In Nationwide Towing & Transport Pty Ltd v Commissioner of State Revenue (No 2) [2018] VSC 609, the Victorian Supreme Court has handed down another decision* against the Victorian State Revenue Office by setting aside payroll tax assessments issued in relation to payments to subcontractors.
In this matter, the taxpayer was contracted by RACV Roadside Services Pty Ltd (RACV) to provide emergency roadside services. The taxpayer in-turn engaged and paid subcontractors to provide those services to the RACV. Payroll tax applies not only to the payment of wages to employees but also to payments to contractors under a “relevant contract” unless an exemption applies. One of those exemptions is that the services provided by the contractors were services performed by persons who ordinarily performed services of that kind to the public generally in that financial year (section 32(2)(b)(iv) of the Payroll Tax Act 2007 (Vic)).
Here, the taxpayer argued that the subcontractors did provide the services to the public. This was on the basis that the subcontractors not only provided the services they were engaged to by the taxpayer (eg towing vehicles) but would often provide to the public additional services (such as mechanical repair services and the supply of car parts not covered by the RACV contract). On the other hand, the Commissioner’s position was that, in order to be satisfied that the subcontractors ordinarily performed services of that kind to the public generally, one of the relevant enquiries (as outlined in Revenue Ruling PTA.021) is whether the contractor was conducting a “genuinely independent business”. Here, the Commissioner argued that the subcontractors provided services to the public (RACV members) in the course of providing services to the taxpayer pursuant to their agreements with the taxpayer.
Justice Croft decided in favour of the taxpayers. His Honour identified that the correct question at law was whether the subcontractors had indeed provided services of that kind to the public generally. The further criterion read in from Revenue Ruling PTA.021 about whether the contractors ran a genuinely independent business was not the relevant question at law and not the proper interpretation of the provision.
Given the breadth and increasing scrutiny of the payroll tax provisions by Revenue Offices, this case importantly provides another layer of clarity on how they should be interpreted.
It also serves as an important reminder that public rulings are not law and may merely represent the Commissioner’s opinion of their interpretation of a provision. The tendency to revert to public rulings as the correct legal position may at times be a faulty position and often serves the best interest of revenue authorities rather than taxpayers. Taxpayers and advisors should always revert back to the provisions and case law and should consider challenging the Commissioner’s opinion where an “aggressive” interpretation of the law has been taken.
To discuss this further or for more information please contact:
Denise Tan
Senior Associate
Sladen Legal
T +61 3 9611 0160 | M +61 438 714 965
Level 5, 707 Collins Street, Melbourne, 3008 Victoria, Australia
E: dtan@sladen.com.au
Phil Broderick
Principal
Sladen Legal
T +61 3 9611 0163 l M +61 419 512 801
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: pbroderick@sladen.com.au
*Please note that this case is now subject to an appeal.
