On 13 December 2023, the Supreme Court of NSW Court of Appeal granted an appeal filed by the Chief Commissioner of State Revenue against a ruling from the Equity Division handed down on 25 May 2023 in 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 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.
The Chief Commissioner of State Revenue assessed ITM should be considered the employer of the individuals collecting the service providers’ workers under an employment agency contract, and therefore ITM was assessed for payroll tax, as the Chief Commissioner claimed payments to independent contractors as being “taxable wages” under employment agency contracts in accordance with the Payroll Tax Act 2007 (NSW).
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, and 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, and consistent with those reference in HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue (2018) 108 ATR 84, 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.
The Chief Commissioner proposed a broader application of the “in and for” test, suggesting simultaneous work for both ITM and the clients. It was submitted that the factors relevant to the “in and for” 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 Chief Commissioner’s assessment, instead focusing on the characterisation of each subcontract as independent. His Honour emphasised using client facilities, sign the visitor’s book, and wearing uniforms, concluding that ITM did not fail the “in and for” test, overturning the assessments.
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; and
- How to determine if the service providers worked “in and for” the clients.
Regarding the first issue, it was determined that the Chief 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.
Concerning the second issue, it was concluded that focusing on irrelevant factors, such as uniforms, signing into a visitors’ book, and using staff facilities, was inappropriate when determining whether a service provider works “in and for” a business. The statutory test requires subcontractors to carry out work for a client in a manner similar to an employee, involving regular and ongoing work in the business.
The Court of Appeal allowed the Chief Commissioner’s appeal, stating the relevant employment agency contracts were between ITM and its clients, leading to payroll tax liability for ITM.
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