Payroll tax on medical practice arrangements (NSW)
In Winday International Pty Ltd v Chief Commissioner of State Revenue  NSWCATAD 270, the New South Wales (NSW) Civil and Administrative Tribunal affirmed the Chief Commissioner of State Revenue's decision to impose payroll tax on contracts the taxpayer had in place with qualified radiologists on the basis that these contracts were found to be employment agency contracts under Division 8 of the Payroll Tax Act 2007 (NSW).
Ultimately, the Tribunal found the taxpayer had advertised their business as being the provision of radiology services to patients. As such, the radiologists were engaged to work in the taxpayer's business. Importantly, the Tribunal was satisfied the facts outlined during the hearing resulted in the patients being clients of the taxpayer rather than clients of individual radiologists.
Remission of penalties and interest in respect of payroll tax underpayments (NSW)
In Tacey v Chief Commissioner of State Revenue  NSWCATAD 255, the NSW Civil and Administrative Tribunal affirmed the Chief Commissioner of State Revenue's decision to disallow the remission of 20 per cent penalty tax as a result of payroll tax assessments issued under audit, on the basis that the taxpayer failed to take reasonable care, despite the use of a qualified accountant who advised on payroll tax matters. Similarly, the taxpayer was unable to provide evidence that the tax shortfall arose solely from circumstances beyond their control, including postal delays and natural disasters. As such, the Tribunal found that the taxpayer had not discharged the onus of proving circumstances that would warrant remission of the penalty tax by the Chief Commissioner.
In contrast, the Tribunal found that additional factors could be taken into account in respect of the remission of the premium interest rate component, but not the market interest rate component. While finding the taxpayer had not taken reasonable care to comply with the law, there was evidence of the taxpayer placing reliance on their advisers in relation to payroll tax issues and the taxpayer had no reason to believe the advisor failed to comply with the Payroll Tax Act 2007 (NSW). Also relevant was the taxpayer's unblemished payroll tax record over many years and cooperation with the Office of State Revenue's investigation. On this basis, the Tribunal found it appropriate to reduce the premium rate component of the interest imposed from 8 per cent down to 2 per cent.
Payroll tax grouping with discretionary trusts (NSW)
In Smeaton Grange Holdings Pty Ltd v Chief Commissioner of State Revenue  NSWSC 1594, the Supreme Court of NSW found for the plaintiffs and revoked the payroll tax assessments issued by the Chief Commissioner of State Revenue. The assessments were issued on the basis that the plaintiffs were grouped for payroll tax purposes on account of a specific individual being a potential beneficiary of a number of discretionary family trusts and therefore being seen to hold a controlling interest in each of the trusts under the payroll tax grouping provisions. The Court held a disclaimer signed by the beneficiary in respect of the relevant trusts had the effect of retrospectively disclaiming their right as a discretionary object of the trusts, with the result that the grouping provisions had no application.
ATO review of recent ABN registrations
The ATO has announced it will be conducting a review of a representative sample of approximately 1,400 Australian Business Name (ABN) registrations issued for individuals, partnerships and trusts between August and October 2016. The purpose of this review is to confirm these ABN applications are valid and there is evidence that either a business is being carried on or steps are being taken to commence a business at the time the ABN is issued.
State Legislative amendments
The following bills introduced into State Parliaments last month have now received Royal Assent:
- State Taxation Acts Further Amendment Bill 2016 (VIC), which amends the Payroll Tax Act 2007 to update the way the exempt rate used in the calculation of the exempt component of motor vehicle allowances is determined.
- Taxation and Related Legislation (Miscellaneous Amendments) Bill 2016 (TAS), which amends the Payroll Tax Act 2008 to ensure harmonisation with Victoria and NSW in relation to the payroll tax treatment of ownerdriver contracts and anti-avoidance provisions related to excluded contracts, and removal of relevant contractor exclusions for insurance and door-to-door sales in line with NSW amendments. See the State Taxes Update for further details.
- Taxation and Related Legislation (Miscellaneous Amendments) Bill 2016 (TAS), which amends the Taxation Administration Act 1997 to extend the standard reassessment time frame and a taxpayer's entitlement to a refund from three to five years, to better align with Victorian and NSW reassessment and refund time frames.
Recently registered PAYG legislative instruments
The following legislative instruments dealing with the Pay-As-You-Go (PAYG) withholding regime were registered during November:
- PAYG Withholding variation for foreign resident capital gains withholding payments - marriage or relationship breakdowns, which removes the requirement for withholding when ownership of a relevant asset is transferred under the Family Law Act 1975 or a state or territory law relating to breakdowns of relationships between spouses resulting in a rollover available under Subdivision 126-A of the Income Tax Assessment Act 1997.
- PAYG Withholding Variation: Donations to deductible gift recipients, which allows a payer to reduce a PAYG withholding payment by the amount they pay to a deductible gift recipient on a payee's behalf (for example, under a workplace giving program).
- PAYG Withholding Variation: Body Corporate, which ensures there is no withholding required for payments to a body corporate of residential or commercial property by a member of the body corporate.
- PAYG Withholding Variation: Performing Artists, which applies a flat withholding rate of 20 per cent to payments to performing artists for performing in a promotional activity.
Globally mobile employees: whose labour laws apply?
This PwC LegalTalk Alert discusses recent Australasian cases which provide guidance as to factors to consider when determining which country's employment laws should apply.