Grubers Beckett Pty Limited v Chief Commissioner of State Revenue  NSWCATAD 30
|Date of judgement||21 March 2014||Proceeding No.||136012|
|Judge(s)||J Block, Senior Member|
|Court or Tribunal||NSW Civil and Administrative Tribunal|
|Legislation cited||Payroll Tax Act 2007 (NSW)
Taxation Administration Act 1996 (NSW)
|Catchwords||Payroll tax – onus of proof - de-grouping|
|Cases cited||Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor  NSWADTAP 19
Jones v Dunkel 1959 (101) CLR 298
On 21 March 2014 Senior Member Block delivered his decision. The Crown Solicitor acted for the Chief Commissioner, the Chief Commissioner of State Revenue (the Chief Commissioner).
The decision under review in these proceedings was the Chief Commissioner’s disallowance of an objection to assessments issued to the taxpayer pursuant to the Payroll Tax Act 2007 (“PT Act”) (“the assessments”). The assessments concerned the period commencing 1 April 2007 to 31 December 2011 (“the relevant period”).
The assessments were issued on the basis that the taxpayer (“Grubers Beckett”) and Business Forum Pty Ltd (“Business Forum”) formed a payroll tax group during the relevant period, along with A.C Gruber and L. Gruber partnership (“the Partnership”) and (prior to its liquidation) Business Forum NSW Pty Ltd (“Business Forum NSW”). Prior to its liquidation, Business Forum NSW provided the same accounting, administrative, employment and management services as Business Forum to Grubers Beckett. Grubers Beckett carried on an accountancy business providing accountancy services to various locations and the Partnership carried on the business of providing accounting services.
The principal issues that arose for consideration were:
whether Grubers Beckett, Business Forum and the Partnership formed a payroll tax group for the relevant period;
if so, whether a determination should be made that Grubers Beckett and Business Forum were not part of a group and should be “de-grouped” under s.79 of the PT Act; and
whether interest on unpaid payroll tax was correctly applied.
Whether there was a payroll tax group
The Chief Commissioner submitted that the commonly controlled business provisions in s.72 of the PT Act applied and that Grubers Beckett, Business Forum and the Partnership constituted a group for payroll tax purposes during the relevant period.
The Chief Commissioner submitted that:
Alfred Gruber, the sole director of the taxpayer, and his wife, Louise Gruber, as a set of persons had a controlling interest in the businesses carried on by Grubers Beckett, Business Forum and the Partnership during the relevant period; and
Accordingly, Grubers Beckett, Business Forum and the Partnership were a payroll tax group during the relevant period.
Mr Gruber gave evidence that the taxpayer intended during the relevant period to enter into franchise arrangements with various persons who would become franchisees of the offices in NSW and QLD. The franchisees would then be entitled to the profits made from the franchises. Mr Gruber also gave evidence that he had no effective control of the offices that were intended to be franchised as control of those businesses effectively resided in the principals of those offices.
The Chief Commissioner submitted in relation to this argument that whether or not the owners of Grubers Beckett had an intention to franchise certain offices and whether or not any steps were taken to act on that intention were irrelevant to the question of the payroll tax grouping. The submission that Mr Gruber did not have effective board control of Grubers Beckett could not be accepted. He was the sole director of the company carrying on the business and the only person entitled to vote and pass resolutions. Moreover, the submission failed to deal with the grouping of Business Forum and the business carried on by Grubers Beckett by way of 100% shareholding of Alfred and Louise Gruber.
Whether the Grubers Beckett and Business Forum should be de-grouped
The Chief Commissioner submitted that the accounting service business carried on by Grubers Beckett and the business carried on by Business Forum were wholly connected and not independent in any sense. Accordingly, a determination under s.79 of the PT Act was not available.
Interest was charged at both the market and premium rates. Penalty tax of 25% was charged for the period prior to 1 April 2009. The Chief Commissioner submitted that the decision not to remit interest was correct. The tax default could not be attributed to the Chief Commissioner.
Senior Member Block affirmed the decision of the Chief Commissioner to group the relevant entities, and to not de-group Grubers Beckett and Business Forum on the basis that Business Forum acted as a service company for Grubers Beckett and the two companies were very closely linked. It followed that the grouping of the companies was required by law.
In relation to the franschisee argument, the following facts were noted by the Tribunal:
There were no written agreements between Grubers Beckett and the franchisees that evidenced the operation of the franchises prior to the end of the relevant period;
Mr Gruber’s evidence was not corroborated by the evidence of any other available witness because the taxpayer decided not to call evidence from the persons it described as “the principals” of the offices owned by the taxpayer;
No separate financial statements were produced for any of the asserted separate franchises; and
Mr Gruber was the sole director of the franchised companies.
Senior Member Block determined that the taxpayer did not discharge its onus of proof. Mr Gruber’s evidence was not credible due to a number of inconsistencies and the evasion of certain questions posed to him. Furthermore, the failure of the taxpayer to call Louise Gruber resulted in the Jones v Dunkel rule being applied. As such, the Tribunal inferred that Mrs Gruber’s evidence would not have assisted the taxpayer’s case.
Senior Member Block further determined that neither the market rate nor the premium rate of interest should be remitted as the Chief Commissioner was not responsible for the default by the taxpayer, and the persons responsible for the companies were experienced accountants who should have known that the companies should be grouped. Furthermore, the Taxpayer had not advanced any valid reason or basis for de-grouping or for any reduction in interest.