Complete Wardrobes & Showerscreens Pty Ltd v Chief Commissioner of State Revenue  NSWCATAD 97
The Taxpayer sought a review of the Chief Commissioner’s payroll tax assessments of the Taxpayer for 2007 to 2010. The taxpayer argued that the relevant contracts provisions of the Act exempted payments to installers and sales contractors, and to the extent that any payments to contractors were liable, the Chief Commissioner should have applied greater percentage deductions than allowed by the Chief Commissioner.
The Tribunal determined that the contracts concerned were for the provision of sales or installation services, and were therefore not wholly exempt. The Tribunal determined that the installation work performed by contractors that included work related to the conveyance of goods was ancillary to the installation services and therefore were not exempt as contracts for the conveyance of goods or for services ancillary to the conveyance of goods.
The Tribunal determined that the Taxpayer had not presented any evidence to support larger deductions for the non-labour content of payments than the percentages allowed by the Chief Commissioner.
Following an audit, the Chief Commissioner of State Revenue issued payroll tax assessment notices (collectively "the Assessments") to Complete Wardrobes & Shower screens Pty Ltd (“the Taxpayer”) on 4 April 2012 for each of the 2007, 2008, 2009 and 2010 payroll tax years ("the Relevant Period"). Each Assessment included payroll tax, interest, and penalty tax. The Taxpayer objected to the Assessments ("the Objection".)
On 13 July 2012, the Objection was disallowed by the Chief Commissioner. On 31 July 2012, the Taxpayer applied for a review of the assessments to the Administrative Decisions Tribunal, which was replaced by the NSW Civil and Administrative Tribunal (“the Tribunal”) on 1 January 2014. The Taxpayer disputed the amount of tax payable in relation to services provided by contractors as well as the imposition of penalties and interest.
The Taxpayer carried on business at Kirrawee in New South Wales as a manufacturer and installer of shower screens and wardrobes. It utilised the services of contract sales agents and installers and usually engaged such services by agreement with companies used or controlled by those agents and installers.
The Chief Commissioner assessed payments to contractors under the relevant contracts provisions, and allowed deductions of 25% for the non-labour component in respect of installers ( the rate normally allowed for contract carpenters), but no deduction was allowed for sales contractors.
The Chief Commissioner had previously audited the Taxpayer in 2006 in relation to the 2003-2005 tax years and had agreed to a compromise assessments under which deductions of 40% for installation contractors and 10% for sales contractors were allowed. However the Taxpayer was advised that these percentages could only be claimed for future periods if the Taxpayer maintained specific records to support these levels of deductions.
The Taxpayer’s Submissions to the Tribunal
The Taxpayer argued that the contracts were for, or ancillary to, the conveyance of goods, and therefore exempt under s.3A(1A)(a) of the Pay-roll Tax Act 1971 (“the 1971 Act”) and s.32(2)(d)(i) of the Payroll Tax Act 2007 (“the 2007 Act”).
The Taxpayer submitted that if any contracts were not wholly exempt, it was entitled to a partial exemption for a proportion of the amounts paid to contractors which represented the non-labour component.
The Taxpayer cited the 2006 audit, and argued that deductions should be allowed of:
- 40% for installers, the same as was allowed in the 2006 audit; and
- 14.28% for sales contractors because they were required to provide their own vehicles and mobile phones.
The Taxpayer argued that the Assessments were re-assessments of self-assessments by the Taxpayer, and s.9 (“Reassessments”) of the Taxation Administration Act 1996 (“TAA”) required the Chief Commissioner to apply deductions of 40% to the payments to installers and 10% to payments to sales contractors because these deductions had been applied to the 2003 to 2005 assessments.
The Taxpayer submitted that consideration of the penalty tax issue should be left until the Tribunal had determined the Taxpayer’s payroll tax liability.
The Chief Commissioner’s Submissions to the Tribunal
The Chief Commissioner submitted that the Taxpayer bore the onus of proof and that it had not discharged that onus in respect of any of the grounds of its objection.
In relation to the Taxpayers claims for deductions, the Chief Commissioner submitted that the earlier audit for the 2003 - 2005 payroll tax years was not determinative of the relevant period, and that the Applicant provided no evidence as to the non-labour component of contract payments for services or expenses incurred by contractors in providing the services.
The Chief Commissioner agreed with the Taxpayer that the issue of penalty tax should be deferred until the Tribunal determined the substantive payroll tax liability of the Applicant.
Reasons for Decision
Conveyance of goods and ancillary services
The Tribunal was not satisfied on the evidence presented that the contracts between the Taxpayer and sales agents were contracts for the conveyance of goods. The Tribunal found that these contracts were contracts for the provision by the contractors of sales services (50).
The Tribunal noted that evidence was presented that the installers conveyed goods and performed work ancillary to the conveyance of goods. However the Tribunal found that the contracts were for the provision of services of installing shower screens and/or wardrobes for clients of the Taxpayer, and the work involving conveyance of goods and work ancillary to conveyance of goods was ancillary to the provision of those installation services (51).
Therefore neither the sales contracts nor the installation contracts were exempt under s.3A(1A)(a) of the 1971 Act and s.32(2)(d)(i) of the 2007 Act (52).
Non-labour component of payments
The Tribunal noted the Chief Commissioner’s Revenue Ruling PTA 018 (“Contractor deductions”) sets out deductions for materials and equipment for certain types of contractors. None of the categories specified in the Ruling refer to sales contractors or installers of shower screens or wardrobes, but it specifies a 25% deduction for Carpenters and 30% for cabinetmakers/kitchen fitters.
The Ruling also states a Principal may apply to the Chief Commissioner for a determination of a deduction for a contractor type that is not listed. However, the Tribunal noted there was no evidence that the Taxpayer had applied for a Ruling in relation to either its sales contractors or installers.
The Tribunal noted that in order to succeed the Taxpayer was required to establish the facts on which it relies to prove its case (69). The Tribunal found that the Taxpayer had presented no evidence in support of its submissions that a deduction of more than 25% should be applied to payments to installers, nor had it presented any evidence to support any deduction for payments to sales contractors ( 68).
Whether assessments were reassessments
The Tribunal was not satisfied that the Taxpayer’s actions of self assessing and paying payroll tax for the relevant years were “assessments” for the purposes of the Taxation Administration Act 1996 (“the TAA”), having regard to the decision of White J in Freelance Global Ltd v Chief Commissioner of State Revenue  NSWSC 127. Therefore the subsequent assessments by the Chief Commissioner were not reassessments, and s.9 of the TAA did not require the Chief Commissioner to apply the same deductions to the 2007 to 2010 assessments as had been allowed for the previous 2001 to 2004 assessments (see 70) and (85) to (87).
The Tribunal was not satisfied that it was more likely than not that the decisions of the Chief Commissioner in relation to the relevant assessments were incorrect, and affirmed the assessments (88).