Payroll Tax – De-grouping (NSW)

In Namoi Tyreright Pty Ltd v Chief Commissioner ofState Revenue [2016] NSWCATAD 88 the issue of de-grouping was brought before the NSW Civil and Administrative Tribunal. The case centred on whether the Chief Commissioner had acted correctly in deciding not to exercise discretion to de-group the entities under section 79 of the Payroll Tax Act 2007.

The Tribunal confirmed the decision of the Chief Commissioner of State Revenue not to exercise his discretion to de-group the Applicant and another member of the group (Tyres4U) for payroll tax purposes, finding that the Applicant had not discharged its onus of satisfying the Tribunal that the business of the Applicant was carried on independently of and was not connected with the business of Tyres4U.

This was despite submissions by the Applicant that the interaction between the two entities was limited to the Applicant’s use of a trademark owned by Tyres4U, the purchase of up to 30 per cent of its trading stock from Tyres4U and assistance by Tyres4U staff to the Applicant with the establishment of phone and bank accounts.

In reaching its decision, the Tribunal considered that the relevant matters included the legal control able to be exercised by Tyres4U over both the owner/manager and the dealer in relation to the manner in which the Applicant’s business was carried out, the expectation that a nominee of Tyres4U sat on the board of directors of the Applicant and is a signatory to its bank account, and the strategy of Tyres4U in relation to the development of the Tyreright network.

Once again, cases such as these serve as a reminder that the onus of proof rests with the taxpayer in respect of de-grouping and they should ensure sufficient evidence is maintained to support their tax position.