Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Homefront Nursing Pty Ltd v Chief Commissioner of State Revenue [2019] NSWCATAD 145 Hearing dates: 19-21 December 2018 Date of orders: 25 July 2019 Decision date: 25 July 2019 Jurisdiction: Administrative and Equal Opportunity Division Before: R L Hamilton SC, Senior Member Decision: 1. Matter remitted to the Chief Commissioner for reassessment in accordance with these reasons. 2. Each party to pay their own costs. Catchwords: TAXES AND DUTIES - payroll tax- general medical practitioners (GPs)-operator of medical centres - relevant contract provisions - availability of exemption (s32(2)(b)(i) Payroll Tax Act- whether Medicare and Department of Veterans Affairs benefits to which GPs were entitled and collected and paid through the medical centre operator "wages' paid by operator to the GPs by s35 Payroll Tax Act Legislation Cited: Administrative Decisions Review Act 1997 (NSW) Civil and Administrative Tribunal Act 2013 (NSW) Health Insurance Act 1973 (Cth) Payroll Tax Act 2007 (NSW) Payroll Tax Act 2007 (Vic) Taxation Administration Act 1996 (NSW) Cases Cited: Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127 J Rowe & Son Pty Ltd v Federal Commissioner of Taxation [1971] HCA 80; (1971) 124 CLR 421 Levitch v CCSR [2014] NSWCATAD 215 Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 O'Grady v Northern Queensland Company Ltd (1990) 169 CLR 356 Optical Superstores Pty Ltd v CSR [2018] VCAT 169 PMT Partners v Australian National Parks and Wildlife Service (1995) 184 CLR 301 Roxborough v Rothmans of Pall Mall Australia Limited [2001] HCA 68 Winday International Pty Ltd v CCSR [2016] NSWCATAD 270 Texts Cited: Bowsted and Reynolds on Agency 21st Edition By P. Watts and F.M.B. Reynolds Thomson Reuters 2018 Category: Principal judgment Parties: Homefront Nursing Pty Ltd atf Cariad Trust (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: P Glissan (Applicant) C Burnett (Respondent) Solicitors: MRM Lawyers (Applicant) Crown Solicitor (Respondent) File Number(s): 2018/0083814 Publication restriction: Nil REASONS FOR DECISION 1. This case involves the payroll tax status of General Practitioners (GPs) engaged to perform their activities at two medical centres ('Surgeries') in the Taree area of New South Wales. 2. The medical centres were operated by the applicant Company which is the trustee of a family trust (the Cariad Trust - 'cariad' means love or sweetheart in Welsh). 3. The relevant payroll tax years are years ended 30 June 2013 to 30 June 2016. One of the GPs commenced work in 2016 and some particular considerations may apply to this person. There were three other GPs involved who according to the records worked during some or all of the other years. 4. A number of the GPs conducted their activities through their own companies. 5. The Tribunal gets its jurisdiction to hear this matter through s 96(1) of the Taxation Administration Act 1996 and s9 Administrative Decisions Review Act 1997. The facts 1. Both parties relied to a considerable extent on the documentary material contained in the s 58 documents. In particular the s 58 documents contained a "sample agreement" which had been supplied by the applicant to the respondent. It appears at pages 62 to 71 of the s 58 documents. 2. Although the applicant's Counsel originally quibbled in the hearing about the use of the sample agreement, when the applicant's onus of proof (s 100(3) Taxation Administration Act 1996) was raised and a number of earlier admissions on behalf of the applicant were highlighted (see pp 82 and 94, s58 docs), the applicant advanced the case on the basis that the sample contract represented the contract between the GPs and the applicant. 3. The respondent also conducted its case on the basis that the sample agreement was representative of the contract between the GPs and the applicant, given the earlier admissions and manner in which the case had been conducted up to the hearing. 4. The sample agreement provides in relevant part as follows, and I have underlined parts which I regard as important: 5. It recites that the Company operates medical surgeries and has agreed with the GP to engage the GP for the provision of general practice medical services on behalf of the Company at the surgeries. 6. The Company and the GP agree (clause 2) that the GP will provide the Services (meaning competent and professional general practice medical services) in accordance with the terms of the agreement and such other medical services as may be agreed between the parties. 7. The agreement can be terminated on 4 weeks' notice (clause 3). 8. Clause 4 provides that the GP is engaged as an independent contractor responsible for taxes and other compliances and acknowledging that the GP is solely responsible for controlling the matter in which the Services are provided. 9. The Company agrees to pay the GP Fees calculated as set out in clause 6. Fee is defined (cl.1) by reference to payments specified in clause 6(a) and (c). The Fee uses Gross earnings (a defined term cl. 1) as a basis; being "charges billed for general practice medical services [this would include payments from Medicare and Department of Veterans' Affairs (DVA)] for services to patients provided by the GP but paid to the Company] by the medical practitioner to patients of the Surgeries; and Consultation Specific Special Incentive Payments. 