and Administrative Tribunal New South Wales Medium Neutral Citation: XL Retail Services Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCATAD 22 Hearing dates: 5 December 2024 Date of orders: 17 January 2025 Decision date: 17 January 2025 Jurisdiction: Administrative and Equal Opportunity Division Before: EA MacIntyre, Senior Member Decision: (1) The assessments under review are revoked. (2) The Tribunal assesses the amount of payroll tax and interest set out in the Respondent's notices of assessment to be payable by the Applicant in accordance with the notices. (3) Penalty tax is remitted in full. Catchwords: REVENUE LAW - State taxes - payroll tax -employment agency contract - services "for the client" - "in and for" the conduct of client's business - cleaning services - trolley collection services REVENUE LAW - assessment - reassessment - payroll tax return - chain of "on-hire" - reliance on legal interpretations and assessment practices – ruling PTA 027 REVENUE LAW - penalties - reasonable care - interest - market rate – remission 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 2007 (NSW) Cases Cited: Banfirn Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1058 Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd (2020) [2020] NSWCA 126 Chief Commissioner of State Revenue v E Group Security Pty Ltd [2022] NSWCA 115 Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19 Chief Commissioner of State Revenue v Integrated Trolley Management Pty Ltd [2023] NSWCA 302 HRC Hotel Services Pty Limited v Chief Commissioner of State Revenue [2018] NSWSC 820 JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744 UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852 Texts Cited: Nil Category: Principal judgment Parties: XL Retail Services Pty (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel Applicant: E Kovacs and J Nixon Respondent: T Stretton Solicitors Applicant: Brown Wright Stein Lawyers Respondent: Crown Solicitor File Number(s): 2023/00135476 Publication restriction: None REASONS FOR DECISION 1. These proceedings arise out of a dispute between XL Retail Services Pty Ltd ("Applicant") and the Chief Commissioner of State Revenue ("Respondent") over certain assessments of payroll tax, interest and penalty tax. Background 1. The Applicant provides services to various supermarkets and other retail businesses. The services include commercial cleaning and trolley collection services. It uses subcontractors to provide these services. 2. The Applicant is certified by the International Organisation for Standardisation as a "Certified Safety & Environmental Systems Company." 3. The Applicant's major clients accounted for 90% or more of its revenue. They included major supermarket and retail chains. The services provided to them were under written contracts and in one case, a partly written contract. Six of these contracts were included in evidence. 4. The services the Applicant provides are of a specialist nature. Through its subcontractors, these services include cleaning, periodic floor maintenance and ad hoc cleaning. The services also included cleaning following refurbishment of buildings and cleaning of distribution centres. Trolley collection services were, in one case, included in the services provided. 5. The first category of cleaning services included specialist floor cleaning services using "scrubbers" and "buffers". The cleaning services also included the cleaning of various facilities and amenities at client sites, such as toilets, lunchrooms and staff areas. Cleaning services were also provided for windows and "chrome work" around refrigerators and freezers. 6. A second category of service provided was that of floor maintenance. This included repairing and repolishing the floor in supermarkets and other retail locations. A "cutback" process was undertaken on an approximately quarterly basis to reapply chemicals. A "strip and seal" process was undertaken once a year to strip all polish from a floor and entirely repolish the floor. These processes involved the use of specialised equipment and hazardous chemicals. 7. A third category of service was ad hoc cleaning. These were largely one-off cleaning services or discrete cleaning tasks. 8. A fourth category of cleaning service was a building clean where a site had been renovated or refurbished. 9. Cleaning services were provided to distribution centres of a client. This involved the use of sweeper and scrubber machines, high pressure cleaning of storage boxes and replacement of forklift batteries. There was no written contract for these services with the client in question. 10. The Applicant's services were provided to each of its clients at multiple sites throughout the state. The client, generally, had the power to add new sites or remove existing sites from the scope of services. 11. Typically, the management hierarchy at each site for four of the major chains serviced by the Applicant comprised of a store manager, a person who acted as a second in charge and then a series of other managers responsible for various departments within the store. The employees of the clients were supervised through this chain of management in respect of the times they worked. 12. On 24 March 2021, the Respondent commenced a payroll tax investigation of the Applicant. Following that investigation, the Respondent determined that the cleaning and trolley collection contracts between the Applicant and its clients were "employment agency contracts" within the meaning of s 37(1) of the Payroll Tax Act 2007 (NSW) ("PTA"). 13. On 26 August 2022, the Chief Commissioner of State Revenue, the Respondent, issued assessments for payroll tax he said was due under the PTA. These assessments were for the financial years ended 30 June 2017 to 30 June 2022. Interest and penalty tax was also assessed. 14. The Respondent's assessments were based on a determination that the Applicant's cleaners and trolley collectors provided services "in and for" the conduct of its clients' businesses. The Applicant disputed the basis of the assessments, along with penalty tax and interest assessed. 15. The Respondent's assessments are based on an estimate that 70% of the payments made were liable to payroll tax. This estimate related to regular services as opposed to ad hoc services. The Respondent accepted that the ad hoc services were not liable to payroll tax. 16. The total amount of payroll tax assessed was $2,204,795.21 In addition, the interest at the market rate assessed was in an amount of $25,355.80. No interest was assessed for the years 2020, 2021 and 2022. Penalty tax was assessed in an amount of $326,590.18 at the rate of 25%. No penalty tax was assessed for the final two years, being 2021 and 2022. 17. The Applicant objected to the Respondent's assessments on 25 October 2022. On 1 March 2023, the Respondent disallowed the objection. 18. On 20th April 2023, the Applicant commenced proceedings before the Civil and Administrative Tribunal ("Tribunal") seeking review of the assessment. Applicant's right of review 1. Where payroll 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). 2. 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. 3. 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. 4. The onus of proving their case lies with the Applicant (s 100(3) of the Administration Act). 5. 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." Consideration 1. Under the PTA, payroll tax is imposed on all "taxable wages" (s 6). Taxable wages are all "wages" that are taxable in the jurisdiction other than "exempt wages" (s 10). 2. For the purposes of the PTA, under Division 8 of Part 3, certain amounts paid or payable in relation to an "employment agency contract" are taken to be wages paid or payable by the "employment agent" (s 40) and subject to taxation as such. The main matter for consideration is whether the contracts is issue were "employment agency contracts" and whether the persons who performed work did so "for or in relation to which services are supplied to the client". If so, taxation applies. 3. Section 37 and 39 of the PTA provides as follows: "37 Definitions (1) For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express or implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent. (2) However, a contract is not an employment agency contract for the purposes of this Act if it is, or results in the creation of, a contract of employment between the service provider and the client. (3) In this section— contract includes agreement, arrangement and undertaking" …. 39 Persons taken to be employees For the purposes of this Act, the person who performs work for or in relation to which services are supplied to the client under an employment agency contract is taken to be an employee of the employment agent". 1. The determination of this matter requires consideration of a number of questions. They are the following: 1. What if any contracts in the relevant "chain of on-hire" are "employment agency contracts"? 2. Whether a person has performed relevant services procured by the Applicant "for a client" within the meaning of Div 8 of Part 3 of the PTA? 3. Whether the Administration Act required the assessments in dispute to be made in accordance with the legal interpretations and assessment practices generally applied by the Respondent in relation to payroll tax matters, and if so, whether there was a contravention of the practices set out in ruling PTA 027? 4. If payroll tax is payable, whether penalty tax assessed should be remitted on the basis that the Applicant took reasonable care to comply with its obligations? 5. Whether interest assessed at the market rate should be remitted? Chain of on-hire – are there "employment agency contracts"? 1. The chain of on-hire under which services were provided to the relevant clients begins with the services provided by the actual persons retained to provide cleaning and trolley collection services. They do so under contracts with the Applicant (or another contractor who on-supplies their services for the benefit of the Applicant). The Applicant, in turn, may make contracts with the relevant supermarket businesses and other retail businesses, under which the Applicant, in turn, is bound to provide the relevant cleaning and trolley collection services. In one case, the Applicant contracted with an intermediary, who in turn, supplied services to the relevant retail business. 