Australia – Human Resources Tax Developments.

At a glance

Payroll tax

Issue of Revenue Ruling No JAP 001 by the NSW Office of State Revenue
On 19 October 2015, the NSW Office of State Revenue (OSR) issued Revenue Ruling No. JAP 001 on late applications for registration of new jobs under the payroll tax rebate scheme. The scheme was established under the Payroll Tax Rebate Scheme (Jobs Action Plan) Act 2011 (NSW) (Act) to assist with the creation of new jobs.

Under the scheme, businesses in NSW that increase the number of full-time equivalent employees will receive a payroll tax rebate for employing each additional employee in a new job created after 1 July 2011. A rebate of $2,000 is payable if eligible employment is maintained for at least one year and a further rebate of $3,000 is payable if eligible employment is maintained for two years. Applications for the rebate will close on 30 September 2019 for new jobs created up to 30 June 2019.

Currently, under the Act, an employer must apply for registration of a new job to receive the rebate within 30 days after the relevant employment commenced. The Chief Commissioner of State Revenue is also given a discretion to accept registration applications after the 30 day period has passed. Since the commencement of the scheme, the Chief Commissioner's practice has been to accept all late applications for registrations without justification, ie without enquiry as to the reasons for late applications.

The Revenue Ruling states that from 23 November 2015, the Chief Commissioner will only accept a late application for registration (ie one made more than 90 days after commencement of the employment) without justification if having regard to all relevant factors, the Chief Commissioner considers it appropriate to do so. The relevant factors include:

•   the purpose of the scheme;

•   the reasons for the delay in applying for registration; and

•   the length of the delay.

  An application for registration made more than 90 days after commencement of the employment must be accompanied by a submission explaining why it should be accepted more than 30 days after commencement of the employment and the reasons for the failure to apply within that period.

De-grouping denied to NSW taxpayer
On 19 October 2015, the NSW Civil and Administrative Tribunal (Tribunal) affirmed the decision of the Chief Commissioner of State Revenue to exclude Regis Mutual Management Pty Ltd (Regis) from a payroll tax group in Regis Mutual Management Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 213.

The Commissioner had issued payroll tax assessment notices to Regis in respect of the period 1 June 2008 to 31 December 2011 (relevant period) on the basis that Regis was grouped with Capricorn Society Ltd (CSL) and Regis Mutual Management Australia Pty Ltd. In December 2012, Regis lodged a de-grouping application for the Commissioner to make a determination to exclude Regis from the group. The Commissioner declined the application on the basis that the group arose under section 71 of the Payroll Tax Act 2007 (NSW) (groups arising from the use of common

employees).

Regis contended that Regis did not control the manner in which CSL employees conducted their work for Regis and further, the absence of control meant that CSL employees were not performing duties in connection with Regis's business but rather, were supplying services. Regis also argued that there were no specified or dedicated CSL employees that performed the work and they performed work remotely and not on site.

The Tribunal decided that having regard to the evidence, the business of Regis was not carried on independently of and was connected with the carrying on of one or more businesses carried on by CSL. The evidence included the following:

•   the nominees of CSFS (a subsidiary of CSL) in the board of directors of Regis were the Chief Executive Officer and Chief Financial Officer of CSL until about May 2011 and they held an effective veto in respect of decisions of that board by virtue of a 50% shareholding of CSFS in Regis;

•   there were extensive and important services provided by CSL to Regis throughout the relevant period;

•   the fees paid by Regis for the provision of services were without any evidence of Regis considering obtaining those services from a different provider;

•   there was a lengthy delay in documenting the Services Agreement;

•   a group workers’ compensation insurance was effected for much of the

  relevant period;

•   CSL provided guarantees for the benefit of Regis without any consideration

  from Regis to CSL and without any evidence of any indemnity; and

•   $300,000 capital was provided by CSL to Regis, which was important to Regis

  in being able to maintain its solvency and continue to carry on its business, and it was not uncommon for CSL to provide financial support to its controlled entities.