10. A particular regime applies during the first 13 weeks of engagement of the GP. During the first 13 weeks of engagement there is provision that the minimum fee payable shall be $3,600 per week if 71.5% of Gross earnings do not exceed that amount (clause 6(a) and (b)). 11. After this 13 week period the Company pays the medical practitioner a Fee of 71.5% of Gross earnings generated by the GP calculated at the end of each fortnight of engagement (clause 6(c)). The GP is required to invoice the applicant with a tax invoice inclusive of GST (clause 6(c) and (f)). 12. The GP is entitled to 4 weeks leave of absence (clause 7), but it is unpaid as emerged from the evidence. 13. The GP is obliged to provide Services for a minimum of 10 x 4 hour Sessions per week at the Surgeries (clause 8 (a)). The GP is also required to provide the Company with all such information and documents as the Company may require; to keep and maintain all records required by law (which are agreed to be the property of the Company and the GP is prohibited from copying them or removing them from the surgeries); and the GP must use best endeavours to promote the interests and welfare of the Company and the patients; and conduct services competently professionally and respectfully. The GP is stated to retain full discretion to exercise professional judgement as to the manner in which medical services are performed. The GP also agrees to share duties relating to after hour calls, on-call roster home visits, and nursing home visits (clause 8). 14. On the Company's part it agrees to provide the GP with administrative services, clerical and professional staff and facilities, plant and equipment necessary for the medical practitioner to provide medical services from the Surgeries (clause 9). 15. The GP agrees to maintain the confidential information of the Company (clause 10). 16. The Company can terminate the agreement without notice in the event of a serious breach of the agreement or serious or wilful misconduct by the GP (clause 11). 17. The GP is responsible to ensure that they have a functioning provider number (this is for Medicare purposes) and Local Medical Officer status with DVA (clause 14). The Company is not registered as a medical practitioner, does not have a provider number or a Medicare number (Dr Holliday witness statement of 1 November 2018). 18. The GP is also required to maintain professional indemnity insurance at their own cost (clause 16). 19. At page 351 of the s58 documents there is a summary setting out the names of the GPs and the amounts they have been paid in the relevant years. 20. There were three witnesses called on behalf of the applicant. There was Dr Holliday the principal of the Company; Ms Phillips the financial controller; and Mr Hewitt the Company's external accountant. 21. What emerged from the cross examination of Dr Holliday and Ms Phillips was the process by which Medicare and DVA payments were billed and collected. Each of the GPs were the subject of arrangements under which they bulk billed Medicare and DVA under an arrangement with patients. The GPs became entitled to payment from Medicare and DVA by assignment of benefits by patients. Medicare and DVA arrangements were the same or similar according to the witnesses. There was an arrangement between the GP and the Company under which the Company handled claims by GPs on Medicare/DVA and directed Medicare and DVA to pay bulk billed amounts to a clearing account managed by the Company (Relevant sample documents are at pages 396 to 400 of the S 58 docs). 22. The Company would retain the agreed percentage for the provision of services and facilities and staff at the medical centre, and pay the agreed percentage to GPs. Examples of the GPs' tax invoices are to be found at pages 212, 213, 218, 219, 224,225, 230 and 231 of the s58 documents. 23. Where patients were not bulk billed those patients made payments directly to the Company which deposited them in the clearing account. 24. The applicant treated amounts received for medical services (called "Registrars Income") in its account as part of its income (see pages 310, 322 and 330 of s58 documents). 25. It treated payments to "contractors" as expenses in its accounts (see pages 311, 323 and 334 of s58 documents). 26. Business receipts from various sources were treated as assessable income. The cost of contractors was treated as a tax deduction by the Company (Dr Holliday oral evidence and attachment 1.5 of Dr Holliday's witness statement of 16 July 2018). 27. Dr Holliday's witness statement (para 12) stated that most patients assigned their Medicare or DVA benefits to the GP. This is what is referred to as bulk billing. Some patients pay for the medical service and recover an 85% refund Medibank or DVA themselves. Patients requiring medico-legal reports have the medical practitioner fee invoiced to the payer (presumably largely insurance companies) and payment is collected by the Company. In my view, a distinction needs to be drawn between these different types of receipts. 