2. In identifying whether there was an "employment agency contract" for the purposes of Div 8 of Part 3 of the PTA in the relevant chains of on-hire, the parties were in agreement that the contracts that needed to be considered by the Tribunal were those between the Applicant and the supermarkets and other businesses to which the Applicant provided services and not the contracts between the Applicant and its own subcontractors (or other contracts in the chain of on-hire under which the Applicant received the benefit of someone's services). 3. Identifying what contracts within a chain of on-hire may fall within Div 8 of Part 3 the PTA, first of all, requires consideration of the purpose of the Division. In Chief Commissioner of State Revenue v Integrated Trolley Management Pty Ltd [2023] NSWCA 302 ("Integrated Trolley Management"), the Court of Appeal considered whether certain contracts for trolley services between various supermarkets and a service provider fell within Div 8. 4. The service provider in Integrated Trolley Management had a number of trolley collection contracts with its clients. The contracts imposed extensive requirements formulated by the client with which service providers who were subcontractors of the service provider were required to comply. There was also a separate cleaning contract with a client relating to two stores. 5. Basten AJA said in Integrated Trolley Management, at [28]: " …. the purpose of the Division is to impose a tax liability on payment to persons who perform work for the client of the employment agent. The Division is not engaged where the service provider (or, it would seem, its employees) enters an employment contract with the client. Thus, the legislative purpose is to impose payroll tax in circumstances where the party which might have been the employer (and thus liable for tax on the wages paid to its employees) is the client, so that that liability is not removed by the interposition of an employment agency, but is merely transferred to the employment agent. It is the absence of such a contract of employment with the client which engages the Division. It is the client which will make payment for those services, not to persons with whom it has no contract, but to its employment agent. If there is a constructional choice, a purposive approach, mandated by s 33 of the Interpretation Act 1987 (NSW), indicates that the employment agency contract is the contract between the "client" and its "employment agent". The alternative approach, which would potentially result in a plethora of employment agency contracts, as between ITM and each of the service providers with which it contracted, is inconsistent with the statutory purpose". 1. The Court of Appeal concluded that the relevant "employment agency contracts" were the contracts between the "client" and its "employment agent". In the present case also, the question for determination is whether or not the contracts between the Applicant on the one hand as "employment agent" and the various supermarkets and other businesses on the other, for the provision of services to them by the Applicant, are "employment agency contracts". Are the contracts between the Applicant's clients and itself brought within Div 8? 1. A number of written contracts between the Applicant and its major clients were in evidence. There were five such contracts under which services were provided to supermarket and other retail businesses. There was a sixth contract that was partly in writing requiring services to be provided for a client's logistic centres. All six contracts were with major clients, producing 90% or more of the Applicant's revenue. Submissions of the parties were based on the terms of these contracts, although there were certain other contracts also in evidence. 2. The five written contracts servicing retail facilities are broadly comparable, dealing with similar subject matters and setting out similar obligations that the Applicant must perform or procure performance of, although the level of detail varied between the contracts. A summary of the relevant provisions and subject matters is as follows: Subject matter Contract 1 commencing 19 October 2015 Contract 2 commencing 30 March 2020 Contract 3 Contract 4 Contract 5 dated 25 November 2019 dated 15 October 2014 dated 21 November 2019 1.Services Cleaning services to be provided over 3 years (cl 2.1 and 3.1 and Sch 1)). Cleaning services to be provided over 3 years (cl 4.1, Schedule 1 including Specifications). Cleaning and trolley collection services to be provided over 3-year period (subject to renewal after initial 2 years) (cl 1, 2.1 and Schedule 1 and 6). Cleaning services to be provided over 3 years Cleaning services to be provided over 3 years (cl 2.1, 3.1 and Schedule 3). (cl 3.1 and Specifications). Applicant to comply with all reasonable directions of client (cl 7.2(d)). Applicant to comply with all reasonable directions of the client's representatives (cl 13.2(f)). Applicant to ensure adherence to the reasonable orders and directions from client (cl 10(c)). Applicant to follow all reasonable directions of client (cl 3.2(b)). 2.Client's Directions Client has ability to require cleaners to be removed or replaced (cl 10.3). Client has ability to remove individual cleaners (cl 16.3). Warranty that Applicant must comply with all reasonable directions of client's representative (cl 30(e)). Applicant to observe all client security, administrative and other reasonable requirements and directions, in particular concerning occupational health and safety (cl 6). Applicant to observe client's security, administrative and "other reasonable requirements and directions" (cl 6). If cleaner is not providing services in compliance with client's policies or relevant law or conducting work in particular ways, the agent must promptly remedy non-compliance (cl 11.5). 3.Communication with Client Applicant to provide supervisor to liaise with store or duty manager on day-to-day issues (cl 10.1(g)). Applicant to ensure that at any point in time there is at least one representative present at each site who can clearly understand instructions, requests or requirements from and communicate with the client's representatives for the purposes of performing all or any part of the services (cl 16.1(i)). Parties to meet for the purposes of monitoring performance of Applicant (cl 14.2). Senior management to meet to measure performance (cl 15). Applicant supervisor to be readily contactable and have working mobile number (cl 16.1(j)). Applicant to comply with workplace health and safety requirements of client (cl 15.1(a)). Workers must follow trolley transport safety requirements, trolley maintenance requirements and trolley preservation requirements as prescribed (cl 12.1). Cleaners to comply with all occupational health and safety requirements and any other reasonable on-site procedures (cl 3.2(c)) 4.Adherence to client's policies Cleaners to follow all client's policies as notified, including those concerning occupational health and safety (cl 9.1 11.1). To ensure that representatives including subcontractors follow client's policies, security arrangements, requirements and restrictions as notified (cl 17.1). Tasks must be performed in accordance with guidelines set out in trolley collection induction (cl 13.3(a)). Cleaners to observe client's security and administrative requirements including those specifically applying to occupational health and safety (cl 6). Observance of client's security, administrative and other reasonable requirements and directions required (cl 6). Ensure subcontractors follow client's policies (cl 22.1). 5.Subcontracting Not permitted without client's consent (cl 6.1). Applicant not to subcontract without consent (cl 12.1). If subcontracting occurs, applicant not discharged from any obligations and remains liable for the conduct of its subcontractors (cl 12.4). Applicant not to subcontract without consent of client and on subcontracting, the Applicant is responsible for all acts and omissions of subcontractors (cl 25.1 and 25.9). Subcontracting permitted with consent, with power of client to direct Applicant not to use particular subcontractor or employee (cl 15) Subcontracting permitted with client's consent, with power of client to not use individual cleaners (cl 16). Subcontracting not to excuse Applicant from any obligations and remains liable for the conduct of its subcontractors (cl 6.3). 6.Materials Applicant to supply all equipment, cleaning materials and other materials for services (cl 3.7). Applicant to supply all equipment, cleaning materials and any other materials for services (cl 4.10(a)). Consumables to be provided by Applicant (cl 9.1). Materials supplied to be fit for the purpose for which they are supplied and comply with all applicable standards and other published recommendations of the original materials manufacturer (cl 11.1(c)) Trolleys remain the property of the client (cl 8.1). 7.Audits and rectification of non-compliance Client may conduct audits of Applicant's compliance with terms (cl 5.4) and issue improvement notices (cl 5.2). Client may audit for compliance of contract (cl 9.1) and issue a corrective action report (cl 8.2(b)). Applicant to comply with performance management process set out in contract which allows for improvement notices and at risk notices to be issued (cl 14.1). Client may audit Applicant in relation to performance of agreement (cl 17.2) and take certain actions for non-compliance (cl 3.5). Remedies for non-compliant services allowed (cl 3.8). Cleaners not to smoke or consume alcohol or drugs when performing services (cl 10.1(a)(v)). Employees including subcontractors not to consume alcohol or drugs on site (cl 16.1). Cleaners to follow requirements as to clothing (cl 9.1(h)) and act in proper and appropriate manner (cl 10.1(a)(iii)). Compliance with clothing requirements and centre regulations required (cl 15.1(g)). Employees not to bring drugs and alcohol onto site or consume drugs or alcohol on site (cl 13.3(e)). Provision of services in accordance with personal safety including prohibition of consumption of alcohol or illegal drugs (cl 4.3.1 of Schedule 2) 8.Conduct of personnel Client may deny access to premises to supplier representatives who do not comply with client policies (cl 8.1). When the client receives a complaint concerning the Applicant's conduct or identifies possible non- conformances, it may commission an auditor to investigate the claims (cl 9.3(c) and audit the Applicant and its subcontractors at times selected by it (cl 9.3(d)). Employees to comply with dress requirements (cl 13.3(d)). Appropriate dress is required (cl 4.1.1 of Schedule 2) Client can request Applicant to remove or replace representatives including subcontractors (cl 10.3). The client may deny access to premises to cleaners who do not comply with who works policies or site visa protocols (cl 14.2). Personnel to act in a proper and appropriate manner throughout the course of performing services (cl 13.3 (c)). The client has a power to suspend the access rights of a cleaner in certain circumstances including a permanent ban (cl 3.2.3 of Schedule 2) Client can request applicant to remove or replace a subcontractor (cl 16.3). Cleaners to complete requisite safety health and environment induction modules (cl 11.2). Applicant to endeavour to provide the same personnel to clean at each site and cleaners not to work for another party during shift (cl 16.1(c) and (d)). Employees not to provide services to the benefit of any other party during shift scheduled (cl 13.1). Applicant to undertake compliance with occupational health and safety obligations (cl 2.1(b). 