Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Trasco Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 131 Hearing dates: 13 August 2014 Decision date: 09 September 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: Dr H R Sorensen, Senior Member Decision: Application for stay refused Catchwords: ADMINISTRATIVE LAW - Civil and Administrative Tribunal (NSW) - application for stay of operation of assessment decision - whether prima facie case established Legislation Cited: Administrative Decisions Review Act 1997 (NSW) Civil and Administrative Tribunal Act 2013 Payroll Tax Act 2007 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: AHJ v NSW Trustee and Guardian [2011] NSWADT 311 Bentran Pty Ltd v Sabbarton [2014] NSWCATAP 37 Williamson v Director General, Department of Transport [2000] NSWADT 165 Category: Interlocutory applications Parties: Trasco Pty Ltd (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel T Wong (Respondent) G Turner, (Applicant, agent) Crown Solicitor's Office (Respondent) File Number(s): 1410326 reasons for decision 1The applicant, Trasco Pty Ltd, seeks an order staying the operation of payroll tax assessment decisions made by the Chief Commissioner of State Revenue in respect to each of the years ended 30 June 2010, 2011, 2012 and 2013. For reasons set out below the application for a stay is refused. Background 2The substantive proceeding is an application for review pursuant to the Taxation Administration Act 1996 (NSW), s 96. The subject matter of the review are the payroll tax assessment decisions for the years ended 30 June 2010, 2011, 2012 and 2013 notified to the applicant by Payroll Tax Assessment Notices with issue date 24 October 2013. The Chief Commissioner asserts that certain payments are taxable wages under the Payroll Tax Act 2007 (NSW). The assessed tax liability is $125,498.06. 3By letter dated 6 May 2014 the Chief Commissioner notified the applicant that its 19 December 2013 objections to the assessments had been disallowed. The application for review of the assessment decisions was filed 23 June 2014. 4The grounds of objection go to claiming under s 32(2) of the Payroll Tax Act that the subject arrangements were not "relevant contracts". The Chief Commissioner's letter of 6 May 2014 shows that the assessment decisions rely on the "employment agency" provisions of the Act, Division 8 of Part 3 and not the "relevant contract" provisions, Division 7 of Part 3. 5Copies of agreements relating to arrangements which led to the assessments the subject of the substantive proceedings, are at Tab 8 of the documents filed in the Tribunal in this matter pursuant to section 58 of the Administrative Decisions Review Act 1997 (NSW). The documents at Tab 8, folios 58 and 67, and 59 and 74, exemplify the arrangement. In simple terms, the applicant supplies to its client the services of a named service provider referred to in the applicant's documents as the "contractor". The applicant invoices the client for the services, the client pays the applicant and the applicant pays the contractor. The invoice amount includes a mark-up; the applicant pays the contractor a sum equal to the invoice amount less the mark up. 6On 25 June 2014 the applicant filed an Application For Stay or Interim Order. An Amended Application For Stay or Interim Order was filed 3 July 2014. Legislation and principles Payroll Tax Act 2007 (NSW) 7Under the terms of the Payroll Tax Act, payroll tax is imposed on all "taxable wages" (s 6). Liability for the tax falls upon the employer by whom taxable wages are paid or payable (s 7). "Taxable wages" are wages (excluding exempt wages) taxable in NSW - this includes wages paid or payable by an employer for or in relation to services performed by an employee wholly in NSW (s 10). 8Division 7 of Part 3 of the Payroll Tax Act, the "contractor provisions", which comprises ss 31 to 36, apply to a "relevant contract". Pursuant to s 32(1)- In this Division [7], a "relevant contract" in relation to a financial year is a contract under which a person (the "designated person") during that financial year, in the course of a business carried on by the designated person: (a) supplies to another person services for or in relation to the performance of work, or (b) has supplied to the designated person the services of persons for or in relation to the performance of work, or (c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for re-supply of the goods to the designated person or, where the designated person is a member of a group, to another member of that group. 9In the case of a relevant contract the parties are "taken to be", respectively, the employer and the employee (s 33 and s 34). For the purposes of the Act, amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract or the re-supply of goods by an employee under a relevant contract are "taken to be" wages paid or payable during that financial year (s 35). 