28. Where patients assign their benefits to the medical practitioner the medical centre staff batch up the relevant forms and transmit the electronic file to Medicare or DVA with a list containing the patient's name, Medicare number, medical service (MBS) item number and medical practitioner's provider number 1 (Relevant sample documents are at pages 396 to 400 of the s 58 docs). 29. The Medicare and DVA payments are received into the clearing account of the Company because the GPs nominate that account to receive those payments. The medical centre staff checked to ensure that payments from Medicare or DVA reconcile to the details on the batch list sent. The clearing account is used to receive payments and then to disburse them according to the agreed sharing formula applicable between the Company and relevant GP. The medical centre pays the net amount after its service fee to the relevant GP without making any other deduction (for tax or superannuation for instance). 30. Dr Holliday in oral evidence would not agree that amounts received by the Company in respect of medical services provided by the GPs were received by the Company on its own behalf. 31. Ms Phillips the manager of the medical centres provides a little more detail in her witness statement as to the process used to collect amounts from Medicare and DVA. She states that the applicant collects all medical fees at the medical centre into a clearing account and the GP nominates that account for this purpose. She also stated [at para 21] that the medical centre held all medical fees received from Medicare, DVA, private patients or other sources on behalf of the medical practitioners who earn them. Then the GPs are paid the net difference between gross fees and the medical centres agreed service fee without any further deductions. 32. Ms Phillips in oral evidence said that the process used to pay bulk billed Medicare and DVA benefits were "exactly" the same. She explained that there are three types of payment - Medicare benefits, DVA and direct payments. She also said that she considered that the Company held amounts received 'on trust' for the GP. 33. Mr Hewitt the external accountant in his witness statement informed the Tribunal concerning the use of a relevant software program which records the source and nature of fees earned by each GP which is then used to prepare reports as to the source of fees earned by each of the GPs in each of the years (which are included in documents 28 to 32 of the section 58 docs). 34. Mr Hewitt in his oral evidence talked about GPs 'assigning' to the Company Medicare and DVA benefits. There is no other evidence suggesting this is truly an assignment in law. Although the patients assigned the Medicare benefits to the GP pursuant to the Health Insurance Act 1973 (Cth) (s 20A) the GPs do not assign their entitlement to the Medicare/DVA payment to the Company on the documents before me, and the point was not addressed by the respondent. It seems they just direct Medicare/DVA to pay the entitlements to the Company. 35. Mr Hewitt also disagreed with the proposition that the Company received payments on its own behalf and thought that the payments were held by the Company on a 'trust' of some sort. The Submissions Are there 'relevant contracts' involved, and does an exemption apply? 1. The applicant withdrew its reliance on the argument that the Medicare/DVA monies (at least) were held by the Company on trust early in its submissions. However it pressed on with the argument that the Company acted on behalf of the GPs in relation to the collection of fee entitlements from Medicare and DVA. It submitted (Applicant's Submissions (AS) para 46) that it did not remunerate the GPs for medical services provided by them to the public. It said the GPs were remunerated by Medicare, DVA or cash payers and the Company collected the payments, deducted the service fee and paid the balance to the GPs. 2. It was common ground that the GPs were not employees of the Company as such. The respondent submitted that the GPs were the subject of relevant contracts as defined in s 32 of the Payroll Tax Act 2007. The respondent argued that the Company provided the services to the patients and engaged the GPs to perform its work. The applicant argued that the GPs serviced the patients and the Company provided the facilities and services to the GPs at the medical centres. It is not necessary to decide this issue as the result is the same on the relevant contract point. 3. The applicant appeared to accept (AS para 48) that the arrangement fell within the definition of a "relevant contract" in s 32. The applicant placed its reliance upon the exemption contained in s 32(2)(b)(i) of the Payroll Tax Act (PRTA) which provides: "however a "relevant contract" does not include a contract of service or a contract under which a "designated person" during a financial year in the course of business carried on by the designated person: is supplied with services for or in relation to the performance of work where: those services are of a kind not ordinarily required by the designated person and are performed by a person who ordinarily perform services of that kind to the public generally. (underlining added) 1. The applicant argued that because it is a Company it does not require medical services at all and is incapable of receiving them. 2. The respondent denies that the exception in s 32(2)(b)(i) is applicable because the services supplied to the Company are of a kind ordinarily required by it so that it can accommodate patients at its medical centres. The respondent also says that the GPs did not, during the relevant period, ordinarily perform services of that kind to the public generally but instead provided the applicant only. I am unconvinced by this argument. In my view the services were provided to the public, i.e. patients. 