9.Training and deployment pf personnel Applicant to endeavour to provide same personnel to clean each site (cl 10.1(b)). Personnel to be of a particular quality in terms of experience skills, personal presentation and communication skills (Schedule 1, cl 2.1). Employees to undertake annual workplace relations training (cl 13.6). Satisfactory completion of the client's contractor safety induction programme required (cl 3.1.1 of Schedule 2) To ensure that employees and subcontractors complete safety health and environment inductions (cl 11.2). Applicant required subcontractors to cause its employees to undertake workplace relations training (cl 16.7(a)). 1. Contract 1 included obligations under an "EMS Services Manual - Cleaning". They included specification as to types of cleaning required, areas to be cleaned and frequency of cleaning, including daily and periodic cleaning. Cleaning times and the areas and facilities to be cleaned were also specified. It also identifies brands of chemicals for use in cleaning hard floors and vinyl floors. It sets out specifications relating to each chemical provided by the client. There are prohibitions on the use of certain chemicals. 2. Contract 2 is with the same client as Contract 1 and also sets out similar details of the services required to be provided. 3. Contract 3 sets out provisions for what cleaning was to be done, when cleaning was to be carried out, the frequency of cleaning, standards to be observed, what chemicals were to be used (including recommended brands and specific requirements for cleaning vinyl floors) and specifications for wall finishes and timber finishes. It also set out standards for trolley collection services including frequencies of collection. 4. Contract 4 also specifies the cleaning services that it requires including particular specifications relevant to particular flooring types. Times at which cleaning should occur are also specified. 5. Contract 5 specifies cleaning services to be provided including the times at which cleaning should occur, the areas to be claimed, the frequency of cleaning and types of chemicals that should be used. 6. A sixth contract was also in evidence. That contract provided for the delivery of specialised services for distribution centres providing logistical services. The scope and nature of cleaning and other tasks were specified. 7. While the level of detail in each of the relevant contracts may vary, they all contained specifications of what services were to be provided, frequency of the provision of services and particulars as to matters such as types of chemicals to be used. 8. Four statements were provided by Mr Brett Workman. Mr Workman was employed by the Applicant as their general manager. He had held this role since 2019. Between 2009 and 2019, he was employed as operations manager. His evidence describes the operation of the contracts in issue. 9. Mr Workman's evidence was that the subcontractors made their own arrangements for the day-to-day supervision of their staff. His evidence also was that the "monitoring of the delivery of the services was a collaborative approach between XL Retail and the client to address the day-to-day issues that raised their head" (paragraph 62 of Statement of Brett Workman filed on 16 November 2023). Mr Workman's further evidence was that clients' store manager or other managers would raise issues with the provision of services as required, with the subcontractor or the Applicant's operations team. 10. Mr Workman said that the client managers did not talk to the cleaning staff about issues with the services or provide them with directions regarding the performance of the services. Cleaning also typically occurred after hours when there may not have been a client manager on site. There was however an occupational health and safety requirement, in some cases, that there always had to be one of the client's employees present while the cleaners were on site providing the services. That employee would provide the cleaners access to the site through an after-hours entry door. 11. Division 8 captures services where an employment agent procures the services of another person "for a client of the employment agent" (s 38). Section 39 requires that the person perform work "for or in relation to which services are supplied to the client" under the relevant employment agency contract. The language employed by these provisions requires that there be a connection that is sufficiently substantial, between the services and work of the person providing services and doing the work on the one hand and the client of the employment agent on the other. The question for determination in this matter can therefore be formulated in terms of whether the services and work provided under the contracts between the Applicant and its clients, have the requisite connection with the client in the terms required by s 37 and 39. 12. White J in UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852 described, at [62] what kind of connection was required between the services and work performed by a person and the client, to bring Div 8 to bear upon the relevant contract: "Applying a purposive construction, as mandated by s 33 of the Interpretation Act, I think that the definition of an employment agency contract as being a contract under which a person (the employment agent) "... procures the services of another ... for a client of the employment agent" can be read as meaning a contract under which a person procures the services of another person in and for the conduct of the business of the employment agent's client. That was the intended scope of the provisions. It does not do too much violence to the text (Taylor v The Owners – Strata Plan 11564 at [40]) to confine the operation of the phrase "for a client" in that way, rather than as meaning for the client's benefit" (emphasis added). 1. The Courts have considered in a number of cases the kind of connection required between services and work performed and the client, having regard to the "in and for" formulation of White J in UNSW Global. The Court of Appeal in Chief Commissioner of State Revenue v E Group Security Pty Ltd [2022] NSWCA 115 accepted the "in and for" test formulated by White J. 2. The Court of Appeal in Integrated Trolley Management made the following observations on the use of the word "for", which connects the services provided by a person with the client: "As explained in E Group Security, having close regard to the purpose of the legislation, "the preposition 'for' is protean and is capable of bearing a very wide range of meanings depending upon context". That word, as articulated in UNSW Global, applies to the activities of entities that procure persons to provide labour "in, and for the purpose of, the ordinary conduct of the clients' businesses", the test being identified by this Court in E Group Security at [42] and approved at [46]. That language requires the identification of (i) the work to be done by persons who provide the services to a client and (ii) the nature and ordinary conduct of the client's business. It is the relationship between the two which determines the application of s 37(1) in a particular case". 1. Ward CJ in equity (as she then was), in HRC Hotel Services Pty Limited v Chief Commissioner of State Revenue [2018] NSWSC 820 considered the characterisation under s 37 of a services contract under which housekeeping services were supplied to a hotel client. She said, at [153]: "In my opinion the evidence also compels the conclusion that the services were procured 'for' the hotel clients' businesses in the sense of 'in and for the conduct of those businesses'. True it is that payment under the hotel client contracts was structured by reference to room 'credits'. However, in a practical sense the housekeeping staff did form an addition to the hotel's workforce – they not only wore the hotel branded uniform, but they also liaised with guests and other hotel staff in the services provided by way of the servicing and cleaning of hotel rooms and they were entitled to make use of the hotel staff dining rooms during lunch breaks and the like. On the evidence given by Ms Kelly in cross-examination, it is difficult to see how it would be apparent to the ordinary hotel guest that there was any distinction between, say, a hotel employee responsible for the stocking of items in the hotel room, or answering calls placed to the hotel's housekeeping telephone number, and a member of the additional staff sourced from Platinum/SWCA performing services in the cleaning of the guest rooms on the hotel premises." 1. In her reasoning, her Honour drew attention to the function of the relevant staff as forming an "addition" to the client's workforce, as well as the perception of customers as to whether or not they believed that relevant personnel were part of the hotel's staff. These matters appear to have assisted the Court in coming to the conclusion that the staff were used "in and for" the conduct of the client's business. 