10Pursuant to subs 32(2) a "relevant contract" does not include a contract of service or a contract as described in paragraphs (a) to (d) of that subsection. 11Subsection 32(3) provides that for the purposes of s 32, "an employment agency contract under which services are supplied by an employment agent, or a service provider is procured by an employment agent, is not a relevant contract." 12Division 8 of Part 3 of the Payroll Tax Act relates to an "employment agency contract". Division 8 comprises ss 37 to 42. By force of s 37(1), for the purposes of the 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." 13For the purposes of the Act, the employment agent under an employment agency contract is "taken to be" an employer (s 38); 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 (s 39); and any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract, is "taken to be" wages paid or payable by the employment agent under an employment agency contract (s 40(1)(a)). Administrative Decisions Review Act 1997 (NSW) 14Under the Administrative Decisions Review Act, s 60 the Tribunal may stay the operation of a decision under review. Pursuant to s 60(2) and (3)- (2) On the application of any party to proceedings for an application for an administrative review under this Act of an administratively reviewable decision, the Tribunal may make such orders staying or otherwise affecting the operation of the decision under review as it considers appropriate to secure the effectiveness of the determination of the application. (3) The Tribunal may make an order under this section only if it considers that it is desirable to do so after taking into account: (a) the interests of any persons who may be affected by the determination of the application, and (b) any submission made by or on behalf of the administrator who made the decision to which the application relates, and (c) the public interest. 15The Tribunal's power is limited to making such orders as "it considers appropriate to secure the effectiveness of the determination of the application" but only if the Tribunal also considers it desirable to do so after taking into account each of the matters set out in s 60(3). Thus the appropriateness of a stay so that a determination is effective may in the circumstances be outweighed by the factors in s 60(3): Williamson v Director General, Department of Transport [2000] NSWADT 165 at [19]. 16The Tribunal in AHJ v NSW Trustee and Guardian [2011] NSWADT 311 at [14] said the phrase "secure the effectiveness of the determination" is another way of saying that there needs to be irreparable loss or harm to the applicant before consideration will be given to making an interim order. The Tribunal went on to say- [15] Section 60 is to be read keeping in mind the common law principles in relation to the exercise of interlocutory injunctions. In Castlemaine Tooheys Limited v South Australia [1986] HCA 58, Acting Chief Justice Mason said at paragraph 11: "The principles governing the grant or refusal of interlocutory injunctions in private law litigation have been applied in public law cases, including constitutional cases, notwithstanding that different factors arise for consideration. In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction". 17In practical effect the onus is on the applicant to make out a case that it is appropriate for the Tribunal to make such an order: Bentran Pty Ltd v Sabbarton [2014] NSWCATAP 37 at [9], Wright J, President citing Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694. Applicant's case 18The applicant was represented by its director, Mr Grahame Turner. 19The applicant's case appears from written submissions which assert the following- 1. [The applicant] is a company involved in engineering and architectural design and has been trading since 1977 and has previously employed 7 full time staff but currently employs 1 full time and 2 part time staff. 2. [The applicant] had a significant decline in staff from 5 to [1 full time and 2 part time] in 2013 and the significant decline in turnover was noted by OSR representative ... on 11 October 2013.... 3. [The applicant] has been experiencing extremely tough conditions, there is a real lack of contracts and it now employs only the director and two part time staff in the company. 4. [The applicant] does not have the money to pay this demand by OSR and has minimum funds available in the bank and at 71 years of age its director Grahame Turner does not have capacity to borrow anything further and has already loaned $330,000 to the company form borrowed funds. 