Decision
On 13 December 2023, the NSW Court of Appeal granted an appeal filed by the Chief Commissioner of State Revenue against a ruling from the Equity Division. The appeal concerned a decision from 25 May 2023 in what has become a landmark payroll tax case. This case is Integrated Trolley Management Pty Ltd v Chief Commissioner of State Revenue [2023] NSWSC 557.
Integrated Trolley Management Pty Ltd (ITM) had a contract to offer trolley collection services. These were to Woolworths, ALDI, and IGA (the “clients”) through independent contractors (the “service providers”). These providers were responsible for locating, collecting, and returning trolleys to the respective stores.
State Revenue’s position
The Commissioner assessed that ITM should be considered the employer of the service providers under an employment agency contract. Therefore, ITM would be assessed for payroll tax, as the Commissioner claimed payments to independent contractors as being “taxable wages”. This by way of employment agency contracts in accordance with the Payroll Tax Act 2007 (NSW).
ITM’s Position
In response, ITM initiated proceedings in the Equity Division of the Supreme Court of NSW, contesting the assessment notices. ITM argued that the service providers did not work “in and for” the clients. Therefore, they should not be held accountable for payroll tax. ITM made submissions that the “in and for” test required workers’ be ‘sufficiently integrated’ into the client’s business. The four main factors applied included using client facilities, external nature of the task, demarcation through uniforms, signing into the visitor’s book when on the client’s premises, and minimal interaction with client staff and customers. This was consistent with those referenced in HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue (2018) 108 ATR 84.
The Commissioner proposed a broader application of the “in and for” test. The Commissioner submitted that factors relevant to the test included the essential nature of trolley collection to the client’s business, continuity and regularity of the services, client control, and the absence of genuine independence in subcontractors.
Parker J rejected the Commissioner’s assessment, instead focusing on the characterisation of each subcontract as independent. His Honour emphasised using client facilities, signing the visitor’s book, and wearing uniforms indicated ITM did not fail the “in and for” test.
Primary issues on appeal
On appeal, the primary issues addressed were:
- Whether the employment agency contracts were between ITM and the clients or between ITM and the service providers.
- How to determine if the service providers worked “in and for” the clients.
The Court determined that the Commissioner correctly identified the relevant employment agency contracts as those involving ITM and its supermarket clients. When an employer, who would otherwise pay wages to employees for the work, is a client under an employment agency contract, the legislation aims to impose tax liability on the employment agent.
The Court also concluded that focusing on irrelevant factors was inappropriate when determining whether a service provider works “in and for” a business. These factors included, uniforms, signing into a visitors’ book, and using staff facilities. The statutory test requires subcontractors to carry out work for a client in a manner similar to an employee. This involves regular and ongoing work in the business.
The Court granted the appeal stating the relevant employment agency contracts were between ITM and its clients. This led to payroll tax liability for ITM, and established the decision as a landmark payroll tax case.
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Original Decision: https://www.revenue.nsw.gov.au/help-centre/resources-library/case-summary/2023-nswsc-557