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Newcastle Airport Pty Ltd v Chief Commissioner of State Revenue [2014] NSWSC 1501

Date of judgement 31 October 2014, 10 November 2014 Proceeding No. 2013/281117
Judge(s) White J
Court or Tribunal Supreme Court of NSW
Legislation cited Interpretation Act 1987

Local Government Act 1919

Local Government Act 1993

Payroll Tax Act 2007

Taxation Administration Act 1996
Catchwords TAXATION AND REVENUE - assessment for payroll tax - where local councils delegated function of developing and maintaining airport to plaintiff - whether plaintiff's employment of employees or payment of employees' wages for purpose of operating airport were delegated functions or functions incidental thereto; powers, duties, rights and liabilities of trustees - trustee's right of exoneration - where plaintiff held moneys on trust for councils
Cases cited Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26; (2012) 16 BPR 30,397

Arjon Pty Ltd v Commissioner of State Revenue [2003] VSCA 213; (2003) 8 VR 502

Baker v Archer-Shee [1927] AC 844

Balkin v Peck (1998) 43 NSWLR 706

Blackpool Corporation v Locker [1948] 1 KB 349 Re Reference under s 11 of Ombudsman Act 1976 (1979) 2 ALD 86

Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226

Commissioner of State Revenue v Karingal 2 Holdings Pty Ltd [2003] VSCA 214; (2003) 8 VR 532

CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98

D K L R Holding Co (No. 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510

DCC Holdings (UK) Limited v Revenue and Customs Commissioners [2010] UKSC 58; [2011] 1 WLR 44

Federal Commissioner of Taxation v Comber (1986) 10 FCR 88

Glebe Administration Board v Commissioner of Pay-roll Tax (1987) 10 NSWLR 352

Hardoon v Belilios [1901] AC 118

Kemtron Industries Pty Ltd v Commissioner of Stamp Duties (Qld) [1984] 1 Qd R 576

Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344; (2008) 74 NSWLR 550

Marshall v Kerr (1993) 67 TC 56

New South Wales Land and Housing Corporation v Navazi [2013] NSWCA 431

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360

Re Transphere Pty Ltd (1986) 5 NSWLR 309

Williams v Singer [1921] 1 AC 65

Summary

Newcastle Airport Ltd (NAL) sought review of a decision of the Chief Commissioner of State Revenue to assess NAL for payroll tax on wages paid in relation to the civil aviation facility at the Newcastle Airport. NAL managed the facility under delegations from the Newcastle City Council and the Port Stephens Shire Council.

His Honour held that the wages paid by NAL were deemed to have been paid by the councils under s.49 (delegation of functions) of the Interpretation Act 1987, and were therefore exempt under s.58 of the Payroll Tax Act 2007 (PTA).

Background

NAL was incorporated on 25 May 1993 as a company limited by guarantee. Its two members are Newcastle City Council and Port Stephens Shire Council. NAL manages the civil aviation facility at the Newcastle Airport at Williamtown on behalf of the Councils.

During the relevant period, both Newcastle City Council and Port Stephens Shire Council issued instruments of delegation, delegating to NAL the “authority to establish, develop, maintain and regulate a facility for the conduct of civil aviation and all associated and/or supporting activities being a service and/or facility and/or activity within the meaning of s 24 of the Act at the civil area of Williamtown Airport.”

During the relevant period NAL entered into contracts of employment with various individuals and paid wages to those individuals. NAL contended that by reason of s 49(6) of the Interpretation Act, the wages it paid to employees, as delegate of the Councils, are taken to have been payable by and to have been paid by the councils.

NAL advanced an alternative submission that the wages were in fact paid by the Councils because the moneys used by NAL to pay the wages were moneys held on trust for the Councils.

The Chief Commissioner contended that the employment of employees and payment of wages by NAL was not taken to be an act of the Councils as delegators for the purpose of s.49(6) of the Interpretation Act, as there was no express delegation of the councils' function of employment. Further, the Chief Commissioner contended that the activities of the employees are directed to the operation of the airport and the function of operating the airport was not a delegated function under the instruments of delegation and thus could not fall within s.49(6).

Decision

His Honour Justice White found that there was no express delegation of the Councils' function of employment. The functions delegated were the "provision" of services and facilities and the carrying out of activities at the airport. However, his Honour found that the employment of individuals was a means of performing those functions and was incidental to the performance of those functions, and thus fell within s.49(4) of the Interpretation Act. That is, his Honour found that a delegate exercises a delegated function when the delegate exercises a function (employing and paying staff) incidental to the delegated function (provision of airport services and facilities).

In respect of whether “operation” was included in the delegations, His Honour found that the things done by NAL through its employees in operating the airport fell within the terms of the delegations even though the delegations did not include a separate delegation of a function of "operating" the airport. The definitions of “develop” and “maintain” the service and facilities of the airport were sufficiently wide to encompass the act of operating the airport.

Accordingly, His Honour found that the employment of workers by NAL, as an incidental function, was in the exercise of NAL’s delegated function and therefore were taken to be have been done by the Councils pursuant to s.49(6) of the Interpretation Act. The wages paid by NAL were deemed to have been paid by the Councils and are exempt pursuant to s.58 of the PTA.

His Honour rejected NAL’s submission that the wages were paid by the Councils, holding that in exercising its right to be recouped out of the trust assets in respect of the wages it paid, NAL had recourse to its own assets, not the Councils' assets.

Orders

The Court revoked the Chief Commissioner’s assessments and ordered that the Chief Commissioner pay NAL’s costs.

Link to decision

Newcastle Airport Pty Ltd v Chief Commissioner of State Revenue [2014] NSWSC 1501

Last updated: 20 February 2017