Decision Impact Statement released by the ATO for the John Holland case

The Australian Taxation Office (ATO) has issued a Decision Impact Statement in relation to the John Holland Group Pty Ltd & Anor v Commissioner of Taxation [2015] FCAFC 82 case concerning whether the provision of flights as part of a fly-in fly-out arrangement for employees was subject to fringe benefits tax (FBT), and whether the otherwise deductible rule applied to reduce the taxable value of the fringe benefit to nil.

Victoria (VIC): Application of payroll tax to workers hosting promotional events

In Styling Australia Pty Ltd v Commissioner of State Revenue [2015] VCAT 1792 the applicant appealed against the Chief Commissioner’s decision to disallow an objection against payroll tax assessments in which the Commissioner treated promotional staff as employees of the applicant.

The applicant’s business involved the provision of hosting and promotional staff for events, functions, carnivals and marketing campaigns.

In taking the totality of the relationship into account, the Tribunal found that the relationship between the applicant and the workers was an employer-employee relationship and not a relationship where the worker was an independent contractor. Relevantly, the workers had no power to delegate their duties, had no commercial risk and the equipment provided by the worker was largely limited to personal items.

In addition, the Tribunal considered whether the employment agency contract provisions would apply to the arrangement, ultimately finding that these provisions would apply on the basis that the services of the workers were procured by the applicant for one of their clients.

Australian Capital Territory: Payroll TaxPenalty tax in circumstances where the tax default occurred solely due to circumstances beyond the taxpayer’s control

In Commissioner for ACT Revenue v G Kalsbeek Pty Ltd [2015] ACAT 90 the issue of penalty tax remission was considered on appeal. Ultimately, the Tribunal found that remission of the penalty tax could not be granted as the taxpayer was unable to demonstrate that all of the causes leading to the payroll tax underpayment were beyond the taxpayer’s control.

While the Tribunal acknowledged that the sole director of the company had serious health issues and that this was a major factor in the underpayment of payroll tax, the director was also seen to have only limited knowledge of the company’s payroll tax obligations and had not taken steps to acquaint himself with these obligations. In the words of the Tribunal, “a failure to understand the legislation or to obtain advice about it does not put that ignorance beyond the control of the respondent or its director”.

This case serves as a reminder that it is the taxpayer’s responsibility to ensure they are compliant with their payroll tax obligations. If taxpayer’s are unsure of their compliance with the legislation, it is recommended that they proactively seek advice from their tax advisors prior to any revenue authority investigations.

New South Wales: Payroll tax matter regarding ‘employment agency contracts’ set aside by Tribunal to be reconsidered

Following the decision in favour of the Chief Commissioner of Taxation in Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227, the taxpayer appealed against the Tribunal decision. This appeal was on the grounds that the employment agency provisions in the New South Wales (NSW) Payroll Tax Act did not apply because Qualweld was required to achieve a result in the form of completion of specific welding works, rather than to solely supply the services of welders and boilermakers to its clients.

In failing to refer to evidence from Qualweld’s two principal witnesses, the appeal Tribunal found that this amounted to an error of law. Accordingly, the decision was set aside to be reconsidered in full by the Tribunal at a later date.

Limits for FBT entertainment benefits

From 1 April 2016, there will be limits on the use of fringe benefits tax (FBT) concessions for salary packaged meal entertainment and entertainment facility leasing expenses (meal and other entertainment benefits). These changes will impact Public Benevolent Institutions and Health Promotion Charities, Public and Not for Profit Hospitals and Public Ambulance Services. PwC Page 6

All salary packaged meal and other entertainment benefits will be subject to a separate single grossed-up cap of $5,000. Benefits exceeding this cap will count towards an employee's existing FBT exemption or rebate cap. If the reporting threshold is exceeded, these benefits will be reported on an employee’s payment summary.

Recent legislative amendments

A number of legislative amendments have passed recently including:

  • NSW: State Revenue Legislation Further Amendment Act 2014 — Commencement Proclamation (2015 No 733) – provides that the repeal of two payroll tax exemptions for payments to certain contractors, (i.e., door-todoor sales persons and insurance agents) commences from 1 January 2016
  • VIC: State Taxation Acts Further Amendment Act 2015 – limits the payroll tax exemption for new entrant apprentices and trainees to those registered with approved group training organisations only. This amendment aligns the definition of ‘new entrant’ with the current practice of group training organisation.

Single Touch Payroll announcements

The Federal Government has announced changes to employer reporting of pay-as-you-go (PAYG) withholding obligations and superannuation contributions as part of its Single Touch Payroll and Standard Business Reporting initiatives. The requirement for reporting superannuation contributions to funds under SuperStream will not change with the introduction of Single Touch Payroll.

In addition to PAYG withholding and superannuation contributions being reported to the ATO through Standard Business Reporting software and Single Touch Payroll, a number of other employment processes will be streamlined. Individuals will have the option of completing their Tax File Number (TFN) declarations and Superannuation Standard Choice forms using myGov or through their employer’s business management software.

The ATO will be conducting a pilot in the first half of 2017 to demonstrate the deregulation benefits for businesses, with a focus on small businesses. All businesses will be able to commence Single Touch Payroll reporting from 1 July 2017.