2. In Integrated Trolley Management, the Court of Appeal considered, most recently, the reach of the "in and for" test. Basten AJA made the following observations on how the various decisions concerning employment agency contracts had dealt with the question of what kind of connection was required between the services and work which the service provider was bound to provide and what the client received as a result of the provision of those services. He said, at [43]-[44]: "Furthermore, it may be noted that in each new case there is a tendency for the trial judge to address the statutory test in slightly different language, including by asking, as in the passage set out above, whether the procured staff formed "an addition to" the client's workforce, whether their functions were "integral to" the client's business, whether their functions constituted a "core", or "ancillary" function to the client's business and whether they were "integrated into" the client's business. There is no error revealed by the use of different terms which do not replace the statutory language and can usually be understood as a description of what actually occurred in the particular circumstances of the case. Often, the words appear in the summary of submissions. As Ward CJ in Eq stated in Bayton: "266 I accept that what is required is a fact sensitive analysis and that there may be nuances in the application of the test, as the plaintiffs submit. However, as I indicated earlier, I see no basis for reading into the legislation the requirement that the services provided be integral to the client's business or "core" services as opposed to "ancillary" or "incidental" services. I cannot see that the provision of cleaning services after the normal hours of business of a commercial client, for example, is any less the provision of a service "in and for the conduct" of the client's business than the provision of cleaning services during business hours." The focus on earlier judgments gives rise to semantic distinctions of a kind rejected by senior counsel for the respondent in the passages set out at [38] above, as not founded upon the statute. That critique should be accepted, both as a matter of principle, and in its application to the present legislation. As to its application, there is no necessary constraint in s 37(1), on the construction adopted in E Group Security, which requires that there be an existing workforce supplemented through an employment agency contract, nor that employment agency contracts are only covered by the statute where the work to be undertaken is part of a core function of the business". 1. The Court of Appeal (Basten AJA) was also less influenced by the perceptions of a third party as to whether there was any distinction between an employee of the client and a member of the additional staff. His Honour did not consider that this was "relevant at all for the purposes of characterising the contract in question" (at [42]). 2. Whether services that are merely "incidental" to the client's business are intended to be excluded from the reach of Div 8 fell for consideration in JP Property Services Pty Limited v Chief Commissioner of State Revenue [2017] NSWSC 1391. The Supreme Court of NSW was of the view that the relevant "out-of-hours" cleaning services provided to retailers were "incidental" to the client's business and outside the scope of Div 8. However, Payne JA in Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744 said that asking if the services were "incidental" to the client's business, imposed an "impermissible gloss on the statute" (at [97]); See also Integrated Trolley Management, at [4] and [54]). 3. What is clear from the cases considered by the Supreme Court is that the language of Div 8 should not be construed in an unduly restrictive manner, so as to limit the intended reach of the language of these provisions. There is no requirement that services captured by these provisions be "integral" to the client's business so as to exclude services that could be regarded as "incidental" to the client's business. Nor need the service providers necessarily form an "additional" or "supplemental" part of the client's workforce. The language employed by Div 8 contains no such requirements, either in its express terms or by implication. 4. The cases have had regard to various "indicia" that may indicate that a particular service may fall within Div 8. They include the following matters. 5. Importance has been attached to the regularity and continuity of services and work provided to the client and the degree of control maintained by the client over the people performing the relevant work. The kind of control required has been described in terms of the work being to a "significant degree under the control and direction of the client" (Integrated Trolley Management, [86]). Basten AJA said, at [91]: "In substance, to compare the situation the subject of dispute with the hypothetical circumstances of direct employment by the client will serve to emphasise the importance of various features of the arrangement, including the degree of control which would be exercised in each case, whether employees would be maintained on a regular and continuous basis and whether the nature of the services would be different". 1. In finding that the requisite degree of control existed in that matter, the Court, among other things, relied on contractual stipulations requiring the service provider to comply with the client's reasonable instructions and directions. Basten AJA said, at [108]: "However, while it was true that the agreement between ITM and ALDI placed responsibility on ITM for the manner in which the cleaners carried out their work, ITM was also required to "comply with all reasonable instructions and directions given by ALDI stores, and with ALDI stores' standards and operating policies and procedures notified to you, from time to time". 1. Posing the hypothetical question of whether the client might have used its own employees to carry out the services in question may also be of assistance in determining whether the statutory test has been satisfied. Basten AJA described the relevant enquiry in the following terms in Integrated Trolley Management, at [90] – [91]: "Given the purpose of the provisions with respect to employment agency contracts, consideration of how the client might conduct its business, and thus whether it might have conducted its business by employing workers directly, to carry out the services obtained through the agency agreement, can be seen as a potentially valuable inquiry as to the application of the section in a particular case…. In substance, to compare the situation the subject of dispute with the hypothetical circumstances of direct employment by the client will serve to emphasise the importance of various features of the arrangement, including the degree of control which would be exercised in each case, whether employees would be maintained on a regular and continuous basis and whether the nature of the services would be different". 1. The location at which services are to be carried out may, in some contexts, be another matter of relevance. The Court of Appeal, however, did not place weight on the fact that the trolley collection services in question in Integrated Trolley Management could be provided, to some extent, off the premises of the client (per Basten AJA, at [74]). However, the location at which the services were provided was accepted as a matter of relevance (per Payne JA, at [14](1)). 2. The level of interaction between the workers and the client's staff and customers was identified by Payne JA as a matter that could be taken into consideration, but his Honour found this to be a "neutral factor" (at [14](5)). The "in and for" test, in his Honour's view, focussed on the manner in which the services were provided for the client, not upon extraneous interactions with other staff and customers. 3. Whether the workers use the client's staff facilities may also be relevant, although in Integrated Trolley Management, the Court found that the absence of the use of such facilities said little about whether those workers were providing services in and for the conduct of client's business (Payne JA [14](4)). 4. Whether the workers in question provided their own equipment or used the client's equipment may also have a bearing on the enquiry. In Integrated Trolley Management, it was found that it was not the service provider but rather the subcontractors who provided some equipment to trolley collectors. Payne JA said that there was "a lack of any detailed evidence about the quantity and use of any equipment provided. This factor does not persuade me that the trolley collection workers were not providing services in and for the business of Woolworths" (Payne JA, at [14](10)). 5. That the work undertaken by the workers has a discrete or defined nature, should not prevent the application of s 37. In Integrated Trolley Management, Basten AJA said, at [71] – [72]: "It is difficult in principle to understand why the "defined nature of the task" undertaken by trolley collectors, and the fact that there may be an established market for such services, has any significant bearing on the characterisation of the services to be supplied by ITM to the client, for the purposes of s 37(1) of the Payroll Tax Act. Rather, there is nothing in the language adopted by White J, even by way of judicial exegesis, which explains why s 37(1) does not apply to services which have a "defined nature" or involve discrete and defined tasks, or for which there is an established market. One might be pressed to identify many services which could not be so categorised". 1. Whether the contract provides for the provision of a particular outcome or result should not be of relevance either. In Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657, Ward CJ (in equity) said, at [105]: "… I consider that in determining whether the employment agency provisions apply it is necessary to focus on the manner in which the services are provided for the client in order to form a view as to whether those services are being provided "in and for" the conduct of the client's business in the sense considered in UNSW Global. That involves considering the extent to which the indicia identified as relevant by the Chief Commissioner as well as the matters to which the plaintiffs point (such as the degree of independence of the service providers and the significance of the provision of an "integrated package" to the client). I remain of the view that the "results" test (for which the plaintiff advocated in HRC Hotel Services) is not helpful in this context in that the fact that a contract might provide for the provision of a particular outcome or result says little as to whether the provision of services for the purpose of achieving or producing that outcome or result is "in and for the conduct" of the relevant client's business". 