The NSW Chief Commissioner of State Revenue’s (Commissioner) application to the High Court for special leave to appeal the NSW Court of Appeal’s decision in Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126 has been denied, the High Court finding the appeal “would have insufficient prospects of success”.

Background

Between 1 July 2009 and 30 June 2013, the taxpayer (Downer EDI Engineering Pty Ltd) had a partnership with Foxtel to deliver and install television equipment at Foxtel’s customers’ homes. The taxpayer engaged subcontractors to collect the equipment, transport it to the customer’s homes, conduct a safety inspection of the home, install the equipment, check the system works and demonstrate it to the customer and then clean up after themselves.

The Commissioner issued the taxpayer amended payroll tax assessments for the years noted. The Commissioner argued that payments made to independent contractors were payments made under “relevant contracts” and were therefore subject to payroll tax. The key issue at hand was whether the services provided by the subcontractors were ancillary to the supply of the goods under the subcontract.

Court of Appeal Decision

The Court of Appeal dismissed the Commissioner’s appeal from the Supreme Court of NSW and held that the taxpayer was not subject to payroll tax on payments to subcontractors. The Court found that the services provided by the subcontractors were ancillary to the supply or use of the good.

The Court held that the services being supplied to Downer enabled it to fulfil its obligations under contracts with end users. Such installation services were ancillary to the supply of equipment under the subcontract and in the absence of equipment supplied would provide no benefit to the customer until they were installed.

The appeal was dismissed.

Application for Special Leave

The Commissioner sought leave from the High Court to appeal the decision. The crux of the Commissioner’s case being that the interpretation of “supply of goods” by the Court of Appeal was incorrect. The application was dismissed with costs, Justice Gageler stating that it had insufficient chance of success and therefore did not warrant the grant of special leave.

Key Takeaways

Revenue authorities, such as Revenue NSW and the Victorian State Revenue, have been aggressively pursuing taxpayers in recent years in respect of payroll tax compliance and this case was a further demonstration of that. However, the breadth of the payroll tax provisions may not be as wide, and the exemptions may not be as narrow, as the authorities may be attempting to apply.

If you have questions regarding your payroll tax liabilities contact one of our specialist state tax lawyers:

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au