AES Wiring Pty Limited and AKS Distributions Pty Limited v Chief Commissioner of State Revenue  NSWADT 11
|Date of judgement||1 February 2012||Proceeding No.||116053|
|Judge(s)||J Block, Judicial Member|
|Court or Tribunal||Administrative Decisions Tribunal|
|Legislation cited||Taxation Administration Act 1996 (NSW)|
|Catchwords||Payroll tax - penalty and interest charged in consequence of a default; consideration of case law and legislation|
|Cases cited||B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue  NSWADTAP 14
Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor  NSWADTAP 19
Downs v. Chief Commissioner of State Revenue  NSWADT 51
Macsif Pty Ltd v. Chief Commissioner of State Revenue  NSWADT 116
Nikaed Pty Ltd v. Chief Commissioner of State Revenue  NSWADT 21
Re Confidential and Commissioner of Taxation  AATA 415
Peco Arts Inc v Hazlitt Gallery Ltd  3 All ER 193
Trust Co. of Australia v Chief Commissioner of State Revenue  NSWADT 21
Weyers v Commissioner of Taxation  FCA 818
The taxpayers in these proceedings, AES Wiring Pty Ltd ("AES") and AKS Distributions Pty Ltd("AKS") (the taxpayers), sought a review of a decision by the Chief Commissioner to impose penalty tax of 25% and the market rate of interest with respect to a failure to pay payroll tax as a "business group" for the period 1 July 2006 to 30 November 2010 ("the relevant period"). The taxpayers did not dispute the primary decision that they be treated as being grouped for the purposes of the Pay-Roll Tax Act 1971, the Taxation Administration Act 1996 ("the TAA"), and the Payroll Tax Act 2007 (the 2007 Act).
The Tribunal was not satisfied that the taxpayers had demonstrated any basis for it to exercise the discretion to remit the interest or penalty tax, and the decisions under review were accordingly affirmed.
AES commenced trading and employing staff in January 2001, and AKS commenced trading and employing staff in June 2006. From the date on which AKS commenced trading, both companies were under the common control and ownership of the same persons and were grouped from that date under the relevant provisions of the TAA (prior to 1 July 2007) or the 2007 Act (from 1 July
AES had been registered for payroll tax purposes in 2005 following an Office of State Revenue ("OSR") investigation. AKS was registered for payroll tax purposes after an OSR investigation in November 2010 that resulted in the assessments challenged by the taxpayers in the Tribunal proceedings.
The Chief Commissioner issued assessments to both taxpayers which included 25% penalty tax plus the market rate of interest as per the relevant provisions of the TAA, with the premium component of interest being remitted.
The taxpayers submitted that the Tribunal should:
remit the market component of interest with respect to the tax defaults; and either
determine that no penalty was payable pursuant to s.27(3)(a) of the TAA, on the basis that the taxpayers had taken "reasonable care" to comply with the taxation law; or
otherwise remit the penalty tax pursuant to s.33 of the TAA.
Remission of the market component of interest
The Tribunal was not satisfied that the market rate of interest imposed with respect to the default should be remitted. The Tribunal noted the authorities such as Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor  NSWADTAP 19 which have held that the market rate is only to be remitted where a default is entirely the fault of the Chief Commissioner, or where the taxpayer's default is due to circumstances beyond their control. The Tribunal was not satisfied that either of these situations arose in the present case.
Penalty tax and reasonable care
The taxpayers argued that in conducting their tax affairs, they had at all times relied upon the advice of their accountant, who had never informed them that the taxpayers should be registered as a business group for payroll tax purposes.
The Chief Commissioner submitted that consistent with authorities such as Weyers v Commissioner of Taxation  FCA 818, reliance on professional advice is not in itself determinative of whether reasonable care has been taken by a taxpayer. Other factors, such as the previous experience of the taxpayer in handling their revenue affairs, the nature of the advice received from the professional adviser, and the taxpayer's overall level of business acumen should be taken into account in determining whether reasonable care has been taken.
Noting that AES had previously been investigated for a payroll tax default, alleged by the taxpayers to have been caused by an oversight by the same accountant,, the Chief Commissioner submitted, inter alia, that it could not be said that it was reasonable for the taxpayers to rely solely on that accountant’s advice in managing their tax affairs.
The Tribunal found that in all of the circumstances the taxpayers had not discharged the onus of proving that they had taken "reasonable care" to comply with the relevant taxation laws. The Tribunal took into account the apparent unreliability of the accountant’s advice, as demonstrated over a period of time, and the failure of AKS to register for payroll tax for more than four (4) years after it began employing, either on a grouped basis or otherwise, despite the fact that AES, the company with which it was grouped, had previously been investigated for a default. (However, the Tribunal noted that the accountant had not been called to give evidence, and made no finding as to whether or not the accountant’s advice had been a contributing factor in the tax defaults by the taxpayers.)
General discretion to remit penalty tax
The Tribunal was not satisfied that the taxpayers had demonstrated any other basis for it to exercise the discretion to remit the penalty tax under s.33 of the TAA.
The decision under review was accordingly affirmed.