1. The independence of the subcontractor's business from the client's own business has been found not to be relevant in determination of whether Div 8 could apply or not (Integrated Trolley Management, at [93]). In Integrated Trolley Management, Basten AJA said (at [65]) of the concept of "independence" of the subcontractor's business from the client's business that "… that element is inherent in an employment agency arrangement; it cannot be a basis for denying its existence". 2. Some caution, however, is required in considering the various indicia set out in the cases going to the determination of whether the requisite connection between the conduct of the client's business on the one hand and the services and work supplied for its benefit on the other, can be found. These are not indicia that can be applied in a mechanical or formulaic way to determine whether or not Div 8 applies. The question is to be determined in accordance with the provisions of the statute as they apply to the facts of each matter. Ward P said in Integrated Trolley Management, at [2] that: "… the role played by, or weight given to, matters relied on in other cases as relevant indicia in the analysis of whether services are procured "in and for" the conduct of the business of an employment agent's client will vary from case to case; and that such indicia cannot replace the statutory test". 1. Basten AJA similarly said, at [40]: " …. "indicia are not themselves the test"'; the question remains, however, what role such "indicia" are to play in the application of the statutory test to particular relationships. To describe a case as requiring a "fact-sensitive analysis" is, in substance, to say that other cases, involving different circumstances, will have little if any precedential value. The fact that a particular indicium was relied upon by a judge in one case, does not of itself indicate whether that indicium was a necessary or sufficient factor, or merely one to which the judge had regard. Further, the fact that it proved relevant in that case does not demonstrate that it will be relevant, or necessary, in another case involving different circumstances". 1. What follows is that determination of whether a service provider is working "in and for" the conduct of the client's business requires an analysis of the terms of the particular contracts and other relevant facts, with a focus on the manner in which the services are provided for the client (Banfirn Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1058, at [25]; Integrated Trolley Management, at [14](4)). 2. The terms of the contracts in question assume particular importance among the matters going to determination of the issue at hand. The Court of Appeal in Integrated Trolley Management said that the question required consideration of the contracts said to be employment agency contracts, without excluding all other aspects of the evidence as to the manner in which the contracts were carried into effect (at [61]). Where the services in question are provided under a written contract, the task is one of characterising those contracts (Integrated Trolley Management, at [61]). The commercial context may also be relevant (Integrated Trolley Management, at [62] and [112]). 3. The Respondent's submission is that following the reasoning and principles set out in Integrated Trolley Management, the Applicant should be found to be an employment agent. The Respondent refers to the regularity and continuity of services provided, the client's direction and control over the services, the work being performed on the client's premises rather than elsewhere and the fact that the client would otherwise use their own employees for such tasks. 4. Each contract is for a term stipulated in the contract. The services required to be provided had to be delivered on a continuous and regular basis, sometimes daily and otherwise at given intervals on a periodic basis. Stipulated cleaning services had to be provided daily. Other services, such as floor maintenance, were performed less frequently but nevertheless at regular stipulated intervals. The very nature of cleaning services requires that the work be performed on a regular and continuous basis, having regard to the expected condition of premises at the end of each period of operation of a retail or distribution business. The degree of regularity and continuity of services provided in these circumstances and occurring as part of the ordinary conduct of the client's businesses is a matter of considerable relevance going to the determination of whether the services and work in question fall within Div 8. 5. The Applicant submitted that the requirement for regularity and continuity of the services and work provided must involve continuity of individual personnel. I find nothing in the language of Div 8 that requires continuity of individual personnel, either in its express terms or by implication. I see no warrant for reading such a requirement into the legislation. Such a requirement, if it were to exist, may preclude the application of Div 8 to casual staff used in the provision of services. I do not see anything in the statutory context that could exclude casual hires from the types of labour hire arrangements Div 8 captures. 6. In any event, Contracts 1 and 2 contain provisions requiring best endeavours to maintain continuity of staff (at [36] above). There was nothing in the evidence to indicate whether or not such continuity was in fact maintained. However, to the extent that the Applicant deployed the same staff to perform the same regular tasks, there would have been regularity and continuity of the services and work provided using the same individual personnel. Regardless, I do not, for the reasons set out at [74] above, find that continuity of particular staff is a requirement of Div 8 in the circumstances of the matter. Division 8 is engaged when there is provision of relevant "services" and "work", which is done "for a client", with no necessary requirement for continuity of staff. 7. The Applicant's further submission is that the levels of interaction between cleaners and customers or staff is relevant in coming to a determination that there was no employment agency contract. I find nothing in the legislation that could bring to bear such a requirement. Payne JA in Integrated Trolley Management considered the manner in which the services were provided for the client, not upon extraneous interactions with other staff and customers. Division 8 captures relevant "services" that are "for a client" with no requirements for such interactions with customers and other staff. To the extent that what is required are people working "in and for" the conduct of the client's business, I see no basis for excluding from the reach of the Division work that does not require dealings with customers or other staff. 8. The interpretation submitted by the Applicant may result in the exclusion from Div 8 of a range of back-office services and in the case of a retail business, work such as managing storage of goods and moving inventory. While each case must turn on its particular facts, a position that in general may exclude work that does not involve interfacing with customers and other staff from the Division, will, in my opinion, impermissibly restrict the intended operation of the Division and as a consequence, produce an outcome that is inconsistent with the purpose of the statute in its application to relevant "on-hire" arrangements. 9. The Applicant makes detailed submissions that the degree of control of the clients over the work performed under the relevant contracts is not sufficient to bring those contracts within Div 8. The Applicant's submissions require consideration of the relevant contractual stipulations, a summary of which is set out at [36] above. 10. All five written contracts to provide services to retail facilities set out at [36] above contain provisions which require compliance with "reasonable directions" of the client (Contract 1, cl 7.2(d); Contract 2, cl 13.2(f); Contract 3, cl 10(c); Contract 4, cl 3.2(b); Contract 5, cl 6). On their face, these provisions allow the client wide powers of control over cleaners and other workers, through giving reasonable directions. 11. Each of the contracts in question also contains a prohibition on subcontracting without consent of the client (Contract 1, cl 6.1; Contract 2, cl 12.1; Contract 3, cl 25; Contract 4, cl 15; Contract 5, cl 16). A right of veto over who may or may not be subcontracted, is also a relevant matter going to the level of control of the client, through determination of who can and cannot provide services. 12. Each of the contracts in question contain numerous other provisions allowing for various controls over individual cleaners, although the extent of the ground covered by each contract may differ. They include the following requirements: 1. Dress - control over dress (Contract 1, cl 9.1(h); Contract 2, cl15.1(g); Contract 3, cl 13.3(d); Contract 4, cl 4.4.1 of Sch 2). 2. Alcohol and drugs - prohibition of the consumption of alcohol and drug use (Contract 1, cl 10.1(a)(v); Contract 2, cl 16.1; Contract 3, cl 13.3(e); Contract 4, cl 4.3.1 of Sch 2). 3. Behaviour - other stipulations as to behaviour generally (Contract 1, cl 10.1(a)(iii); Contract 2, cl 15.1(g); Contract 3, cl 13.3(c)). 4. Powers of exclusion - powers to exclude cleaners from premises (Contract 1, cl 8.1 and10.3; Contract 2, cl 16.3; Contract 4, cl 3.2.3 of Sch 2). 5. Training - requirements of cleaners to undergo training requirements of the client (Contract 1, cl 11.2; Contract 2, cl 16.7(a); Contract 3, cl 13.3(a) and13.6; Contract 4, cl 2.1(b) and cl 3.1.1 of Sch 2). 6. Compliance with policies Requirements of cleaners to comply with relevant client policies or centre regulations (Contract 1, cl 8.1; Contract 2, cl 15.1(g)). 