5. If business were not so difficult then [the applicant] would not be requesting a stay. 6. [The applicant] seeks a review because the debt that OSR allege come about because OSR have misinterpreted our company's operation .... [The applicant] traded with a number of corporate consultants who in turn were engaged by large third party organizations but were not employees of [the applicant]. 7. If OSR seek to enforce the payment then [the applicant] will be forced to wind up the company and its operations and cease to trade and this will defeat the application for review. 20In oral submission Mr Turner repeated the points raised by the written submissions and asserted that the worth of the company is less than the debt to the respondent. Chief Commissioner's case 21The assessment decisions the subject of the review application rely on the "employment agency contract" provisions being the operative provisions in this instance. The "relevant contract" provisions are excluded by s 32(3). 22The written submissions include the following table showing wages declared by the applicant during the period 2010 to 2013. The source of the information set out in the table is Tab 13 at folios 103-104 of the section 58 documents. Year 2010 2011 2012 2013 Salaries $80,223 $34,557 $18,147 $55,409 Director's Fees $25,000 $25,000 Employer $1,576 $1,353 $4,986 Superannuation Salary Sacrifice super $28,500 $42,000 $63,000 $19,605 Taxable Contractor $772,035 $1,125,241 $1,400,269 $778,800 Total Wages $905,758 $1,228,274 $1,482,769 $858,800 23From the bar table Mr Turner explained that the $778,800 amount in the "Taxable contractor" line of the table includes a 10% mark up for the applicant. 24The Chief Commissioner says the applicant has failed to meet the threshold requirement of s 60(2) in that it has not demonstrated it will suffer irreparable harm if a stay is not granted. In support of that submission it is further submitted that the evidence of the applicant's financial position "suggests that it is likely to have assets from which it could meet the liability from payroll tax that has been assessed"; and, "there is no evidence to demonstrate that the decline in payments to its service providers in the year ended 30 June 2013 "has continued into the next financial year, nor that it is jeopardizing [its] ability to trade. Similar levels of revenue were experienced in 2010 and the company continued to operate." 25Counsel challenged the assertions in paragraphs 4 and 7 of the applicant's written submissions as not being supported by the evidence. As to the applicant's paragraph 7, the Chief Commissioner says the applicant has not identified any relevant aspect of its contract arrangements that has been misinterpreted by the Chief Commissioner. The applicant failed to identify any serious question to be tried and there is no apparent basis upon which the assessments would be revoked. 26Counsel indicated the Chief Commissioner may consider commencing recovery proceedings before the review application is determined. Consideration 27Judicial Member Rice in discussing the meaning of s 60 of the Administrative Decisions Tribunal Act 1997 (NSW) in Williamson v Director General, Department of Transport said- "[15] A stay will guard against situations where the Tribunal sets aside the decision under review, only to find that while waiting for the decision the applicant has, because of the effect of the original decision, ceased trading or is unable to restart operations. In such circumstances the Tribunal's decision would, in the terms of s 60, not be an effective one." 28The possibility of the Chief Commissioner in this case commencing recovery exposes the applicant, on the applicant's case, to suffering an irreparable loss if a stay were not granted. But even accepting that, I am not satisfied that there is a serious question to be tried or put another way, that the applicant has a prima facie case in the sense that if the evidence remains as it is there is a probability that on the hearing of the substantive proceeding the applicant will be held entitled to relief (AHJ v NSW Trustee and Guardian at [15] to [16]). 29Whether the applicant's arrangement with the client and service provided are as contended excluded from being a relevant contract by s 32(2), that is not to the point when the Chief Commissioner's contention is that the employment agency provisions apply here. 30In the circumstance of the applicant not having a prima facie case I am not in this instance, satisfied that even taking into account the matters set out in s 60(3)(a) to (c), namely, the interests of persons who may be affected, submissions of the Chief Commissioner, and public interest, make it desirable to order a stay. Decision 31The application for an order staying the operation of the assessments is refused. The matter is to be listed for directions on 23 September 2014 at 9.30am. ********** 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 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: 09 September 2014