3. The respondent relied on the decision of this Tribunal in Levitch v CCSR [2014] NSWCATAD 215 to support the proposition that it is possible for the services referred to in the definition of "relevant contract" (s32 (1)) PRTA) to be supplied by both the putative "employer" and "employee". The case concerned a firm of architects which engaged an architect/contractor ("consultant") to prepare architectural plans. The arrangement was held to be a relevant contract, and the submission that the contractor only had a relevant relationship with the end client was rejected. Even if the contractor was an independent contractor the arrangement can still fall within the definition of relevant contract. The contractor supplied services to the firm by serving the needs of its clients [at 54]. 4. It was also held that the exemption in s 32(2)(b)(i) was not applicable even though the firm did not require the services for itself those services were required for its clients. This seems to demolish the argument of the applicant taxpayer that it does not require medical services itself and therefore that the exemption can apply to the Company. Other authorities for the same proposition are Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127 (Freelance Global) and Optical Superstores Pty Ltd v CSR [2018] VCAT 169 (Optical Superstores). Consideration 1. I reject the applicant's argument. It runs counter to the authorities mentioned. The applicant conducts a business of providing a medical centre at which general practitioner services are provided. It ordinarily requires the services of GPs in order for it to carry on business. Although the GPs can be regarded as ordinarily providing services to the public generally this is not enough; both limbs of the exemption must be met. Did the Company hold monies on behalf of GPs? 1. As the applicant abandoned its argument that the Company held receipts on trust for the GPs it is not necessary to consider the matter further. The applicant did press its submission that the Company collected the receipts on behalf of the GPs. The respondent submitted that the arrangement did not involve a relationship of agency between the GP and the applicant. Reference was made to the text Bowsted and Reynolds on Agency 21st Edition By P. Watts and F.M.B. Reynolds Thomson Reuters 2018 (especially paragraphs 1-038 and 6–100). It also said that restitution for monies had and received was not appropriate either: see Roxborough v Rothmans of Pall Mall Australia Limited [2001] HCA 68 (Roxborough). Consideration 1. While there may not be a personal, confidential relationship of principal and agent, it does seem to show features of an intermediate commercial arrangement under which the Company organises payment of at least the Medicare/DVA benefits for a fee and for convenience receives them into its clearing account. While I do not consider the Company acted as a true agent of the GPs, it did take on a commercial role collecting what the GPs were entitled to from Medicare and DVA. Even though it took the monies into its clearing account they were identifiable as generated by the relevant GP and were reconciled by Company staff to the claim lodged on behalf of each GP. I cannot see in the High Court's decision in Roxborough anything which would prevent a claim by a GP for monies had and received as against the Company. Are the payments to GPs to be treated as 'wages'? 1. The respondent submitted that the amounts paid to the GPs are paid or payable by an 'employer' for or in relation to the performance of work relating to a relevant contract and caught by s 35 PRTA (Respondent's Submissions (RS) pars 22 & 29). It says it does not matter that part of the amounts were sourced from Medicare or DVA. The PRTA does not trace where funds come from. What matters, according to the respondent, is that the amounts were paid by the Company to the GPs "under a relevant contract". I note these are not the words used in s 35. 2. This point about source is not further developed in the submissions of either party. There were no submissions covering the relevant operation of the Health Insurance Act 1973 (Cth) (HIA). Sec 20 of that Act provides that the patient who incurs the medical expense shall be entitled to payment of the Medicare benefit in respect of the service. The section goes on to deal with other scenarios where the patient who has incurred the medical expense has not yet paid it, but it is not necessary to take this further. Sec 20A of the HIA provides for the patient to assign by agreement his or her right to payment of the Medicare benefit to the practitioner who rendered the service, and the practitioner must accept the assignment in full payment. Section 20AA prevents the creation of a security interest in an assigned Medicare benefit. Section 20AB deals with "approved billing agents" but I have no information about this item before me. 3. On the evidence there is nothing which persuades me that the GPs have in any sense assigned in law or equity their entitlements to Medicare benefits to the Company. 