1. The combined effect of the above provisions is to confer on each client a substantial degree of control over the workforce deployed at its premises by the Applicant. In most of the contracts, the terms specifically dealing with matters of personal conduct and dress, contemplate specific application of the relevant provisions in respect of individual cleaners rather than to the Applicant itself as a body corporate. These matters underscore the ability of the client to exercise specific kinds of controls over individual cleaners. While the obligations in question are assumed contractually by the Applicant, the Applicant's obligations to procure the required conduct by its cleaners, in my opinion, is sufficient to allow for the client to exercise the relevant degree of control. 2. Each relevant contract without exception, requires compliance with the client's reasonable directions (see [36] and [79] above). The power allows direction of the Applicant. The broad language of the general power that allows the client to give reasonable direction would, on a proper construction of each relevant provision, permit the giving of directions referable to particular individuals retained by the Applicant. 3. Even if the evidence of the Applicant was that there was no direct communication between the personnel deployed to provide services and clients, the existence of these powers of direction and a means for communication on a regular basis with the management of the Applicant to deal with issues arising in the provision of services (see line 3 at [36] above), are, in my opinion, sufficient to establish that the cilent maintains a substantial degree of control over the workforce supplied by the Applicant. 4. Basten AJA in Integrated Trolley Management relied in part, on contractual obligations of the service provider to comply with all "reasonable instructions and directions" in concluding that the contracts in question fell within Div 8. The Applicant submits that his Honour's decision is not authority for the proposition that in each and every case, a provision allowing the giving of reasonable directions, determines the matter. I accept this submission. However, I find the reasoning of his Honour apposite to the facts at hand, in allowing significant reliance on the contractual stipulations in evidence, requiring compliance with the client's reasonable directions, in the determination of whether Div 8 applies. 5. The Applicant submits that properly construed, the "reasonable directions" clauses in some of the contracts in issue, were no more than a "warranty" that the service provider will comply with reasonable directions of the client concerning certain limited matters. I am unable to agree. There is nothing in the language of the relevant provisions to allow for placing such a limitation on the reach of the ordinary language of the relevant provisions. Even where described as "warranties", I see nothing in the language or context of the provisions in question, to allow for a reading down of the obligation on the part of the Applicant to comply with reasonable directions. The subject matters of the relevant warranties are disparate, including for example, breaches of laws, misuse of any person's confidential information and warranties of there being no relevant litigation against the Applicant. The existence of these disparate subject matters in provisions titled "warranties", in my opinion, does not give rise to a context that allows for a reading down of the particular warranties. The varying subject matters of the warranties in question, rather, evinces an intention for each relevant paragraph to be read in accordance with its terms and not to be read down in accordance with the context of the other paragraphs dealing with separate subject matters. 6. The particular prescriptions of the work to be done (see [37] – [42] above) also go to establishing the parameters of the client's control of the work of the Applicant's personnel. The specification of works sets out precisely the services to be provided, and when and where the service provision was to occur. The mere fact that the parties have committed to writing a description of the services required, does not provide a contractual basis for the exercise of a significant degree of control. However, it is a relevant matter in that it establishes contractual parameters for the exercise of the control allowed to the client. In other words, the power to give directions could not allow the client to demand more than what is agreed it should receive but will allow the client to give reasonable directions to ensure compliance with any relevant obligation of the Applicant under the contracts in question, including directions as to the performance by members of the workforce of their services. 7. The Applicant submitted that the specified particularity of the services to be provided was intended simply to avoid "scope creep". I am unable to agree. The level of particularity of the services to be provided specified in each of the contracts means much more. It is fundamental to the operation of the contracts in question in identifying their subject matter and setting out in detail what the Applicant was obliged to do and what the client was entitled to receive. 8. The Applicant's makes the further submission that the assumption of client control must take the form of directly controlling and supervising individual workers. I cannot agree. The language employed by the Division does not, either expressly or impliedly, require direct control. It simply requires the provision of services "for the client". Moreover, the scheme set out in Div 8 dealing as it does with employment agency contracts, in its very nature, does not bring to bear an assumption of direct control over the relevant workers in the manner of say a direct employment relationship with the client or something similar. That scheme operates on the basis that the relevant workers will be retained by the employment agent under a separate contract with the employment agent. The scheme of Div 8 therefore contemplates that relevant workers can only be directly answerable, as a matter of contract, to the employment agent. To infer a requirement that control by the client of service providers must be direct will interfere, in a fundamental way, with the intended operation of Div 8 to employment agency contracts. 9. Further, I find nothing in the relevant cases that contemplates a requirement for direct control by the client of workers supplied under an employment agency contract. In Integrated Trolley Management, there was no finding that clients exercised direct control and supervision of individual workers, nor any determination by the Court of Appeal that this was required. 10. The responsibility of the Applicant for direct supervision of its staff, does not, in my opinion, derogate from the powers of control that sit with the client under contract. The Applicant's supervision of its staff takes place subject to the powers of control given to the client in accordance with the terms of each contract with a client, including the client's power to give reasonable directions. 11. The Applicant submits that a number of obligations with which the Applicant must comply, arise pursuant to the client's own statutory obligations, such as those under the Work Health and Safety Act 2011 (NSW). I understand the submission to be that these are obligations that the Applicant needs to comply with, in order to ensure that the client itself is not placed in breach of relevant statutory obligations. It is, however, unclear why these circumstances are relevant to the question in issue. What is relevant is that the contractual framework in question gives the client a substantial degree of control, regardless of the reasons for requiring that control. 12. I understood the Applicant to submit further that the obligations to accept reasonable directions was limited to the power to give directions in respect of the client's own statutory obligations. There was, however, nothing in the contractual framework or the evidence, to indicate that the client's power to give reasonable directions was limited to directions given for reasons of ensuring statutory compliance. Accordingly, I do not find any reason to limit the reach of the client's power to give reasonable directions in the manner submitted by the Applicant. 13. The Applicant submits that certain other provisions allowing for the client to give directions in particular circumstances allow for a reading down of the general power to give reasonable directions set out above. I do not see any reason for such a reading down. Even if there are specific provisions allowing for directions to be given in particular circumstances, it is unclear why the general power to give reasonable direction needs to be read down. Each relevant provision should take effect in accordance with its terms. The general power is not subject to any express limitations for the reasons set out above. I do not see any reason to imply such limitations. 14. A general power to give reasonable direction to any person present on the premises without limitations to the express terms of the power, appears consistent with the legal and business context applying to an occupier of land. As the occupier of premises on which the clients' businesses operated, the client will, as a matter of law, bear certain liability for what happens on the premises. The orderly running of its business will also necessitate control over who is on and what happens on the premises. 15. There was no evidence that as to the basis on which the clients were in occupation of their premises. However, I assume that the client in each case had rights of possession of the land on which it operated, either as owner or as a lessee giving the client exclusive possession. There is nothing in any of the contracts with the Applicant to indicate that the clients' possession was in any way ceded to the Applicant, giving the Applicant any possessory rights. The retention of possession of the land occupied and used by the clients while services were provided, maintained control of premises by the client, including determining who was on the premises and what happened on the premises. These circumstances are not necessary to determine that the clients retained relevant control of the workforce at all times. That determination can be made on the basis of the contracts and other matters in evidence. However, I observe in passing that the holding of rights and obligations as occupier by a client, is consistent with the arrangements in evidence that maintained the clients' control at all times over the workforce present on its premises. 