Small business Grants (Employment Incentive) – NSW

The Small Business Grants (Employment Incentive) Act 2015 received Royal Assent on  29 June 2015.The New South Wales incentive applies to small business employers that are not currently registered for payroll tax and operates similar to the current NSW Jobs Action Plan rebate by establishing a grant scheme of up to $2,000. The relevant period is from 1 July 2015 to 30 June 2019 and requires the individual to  remain employed after 12 months and for the business to maintain its headcount.

Grain Growers Limited v Chief Commissioner of State Revenue [2015] NSWSC 925

Earlier this month, the NSW Supreme Court handed down its decision as to whether Grain Growers is  exempt from payroll tax under section 48 of the Payroll Tax Act 2007.

The Court accepted Grain Growers’ sole or dominant purpose was the advancement of agriculture or the grain industry and these were charitable purposes.

On the second issue of whether the wages paid were in connection with the charitable purpose, the  Court held the test to be applied is whether the activities of the relevant body are such that bodies with the same charitable purpose ordinarily perform them. Significantly for Grain Growers, the Court commented, “The phrase “ordinarily performed” would otherwise be deprived of any real  application, if activities uniquely performed by the particular body could be treated as satisfying that requirement merely because a particular entity performed them to support its charitable  purpose, where other bodies with the same purpose did not ordinarily do so.”

Accordingly, in respect of the wages paid by the bodies that had a commercial character and the wages of Grain Grower’s executive and  administrative staff, the Court was not satisfied they were for work of a kind “ordinarily  performed” in connection with the charitable purpose of Grain Growers, and therefore these wages  are not considered exempt from payroll tax.

Association of Mining and Exploration Companies Inc and Commissioner of State Revenue [2015] WASAT 74
The Commissioner of State Revenue (WA) granted the taxpayer (AMEC) an exemption from pay-roll tax from 1 July 2012 on the ground that it is a  'charitable body or organisation'. The Pay-roll Tax Assessment Act 2012 (WA) provides that the  Commissioner may specify any day – past, present or future – from when the exemption is to apply,  but Commissioner's Practice PT 3.0 says that 'generally' the Commissioner will only apply the exemption from the first day of the financial year in which the application is made.

The Tribunal concluded that the appropriate starting point was that the exemption should come into  force from the financial year in which it is granted and then consider whether there are  circumstances which would dictate that another date is more appropriate. The applicant did not  provide any other circumstances which could be taken into consideration and accordingly the Tribunal found that the Commissioner's decision was correct.

Toveety Maintenance Services Pty Limited v The Chief Commissioner of State Revenue [2015] NSWCATAD 137

The Civil and Administrative Tribunal of New South Wales upheld the Commissioner’s decision that  Toveety Maintenance Services Pty Ltd should be grouped with Howard Heavy Haulage Pty Ltd for 
payroll tax purposes.

The Tribunal noted a number of factors in reaching its decision that the companies are connected and not independent from each other. The relevant factors included the ownership and control of  both companies vested primarily in a husband and wife team, there was significant amount of  intercompany loans between the companies, including an arrangement whereby one could require the  other to advance a sum of up to $1.5 million on demand and guarantees provided for no consideration. There were significant levels of trade between group members and the companies were engaged in similar business activities.

G Kalsbeek Pty Ltd v Commissioner for ACT Revenue (Administrative Review) [2015] ACAT 47
The applicant failed to register for payroll tax in ACT and pay liabilities between 1 July 2007 and  30 June 2012. Following an investigation, ACT Revenue issued assessments for those tax years  with a 50% penalty. The applicant requested a remission of the penalty, which was subsequently denied.

Based on the evidence, the Tribunal was not satisfied the applicant exercised reasonable care with  its tax obligations, nor did it have a reasonable excuse for its non-compliance.However, the Tribunal was satisfied that the default was solely due to circumstances beyond the  control of the taxpayer, namely that the illness of Mr Kalsbeek – the applicant’s sole director and  owner - was a significant unforeseen event that affected the management of the applicant’s  financial affairs, and exercised the discretion under section 31(6) of the Payroll Tax Act to remit  penalties applicable to the period 1 July 2007 to 30 June 2011. The full penalty applied from 1 July 2011 onwards, which was when Mr Kalsbeek returned to work and engaged advisers to handle his  tax affairs.

Limiting certain FBT concessions

On 29 June 2015, the Commonwealth Treasury released exposure draft legislation on measures  announced in the 2015-16 Federal Budget to limit Fringe Benefits Tax (FBT) concessions on certain  salary packaged entertainment benefits from 1 April 2016, for employees of public benevolent institutions, health promotion charities and employees of public and not-for-profit hospitals and public ambulance services.

The measure will introduce a separate single grossed-up cap of $5,000 for salary packaged meal  entertainment and entertainment facility leasing expenses (entertainment benefits) for employees   of such employers. Currently these employees can salary package entertainment benefits with no FBT  payable by the employer, and without the benefits being reported.

All salary packaged entertainment benefits of these employers will become reportable fringe  benefits under the proposed measure.

Closing date for submissions is 21 August 2015.

Modernising car expense deductions

On 16 July 2015, the Commonwealth Treasury released exposure draft legislation containing measures  which seek to remove the ‘12 per cent of original value method’ and the ‘one-third of actual  expenses method’ for ‘work-related car expense’ deductions, and to introduce the single 66 cents per kilometre rate from the 2015-16 income year, as announced in the 2015-16 Federal Budget. 

Comments are due by 5 August 2015.