4. I see the question as being rather more subtle than submitted. It turns on the words of s 35(1) PRTA as they apply to facts here. As I see it, the issue is really whether the amounts received by the Company from Medicare and DVA are received for its own account out of which it pays the GPs, or whether it receives those amounts on behalf of the GPs as a kind of "bank" of convenience. 5. Section 33 of the PRTA deems the Company to be an "employer" and s 34 deems the GPs to be "employees" if there is a relevant contract involved. 6. Section 35(1) and (2) of the PRTA provide: 35 AMOUNTS UNDER RELEVANT CONTRACTS TAKEN TO BE WAGES (1) For the purposes of this 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 …are taken to be wages paid or payable during that financial year. (2) If an amount referred to in subsection (1) is included in a larger amount paid or payable by an employer under a relevant contract during a financial year, that part of the larger amount which is not attributable to the performance of work relating to the relevant contract … is as determined by the Chief Commissioner… 1. The difficult question for me is whether the amounts paid by the Company to the GPs are "for or in relation to the performance of work relating to a relevant contract" which are taken to be wages paid or payable during that financial year under s35(1). How far do the terms "in relation to" and "relating to" go? 2. If one could wander at will through the fields of speculation there is a wide scope of operation of the terms. It is reminiscent of the idea of "Six Degrees of Separation". However for present purposes the relationship must be one which is relevant having regard to the context in which the terms are found. 3. In O'Grady v Northern Queensland Company Ltd (1990) 169 CLR 356, a case involving jurisdiction of the mining Warden's Court, which depended on whether a contractual dispute about rescission was relevantly 'in relation to' mining, McHugh J said that: "The prepositional phrase 'in relation to' is indefinite. But, subject to any contrary indication derived from its context or drafting history, it requires no more than a relationship, whether direct or indirect, between two subject matters." 1. His Honour went on to say it is a matter of judgement depending on the facts of each case. 2. In the same case, however, Dawson J (in the majority) said: "The words 'in relation to', read out of context, are wide enough to cover every conceivable connexion. But those words should not be read out of context …. What is required is a relevant relationship, having regard to the scope of the Act. Where jurisdiction is dependent upon a relation with some matter or thing, something more than a coincidental or mere connexion — something in the nature of a relevant relationship — is necessary." 1. In PMT Partners v Australian National Parks and Wildlife Service (1995) 184 CLR 301, where the issue was whether an action was 'in relation to' arbitration, it was said that: "the connection which is required by the phrase 'in relation to' is a question of degree. There must be some 'association' which is 'relevant' or 'appropriate'. The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context." 1. In the context of Division 7 PRTA, which seeks to extend the meaning of wages under a contract of service to payments under a contract for services, the payment must be one which is "in relation to" the services in the sense that it is, directly or indirectly, one in return for the services or performance of work by the "employee" to the "employer". In this case it is Medicare/DVA which provides the return for the medical services to a GP where a patient has assigned his or her Medicare benefits. 2. The words of the sample agreement are inelegantly drafted. Cl 6 states that the Company will pay the GP Fees calculated (after the initial 13 week period) as 71.5% of Gross Earnings generated by the GP calculated fortnightly. One interpretation is that this is remuneration paid by the Company on a quasi-commission basis depending on earnings. The question is whether this represents the true nature of the arrangement. Or is this payment arrangement also consistent with the Company simply collecting fees to which GPs remain entitled? 3. The witnesses indicated that they regarded the monies collected by the Company as subject to some sort of obligation, although the precise terms are not obvious. There was no evidence from the GPs to indicate what their view of the position was. 4. The accounting and tax treatment of receipts by the Company do provide some indication of how it saw the character of its receipts. But these factors are not determinative of the tax outcome (e.g. J Rowe & Son Pty Ltd v Federal Commissioner of Taxation [1971] HCA 80; (1971) 124 CLR 421). 5. The respondent distinguished the decision of the Victorian Civil and Administrative Tribunal (VCAT) in Optical Superstores Pty Ltd v CSR [2018] VCAT 169 (at pars [81 to 82]; see also [85, 108 to 110]). The principal issue in the case was whether the arrangements with optometrists (or their entities) operating in the optical dispensary stores of Store Owners were relevant contracts under the Victorian Payroll Tax Act 2007 which made equivalent provision in its s 35 to s 35 of the New South Wales Act. The applicability of the Victorian exemption provisions are not presently relevant. 