April 13, 2024


Think Differently

Payroll tax (NSW): employment company agreement take a look at upheld

The NSW Courtroom of Appeal has ruled that there was no persuasive rationale to depart from the “employment company contract” test established out in UNSW Worldwide Pty Ltd v Main Commissioner of Point out Profits (NSW) 2016 ATC ¶20-599 [2016] NSWSC 1852 (UNSW World).


The taxpayer was the most important working business in a business team that delivered stability services to its purchasers. Following an audit, the Commissioner assessed the taxpayer to payroll tax for the yrs finished 30 June 2016 to 2018. The assessments similar to payroll tax in respect of wages of protection guards whose expert services had been sub-contracted from third events.

At situation was whether or not the preparations amongst the taxpayer and its clientele (or, alternatively, the arrangements concerning the taxpayer and its wholly-owned subsidiaries) were “employment agency contracts” as described in s 37 of the Payroll Tax Act 2007 (NSW).

At initial occasion, Ward CJ held (at 2021 ATC ¶20-800 [2021] NSWSC 1190) that the arrangements by which the taxpayer furnished safety guard expert services to clients did not constitute employment agency contracts and did not give rise to payroll tax liability. It was common floor prior to the main decide that the definition of “employment company contract” in s 37 was to be construed in accordance with the reasoning in UNSW World at [62], particularly that an work agency agreement was a deal underneath which “a particular person procures the providers of another particular person in and for the conduct of the business enterprise of the employment agent’s client”.

The Commissioner appealed versus the initially instance choice. Even so, prior to the listening to of the enchantment it was prompt in Bonner & Anor v Chief Commissioner of State Profits (NSW) 2022 ATC ¶20-826 [2022] NSWSC 441 that the design in UNSW World was erroneous and warranted appellate review. The Commissioner amended his discover of charm to contain a reconsideration of the present circumstance regulation.

The Commissioner’s principal submission was that the UNSW World-wide development imposed an unwarranted gloss on the definition of employment agency contract, thus departing from and narrowing the statutory textual content, opposite to common concepts of statutory construction. More, the construction experienced adverse simple consequences for the operation of the laws (this kind of as excluding from the scope of the laws instances wherever entities induced products and services to be supplied domestically).


According to the NSW Court of Attractiveness, there was a effective inference that the legislature was to be taken to have endorsed the construction in UNSW World wide in circumstances where by the Commissioner had on a regular basis commenced and defended laws primarily based on the employment agency agreement deeming provisions, had continuously propounded the check originally proposed by him in 2016, and in which the laws experienced been reviewed pretty consistently.

The court docket reported that the development in UNSW Worldwide reflected a not unnatural this means of the statutory words and phrases “procures the services of an additional man or woman for a shopper of the employment agent” and accorded with the purpose of the Payroll Tax Act by getting associations that slide shorter of classic employer/worker associations and deeming them to be these types of. Accordingly, there was no compelling purpose to depart from the UNSW World-wide test.

Resource: Main Commissioner of Condition Earnings (NSW) v E Group Security Pty Ltd 2022 ATC ¶20-833 [2022] NSWCA 115, 6 July 2022.