Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242

Date of judgement 20 August 2015 Proceeding No. 2014/371573
Judge(s) Beazley P
Macfarlan JA
Meagher JA
Court or Tribunal Court of Appeal, Supreme Court of New South Wales
Legislation cited Civil and Administrative Tribunal Act 2013, ss 62, 80, 83

Payroll Tax Act 2007, ss 71, 72, 74, 79

Taxation Administration Act 1996, s 96
Catchwords TAX – payroll tax – Chief Commissioner's de-grouping discretion under Payroll Tax Act 2007 (NSW), s 79 – whether Appeal Panel erred in law in concluding that precondition in s 79(2) not satisfied – whether precondition in s 79(2) satisfied when it is just and reasonable to exclude persons from a group in order to alleviate harsh consequences of grouping provisions – whether matters required to be considered when addressing that precondition include presence or absence of artificial arrangements to avoid duty; the splitting of existing business and other stratagems; and/or commercial arm’s length terms of dealings between members
Cases cited Baxter v Chief Commissioner of Pay-Roll Tax (1986) 7 NSWLR 122

Commissioner of Pay-Roll Tax v R G Elsegood & Co Pty Ltd [1983] 1 NSWLR 223

Commissioner of Stamps v Garrett F Hunter Pty Ltd (1997) 69 SASR 275

Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181; 87 ATR 880

FCT v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503

R G Elsegood (Sales) Pty Ltd v Commissioner of Pay-Roll Tax (NSW) (1982) 12 ATR 750

Seovic Civil Engineering Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 52

Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue of the State of New South Wales [2011] HCA 41; 245 CLR 446

Thiess v Collector of Customs [2014] HCA 12; 250 CLR 664

Summary

The three applicant companies sought leave to appeal a decision of the Appeal Panel of the New South Wales Civil and Administrative Tribunal in Chief Commissioner of State Revenue v Seovic Engineering Pty Ltd [2014] NSWCATAP 94 pursuant to s 83 of the Civil and Administrative Tribunal Act 2013.[1]

The applicants, Seovic Civil Engineering Pty Ltd (“Civil”), Seovic Engineering Pty Ltd(“Engineering”) and Exell Management Pty Ltd (“Exell”) sought to challenge the decision of the Appeal Panel in relation to the de-grouping discretion in s 79(1) of the Payroll Tax Act 2007 (“PTA”) for the relevant payroll tax assessment period (1 July 2007 to 30 November 2011). The exercise of this discretion depends on the Chief Commissioner first being satisfied of the matters in s 79(2) in relation to the business of any company sought to be excluded from the group of employers.[2]

Background

At first instance, the applicants were successful in arguing that the Chief Commissioner had erred in not exercising his discretion under s 79 of the PTA. The matter was remitted to the Chief Commissioner for determination.[3]

As a consequence, the Chief Commissioner appealed to the NCAT Appeal Panel. The question before the Appeal Panel was whether the undisputed facts and facts as found by the Tribunal were capable of satisfying the precondition in s 79(2) of the PTA.[4] This question was decided in favour of the Chief Commissioner, that is the undisputed facts and facts as found by the Tribunal were not capable of satisfying this precondition. The Appeal Panel allowed the appeal, set aside the Tribunal’s orders and dismissed the application.[5]

Proposed Grounds of Appeal

The applicants raised three questions of law:[6]

  1. Whether the Appeal Panel erred in not construing s 79 of the PTA as conferring a broad discretion enlivened whenever the exclusion of persons from a group is just and reasonable in order to alleviate otherwise harsh consequences of the grouping provisions;

  2. Whether the Appeal Panel was obliged to take into account as mandatory relevant considerations the presence or absence of artificial or contrived arrangements to avoid duty; the splitting of existing business and other stratagems; and the commercial arm’s-length terms of the dealings between group members; and

  3. Whether the Appeal Panel erred in failing to consider the “nature and degree of ownership and control of the businesses” of Civil and Engineering as a mandatory relevant consideration.

Judgment

The primary judgment was delivered by Meagher JA with whom Beazley P and Macfarlan JA agreed.

As to question one, the Court of Appeal rejected this argument on the basis that Applicants' characterisation of the discretion in s 79 found no support in the statutory language. The Court held that the precondition of the Chief Commissioner's discretion to relieve against the unreasonable operation of the grouping provisions is found in s 79(2) of the Act.[7] The Chief Commissioner must be satisfied that the business carried on by a person is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of the group.[8] This is the statutory test.

As to question two, the Court of Appeal found that of the three considerations, only one was a fact that could be taken to fall within the “nature of the businesses”.[9 That is, there was ‘commercial arm’s-length terms of the dealings between group members’. The Appeal Panel already took this consideration into account by its reference to the “facts of this matter” at [51].[10] The Court held that the other two matters did not concern the “the nature and degree of ownership and control of the businesses” or “the nature of the businesses and therefore they were not mandatory relevant considerations.[11]

As to question three, the Court of Appeal concluded that the Appeal Panel took into account the “nature and degree of ownership and control of the businesses” of Civil and Engineering.[12] It was recorded at [33] of the Appeal Panel decision that “Civil and Engineering each carried on a business independently and without any connection with each other” and that there was “no evidence of control in the management of Exell”.[13] Regardless, the Court of Appeal said that such an omission by the Appeal Panel would not have been material to their conclusion that it could not be satisfied as to the absence of a connection between the carrying on of the relevant businesses.[14]

Decision

The Court of Appeal determined that none of the questions raised by the applicants disclosed a legal error.[15]

Orders

  1. Dismiss the summons seeking leave to appeal; and

  2. Applicants pay the respondent’s costs of that summons.

Link to decision

Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242

Footnotes

  1. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [3].
  2. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [4].
  3. ^ See Seovic Engineering Pty Ltd & Ors v Chief Commissioner of State Revenue [2014] NSWCATAD 52.
  4. ^ Chief Commissioner of State Revenue v Seovic Engineering Pty Ltd & Ors [2014] NSWCATAP 94, [10].
  5. ^ See Chief Commissioner of State Revenue v Seovic Engineering Pty Ltd & Ors [2014] NSWCATAP 94.
  6. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [15].
  7. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [20].
  8. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [22].
  9. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [24]-[25].
  10. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [25].
  11. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [26].
  12. ^ See Chief Commissioner of State Revenue v Seovic Engineering Pty Ltd & Ors [2014] NSWCATAP 94, [25]-[26], [33], [48]-[55].
  13. ^ Chief Commissioner of State Revenue v Seovic Engineering Pty Ltd & Ors [2014] NSWCATAP 94, [33].
  14. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [32].
  15. ^ Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242, [6].
Last updated: 18 May 2016