16. One of the relevant considerations that can be taken into account in determining whether Div 8 applies, is whether the client might have conducted its business by employing the relevant workers directly to carry out the services obtained through the purported employment agency agreement. The Applicant argues that the services it provides are specialist in nature and not of a kind that could be provided by the employees of the client. This is because the clients' employees had not yet received the necessary training and equipment. 17. The Respondent's submission in reply is that the test is not whether the client has already put its employees in a position to carry out the services or has an existing workforce with the relevant training. It is whether the client "might have done so". 18. I am in agreement with the Respondent's submission. I find nothing in the relevant provisions of the PTA either expressly or impliedly excluding from its ambit services that a client, at a particular point in time, does not have the capability to provide in-house. The mere fact that, at the relevant time, the clients' employees did not have the skills to carry out the relevant work does not, in my opinion, preclude those services from the reach of Div 8. 19. In posing the question of whether the client could have insourced the services in question, the required counterfactual, to the extent that one is necessary, may take account of the client hypothetically training its own staff to undertake the relevant work but also hiring from the market personnel who already had relevant training and skills. It is open to the Applicant's clients, hypothetically, to obtain whatever services they need, at such time as they need those services, including establishing their own in-house cleaning capability. On the evidence, one such client had in the past replaced the services provided by the Applicant with its own staff providing the relevant cleaning services in-house. 20. Further, I see nothing in the language of Div 8 that excludes from its reach services that require specialist accreditation or skills. Although the services in question are specialist, these are not services of a kind that must, by their nature, be provided by an independent third party outside the control of the recipient of the service, such as independent audit services. 21. In Intergated Trolley Management, Payne JA said of the contract in issue in that case between a supermarket chain and a service provider, at [11] and [12]: "At the relevant level of generality, the Woolworths' business may be described as the sale by retail of goods to consumers. The business presently relevant is Woolworths' physical retail stores, rather than its online business. A key part of the retail offering at Woolworths' retail stores is the provision of trolleys, owned by Woolworths. Those shopping trolleys are made available to retail consumers to collect goods as they shop at the Woolworths' store. Customers of Woolworths are permitted to use the Woolworths owned trolleys to take goods, once purchased from Woolworths to their cars in adjacent car parks. ITM, in its contracts with Woolworths, agrees to provide workers to provide trolley collection services on a continuous basis during Woolworths' trading hours from the shopping centre where the 'store is located, including adjacent car parks and loading docks. It is critical to Woolworths' business that there is a continuous and plentiful supply of available trolleys for customers to use at each of its retail stores. Under the contract between ITM and Woolworths, ITM procures workers for Woolworths to perform trolley collection services on a continuous basis during Woolworths' trading hours from the shopping centre where the Woolworths' store is located". 1. The question in issue does not require determination of whether the services supplied by the Applicant are "incidental" or "integral" to the operation of the clients. However, it could be said in the matter at hand also, that the provision of clean and properly maintained premises is "critical" to the businesses of the Applicant's clients. 2. The sixth contract in evidence was between the Applicant and another service provider. That other service provider in turn contracted with the operator of certain logistic centres. The contract commenced from about January 2017. There was no written contract signed by the parties and the arrangements appear to have been informal. 3. There was, on the evidence, regularity and continuity in the provision of the relevant services. The very nature of the operation of a logistics centre servicing a retail business, like retail premises themselves, requires regular and continuous cleaning services and other relevant services. I also accept the Respondent's submission that the client had the ability to obtain its own services to replace those of the Applicant. I also find that the specification of services and the budgeting of hours is sufficient, together with the other matters set out above, to allow an inference that the client held the requisite degree of control. 4. The absence of a written contract poses certain difficulties in identifying what exactly the full terms of the sixth contract were. The evidence included an unsigned "Master Services Agreement" dated 22 June 2022 which included a provision requiring compliance with reasonable directions (cl 3.2(b)). There were no submissions as to the applicability or otherwise of the provision as part of the contract. Regardless, having regard to the other matters at [105] above, I am unable to find that the Applicant has discharged the onus of proof to show that the services under the sixth contract fall outside Div 8. Conclusion as to liability for payroll tax 1. I find that each of the six contracts under consideration answers the description of an "employment agency contract" within the meaning of s 37 of the PTA. I find that the regularity and continuity of the provision of the services and the degree of control exercised by the client, for the reasons set out above, are indicative of the services provided for the clients in question being of a kind that fall within Div 8. That conclusion is also supported by the client's own ability hypothetically to establish a capability for the supply of those services, notwithstanding their specialist nature. These are services provided and used "in and for" the conduct of the clients' businesses. They were provided by the Applicant "for a client". 2. Whether or not there was interaction between the Applicant's personnel and the clients' customers or staff and whether or not the facilities of the clients were used by the staff of the Applicant, do not, in my opinion, have a significant bearing on the matter. That the services in question were provided on the premises of the clients has some relevance but is not determinative. 3. I do not think that the identification of the Applicant's personnel with its own branding on their uniforms or the use by the Applicant of equipment it was contractually obliged to provide derogate from the conclusions that Div 8 applies. Similar circumstances did not prevent the Court of Appeal from finding in Integrated Trolley Management that the services provided by the service provider in that case fell within the Division 8. Ruling PTA 027 1. Under s 9 of the Administration Act, a reassessment is to be made "in accordance with the legal interpretations and assessment practises generally applied by the Chief Commissioner at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time". 2. Because an assessment was already taken to have been made when the Respondent calculated the tax liability of the Applicant based on relevant returns of the Applicant under the PTA (Administration Act, s 8(1)), the Respondent accepts that the assessments in dispute are "reassessments". For the purposes of review by the Tribunal, what is an "assessment" is defined to include a "reassessment". 3. The Applicant's submission was that the reassessments made by the Respondent were contrary to the practices of the Respondent set out in ruling PTA 027. 4. Relevantly, ruling PTA 027 provides as follows: "A 'chain of on-hire' occurs when an employment agent on-hires a service provider to another employment agent who in turn on-hires the service provider to its client. A strict application of the employment agency provisions on a 'chain of on-hire' would mean that both employment agents are liable for payroll tax on essentially the same employment agency arrangement. To overcome this situation, in circumstances where there is a 'chain of on-hire', the employment agent closest to the ultimate client will be regarded by the Chief Commissioner of State Revenue as the agent who is liable for payroll tax". 1. The Applicant's contention is that in respect of one of the contracts in issue, it was not the employment agent closest to the ultimate client. The Applicant itself was retained by another party who had the contract with the relevant client. In the Applicant's submission, because it was not the entity closest to the ultimate client, it was not liable for and should be excused from obligations for payment of payroll tax. 2. The contract between the ultimate client and the party contractually bound to the ultimate client was not in evidence. In these circumstances, I am unable to make a determination as to whether or not that party was also an "employment agent" so that the circumstances could fall within a chain of on-hire arrangement of the kind described in ruling PTA 027. 3. Ruling PTA 027 sets out further requirements that are relevant. In the circumstances at hand, it contemplates that the party with whom the Applicant contracts should complete a payroll tax form OPT 020 and the Applicant should "require" the party with whom it has contracted to complete that form. That form asks for confirmation that either the party is not liable for payroll tax or is liable for payroll tax. If it says that it is not liable for payroll tax, the Applicant may be liable. There is no evidence that these procedures were followed, and a form OPT 020 completed and provided to the Respondent. 