6. The applicant taxpayer argued that the arrangements with the optometrists were tenancy agreements and not relevant contracts. 7. Furthermore the applicant taxpayer argued that the payments by Store Owners to optometrists were not for or in relation to the performance of work [at 28]. 8. It argued that the majority of the funds flowing from the applicant taxpayer to the optometrist entities were Medicare and private patient fees held on trust and subject to deduction for occupancy fees for the use of consulting rooms in the optical dispensary stores. The occupancy charge was made according to hours of use of the consulting rooms. 9. The optometrists were required to nominate the applicant taxpayer to receive into its account Medicare payments to which the optometrists were entitled; and to invoice non-Medicare patients and require payment to be made to the taxpayer, which intermingled all funds received. 10. The Victorian Tribunal found (relying on Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127 (Freelance Global) that the optometrists were supplying services to the principal by serving the optometric needs of the clients of the principal, and thus there were relevant contracts [at 82]. 11. The Victorian Tribunal went on to find [at 102] that the amounts paid for services to clients were held on trust for the optometrists due to the explicit trust language used in the agreement, and the manner in which the funds were treated even though they were not kept as separate trust monies. 12. The Commissioner argued that trust distributions can still be deemed wages in reliance on Freelance Global. The Victorian Tribunal distinguished Freelance Global on the basis that in that case the clients were billed by the principal, and contractors had no entitlement to payment because they were objects of a discretionary trust. 13. The Victorian Tribunal held [at 108] that: in the present case, any Consultation Fees are billed to Medicare or patients by the optometrists or the Optometrist Entities, and the funds released to the Optometrist Entities (net of the occupancy fees) are simply the return of amounts to which they were entitled for the services provided to the patients, not to the Trustee. 1. No doubt this conclusion was assisted by the finding of an express trust. But the words quoted from [108] are not qualified and seem to me to be apposite in this case (even though the trust argument is no longer pursued). 2. In Optical Superstores there was also a provision in the agreement with the optometrists for the payment by a Store Owner, referred to as a location attendance premium (LA Premium), to an Optometrist Entity. This occurred where the Consultation Fees derived by the Optometrist Entity were less than the amount payable by them for occupancy under the arrangements. In effect L A premiums which were a top up payment to the optometrist for turning up at the location of the store. The LA Premiums were held to be payments for work subject payroll tax. 3. This analysis is likely to apply to payments of the first 13 weeks of a GP's engagement in the case before me, but the appropriate means of dealing with it is to remit the matter back to the Chief Commissioner for reassessment. 4. The respondent also placed reliance on the decision of this Tribunal in Winday International Pty Ltd v CCSR [2016] NSWCATAD 270 to support the proposition that services could be rendered to patients by the GP and the Company. That case concerned the payroll tax treatment of amounts paid by the operator of a radiology facility to radiologists to whom it provided premises, plant and equipment, staff and medical supplies for a service fee. The applicant there raised similar arguments to those used by the applicant in this case i.e. that only the radiologists could render fees pursuant to the Health Insurance Act 1973 (Cth) so that the amounts received by Winday belong to the radiologists, and Winday was merely accounting for the radiologists' own money after deducting the service fee. 5. In a similar way to the present case, the radiologists in Winday directed Medicare to make payments to which they were entitled to the taxpayer [at 47]. The radiologists had an express obligation to deliver all fees from whichever source without any deduction to Winday [at 50]. The payments received from Medicare for radiology were not received into a separate bank account by Winday [at 58-59]. Radiologists were entitled to a minimum payment from Winday of $2000 per day [at 55 and 66].] 6. The Tribunal did not analyse the characterisation of the Medicare payments for radiologists' services or on the asserted statutory prohibition on anyone other than radiologists providing such services, due to a lack of evidence [at 76]. 