4. The scheme of ruling PTA 027, in my opinion, contemplates compliance with the requirements set out above to determine who is liable for payroll tax, before the Applicant can rely on the ruling in question, to excuse itself from a liability for payroll tax. It requires the procedure to be followed so that the parties can "know exactly what their respective payroll tax obligations will be". It is clear enough that the scheme of ruling PTA 027, while contemplating that the party nearest to the ultimate client should bear the liability for payroll tax if they are an employment agent, first requires the procedures set out in the ruling to be followed in order to ascertain whether, in fact, the party in question is liable at all in the first place. In the absence of having followed the procedure to ascertain whether the person closest to the client was in fact liable, I do not think that the Applicant can sustain a claim on the basis of Ruling PTA 027 and s 9 of the Administration Act, that it is not liable for payroll tax. Interest 1. The components of interest that may be assessed are made up of interest assessed at the market rate and interest assessed at the premium rate. Only interest at the market rate has been assessed in the present case. 2. The Applicant challenges the assessment of that interest in this matter. They ask for remission of the interest. 3. The rationale for the market rate of interest is described as follows in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19 and why it should be remitted only rarely. The Administrative Decisions Tribunal said, at [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 Accepted 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". 1. The power to remit interest is set out in s 25 of the Administration Act. Bathurst CJ in Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd (2020) [2020] NSWCA 126 considered the reach of the power in s 25 of the Administration Act to remit interest. His Honour did not think there was a relevant limit on the power of the Chief Commissioner to remit interest in s 25 of the Administration Act. 2. The approach of the Respondent, set out in practice note CPN 024, is that where the circumstances of non-payment were beyond the control of the taxpayer, remission of interest assessed at the market rate may be justified. 3. The Applicant gave evidence of difficulties it encountered in running its business at the relevant time, on account of health problems of the wife of the Applicant's principal and managing director, and the responsibility placed on him to care for her. I accept the evidence provided as to the situation of the Applicant's managing director. However, I am unable to find that these difficulties created circumstances beyond the control of the Applicant that resulted in non-compliance. The inability of particular personnel to work does not prevent a corporation from finding replacement personnel to allow for the continued operation of its business. There was no evidence of financial difficulty that would prevent finding such replacement personnel. 4. The Tribunal in Incise Technologies laid emphasis on fault on the part of the Respondent as grounds for remission. There is, however, no evidence that there was any fault on the part of the Respondent resulting in the tax default in question occurring. 5. It is well accepted that interest at the market rate should rarely if ever be waived, because to do so would be to devalue the amount of tax payable. I see no reason to depart from this principle in the present case in light of the matters set out above, in particular, the absence of fault on the part of the Respondent. It follows that the assessment of interest at the market rate should stand. 6. There was no assessment of interest at the premium rate. The premium rate is penal in nature. However, on the evidence, there was no culpable behaviour on the part of the Applicant for the reasons set out below. The Respondent was correct in not making an assessment of interest at the premium rate, in the absence of culpable behaviour on the part of the Applicant. Penalties 1. The Respondent's power to assess penalty tax arises under s 26 of the Administration Act. It is imposed in addition to interest. The Administration Act expressly provides that the imposition or remission of interest is not relevant to the imposition or remission of penalty tax (s 33(2); see also s 25(4)). 2. The amount of penalty tax payable for a tax default is relevantly set at a default rate of 25% of the amount of tax unpaid (s 27). The Respondent has the power to make certain variations to the amount of penalty tax. He may increase the amount of penalty tax in certain circumstances based on the degree of culpability of the taxpayer that are not presently relevant. 3. The Respondent's guidelines as set out in CPN 024 are as follows: "Penalty tax is generally imposed after all the facts and circumstances surrounding the tax default are considered. In certain circumstances the Chief Commissioner may increase the rate of penalty tax or determine that no penalty tax is payable. A liability to penalty tax arises when a tax default occurs. Penalty tax is in addition to interest. The amount of penalty tax is 25% of the amount of unpaid tax or 50% if the taxpayer is a significant global entity within the meaning of the Income Tax Assessment Act 1997 of the Commonwealth. The Chief Commissioner may increase the amount of penalty tax to 75% of the unpaid tax if the tax default was caused wholly or partly by the intentional disregard of the taxation law. Penalty tax may be reduced if a taxpayer makes or voluntary disclosure of a tax default before or during an investigation. ….. The Chief Commissioner also has a general discretion to remit penalty tax by any amount in such circumstances as the Chief Commissioner considers appropriate (s 33 of the TAA). Where there is evidence that the taxpayer (or their representative) took reasonable care to comply with the taxation law, or the tax default occurred solely because of circumstances beyond their control (excluding financial incapacity), the Chief Commissioner will usually determine that no penalty tax is payable". 1. The Respondent has a power to determine that no penalty tax is payable in respect of a tax default under s 27(3)(a). He may exercise that power if satisfied that the taxpayer or a person acting on behalf of the taxpayer, took "reasonable care" to comply with the taxation law. The Respondent did not use his power to remit penalty tax. 2. A separate power to remit penalty tax is allowed under s 33 of the Administration Act. The Court of Appeal in Downer EDI considered that the power of remission under s 33 was not limited either expressly or by necessary implication by the mandatory reductions required by ss 28 and 29 of the Administration Act. Bathurst CJ said: " …. it does not seem to me that the power in s 33 of the TAA to remit penalty tax "in such circumstances as the Chief Commissioner considers appropriate" is limited either expressly or by necessary implication by the mandatory reductions required by ss 28 and 29. These mandatory reductions are a relevant matter for the Commissioner to take into account in considering whether to exercise the power to remit in s 33 but they do not limit that power. As the Chief Commissioner pointed out, in Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue Ward CJ in Eq stated at [301] that 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 TAA had not been made out. However that was a matter of discretion not power". 1. The discretionary powers set out in s 33 remain broad and unfettered. In light of the broad and unfettered character of the discretion, no fixed rules can be brought to bear precluding an exercise of discretion. Despite the broad and unfettered discretion allowed under s 33, however, there need to be limits on its exercise, in that that discretion cannot be exercised in a way that defeats the fundamental legislative objectives of the penalty scheme. 2. The amount of penalty that should or should not be assessed turns largely on the question of whether or not the Applicant took reasonable care in returning the correct amount of payroll tax. The Applicant's submission, in summary, is that it took reasonable care in that it relied on what it understood to be the conclusion in JP Property Services decided in 2017, that "out of hours" cleaning services provided to supermarkets and other businesses were not caught by Div 8. The self-assessed position taken, in the Applicant submission, was in the circumstances reasonable. The Applicant therefore asserts that no penalty tax should be assessed. 3. I accept the Applicant's submission that at the times of the relevant tax defaults, the position in JP Property Services appeared to stand and had been relied upon by the Applicant. However, following the decision of the Court of Appeal in Integrated Trolley Management, handed down on 13 December 2023, the finding in JP Property Services that relevant cleaning services did not fall within Div 8 was no longer easily sustained. 4. I do not think that the imposition of penalty tax is appropriate in circumstances where the Applicant, acting reasonably, followed the reasoning and guidance set out in the earlier decision of the Supreme Court. The assessment of penalty tax related to years before the date of the decision in Integrated Trolley Management. It is unclear what more the Applicant could have done during the relevant years, other than rely on the then current guidance provided by the Supreme Court. Remission of penalty tax should therefore be made under s 33, or otherwise determined not to be payable under s 27(3). Accordingly, the Respondent's assessment of penalty tax should be set aside. Orders 1. The assessments under review are revoked. 2. The Tribunal assesses that the amount of payroll tax and interest set out in the Respondent's notices of assessment to be payable by the Applicant in accordance with the notices. 3. Penalty tax is remitted in full. ********** 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 Amendments 23 January 2025 - Correct description of party referred to in para [84] - Amended from "Applicant" to "client". DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 January 2025