7. The respondent in Winday argued that the payments to the radiologists were caught by both Division 7 (the relevant contract provisions) and Division 8 (the employment agency provisions) of the Payroll Tax Act. The Tribunal held that Division 8 applied and there was an employment agency contract between the radiologists and Winday. It did not go on to consider Division 7 because employment agency arrangements were excluded from Division 7 by s 32 (3) PRTA. This meant that there was no consideration of the operation of s 35. The wording of S 40 differs slightly but importantly from that in s 35 and provides as follows: For the purposes of this Act, the following are taken to be wages paid or payable by the employment agent under an employment agency contract: (a) 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 1. In s 40 the term "in respect of" connotes a more direct connection to the services than "in relation to" as used in s 35. The 'wages' in s 40 are those paid "under" an employment agency contract. These are not the words used in s 35 PRTA. The terms of s 40 are not examined in Winday. I do not consider that the decision in Winday binds me in relation to the decision in this case. Consideration 1. In my view the amounts paid by the Company to GPs sourced from Medicare/DVA do not have a relevant relationship with the relevant contract for the purposes of s 35 PRTA, because the arrangement is a collecting mechanism for the GPs' Medicare and DVA entitlements; a provision of services and facilities to GPs in which the GP services are supplied; with payment to the Company for the use of its facilities by a share of fees they receive for providing services to patients. 2. This appears to me to be an attempt to extend the Relevant Contract provisions to what I see as a convenient method of conducting certain business transactions. In each case the payment from Medicare or DVA is an entitlement of the GP who has not "assigned it" in the legal sense to the Company. It has merely directed Medicare or DVA to make the payment to the Company as a matter of convenience in a way quite similar to using the medical centre as a bank. If the GPs had taken the Medicare/DVA entitlements into their own accounts and there was a direct debit of the fee by the Company, I doubt this matter would have come this far. 3. With the GPs' agreement the medical centre under contract has deducted its service fee from the receipt of the GPs entitlement from Medicare/DVA. 4. To take an example used by the Chief Commissioner in the Payroll Tax Information Sheet sent to the applicant's accountants (pp 85-91 s 58 docs; especially at p 86) and to extend it just a little; if a bank was using the services of a fit out contractor for its premises as an ordinary part of its business and the contractor offered those services to the public generally the exemption in sec 32(2)(b)(i) would not apply according to the Chief Commissioner. If it is assumed that the contractor also has a loan at interest from the bank; and that it has fit out contracts with another unrelated client; and receives payments from the other client into the bank account; it can hardly be said that a payment by the bank to the contractor out of money received from the other client falls into section 35 of the PRTA, even if the bank deducts interest from the bank account of the contractor. Decision 1. It is my opinion that payments by the Company to the GPs of Medicare/DVA entitlements do not fall within s 35(1) PRTA. The relationship between the GPs' work remunerated in this way and the payment is too remote. However they may form part of a larger amount referred to in s 35(2) PRTA. For example payments made for medico legal reports would not be in the same category as Medicare/DVA benefits. Payments made by cash paying patients who make their own claims for medical benefits would also not fit into the principle. If the Company makes 'top up' payments to GPs in their first 13 weeks of engagement the top up amount would fall under s 35 PRTA. 2. These issues need to be further investigated by the Chief Commissioner with the assistance of the taxpayer. The appropriate way for this to occur is for the matter to be remitted to the Chief Commissioner for reassessment in accordance with these reasons. 3. The taxpayer did not specifically object against the imposition of penalty tax and interest. No submissions were made on the issues. It seems the taxpayer was prepared to stand or fall on the point of whether the assessments were excessive. The penalty and interest issues need to be considered again in the context of the reassessment of the primary tax, so I will not further consider the question. 4. The taxpayer also sought costs. It submitted that this was a 'test case' and so the respondent should pay its costs (presumably regardless of the outcome). The respondent rejected the 'test case' label, and resisted an order for costs. This is all I have to work with. 5. The usual rule in the Tribunal is that each party pays their own costs, and that an award of costs requires demonstration of "special circumstances" (s 60 Civil and Administrative Tribunal Act 2013). On the state of the evidence and submissions the applicant has not discharged its burden of showing special circumstances (meaning 'out of the ordinary' but not as high as 'extraordinary' see Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11]). 6. ORDERS 1. Matter remitted to the Chief Commissioner for reassessment in accordance with these reasons. 2. Each party to pay their own costs. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 25 July 2019