Supreme Court of Victoria refuses to grant the Law Institute of Victoria an exemption from liability to pay payroll tax
The Supreme Court of Victoria (Court) decided in Law Institute of Victoria v Commissioner of State Revenue [2015] VSC 604 on 21 October 2015 that the Law Institute of Victoria (LIV) was not entitled to an exemption from liability to pay payroll tax in Victoria on the basis that it was a non-profit organisation having as its sole or dominant purpose a charitable purpose within the meaning of section 48 of the Payroll Tax Act 2007 (Vic) (Act). The LIV was seeking an exemption for the tax periods 1 July 2008 to 30 June 2013 (relevant period).

The LIV contended that during the relevant period, its dominant purpose was to promote the development of the law and the legal profession for the benefit of the public, which was a charitable purpose. The LIV submitted that any benefits to the LIV members were an incidental consequence of the LIV's pursuit of its charitable purpose. Further, the LIV argued that during the relevant period all its staff members were involved in work of a charitable nature and to the extent they were involved in commercial activities, it was in furtherance of the charitable purpose of the LIV.

The meaning of "charitable" purpose was not in contention and the Court ruled that it is to be understood by reference to general law. In relation to the meaning of "dominant" purpose, the Court decided that the word means a "prevailing or ruling characteristic". For a purpose to be dominant, it must be established as the main object of an organisation and it will not be sufficient to show that the organisation has other independent objects or activities which are lawfully pursued "without having any

essential bearing upon the pursuit of the main object".

The Court considered that the enquiry to be undertaken in determining whether an entity is an organisation having as its dominant purpose a charitable purpose requires regard to the objects, purposes and activities of the organisation. Justice Digby stated that the starting point for the enquiry would be the objects that were in clause 2 of the LIV's constitution.

In Digby J's view, the objects in the LIV's constitution included a mix of charitable objects, regulatory objects and objects that were designed to promote the members' interests. Further, the LIV's constitution did not provide clarity as to which of the objects represented the LIV's main or dominant object or purpose. His Honour then turned to the LIV's activities and resources for further guidance.

The Court concluded that during the relevant period, in major part, the LIV did not carry out its regulatory and membership activities to enable it to directly or indirectly promote its charitable purposes. The LIV's regulatory and membership activities did not have an essential bearing on the pursuit of and were not incidental or ancillary to the LIV's charitable objectives. The LIV's membership and regulatory activities constituted a substantial independent objective of the LIV and thus, the LIV did not have as its dominant purpose a charitable purpose and was not exempt from payroll tax for the relevant period.

Fringe benefits tax

Limits on the concessional treatment on salary packaged entertainment benefits
The Tax and Superannuation Laws Amendment (2015 Measures No 5) Bill 2015 (Bill) was introduced on 15 October 2015. The Bill seeks to make amendments to the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTAA 1986) to limit the concessional treatment on salary packaged entertainment benefits which include meal entertainment benefits and entertainment facility leasing expense benefits.

The amendments will apply to the 2016-17 fringe benefits tax year onwards and include the following:

•   removing the reporting exclusion in respect of salary packaged entertainment benefits so that salary packaged entertainment benefits would always appear as part of an employee's reportable fringe benefits total included on their payment summaries;

•   removing access to elective valuation rules when valuing salary packaged entertainment benefits to prevent unintended and excessively concessional values being applied to the benefits; and

•   introducing a cap on the total amount of salary packaged entertainment benefits that employees can be provided by exempt employers within the meaning of section 57A of the FBTAA 1986 (including public benevolent institutions, health promotion charities, not-for-profit hospitals, and public ambulance services) and rebatable employers covered by section 65J of the FBTAA 1986 that are subject to fringe benefits tax on a concessional basis.

Tax Administration

The Queensland Court of Appeal considers the meaning of word "payable" in section 69(1)(b) of the Tax Administration Act (2001) (Qld)
The Queensland Court of Appeal (Court) in Commercial Property Management Pty Ltd & Ors v Commissioner of State Revenue [2015] QCA 209, decided on 29 October 2015,

refused the taxpayers' leave to appeal to the Queensland Civil and Administrative Tribunal (QCAT) to review a decision of the Commissioner of State Revenue (Commissioner) in respect of the taxpayers' payroll tax debts.

Background

On 30 October 2013 the taxpayers had objected to default payroll tax assessments issued by the Commissioner in the amount of $360,000. The taxpayers had then entered into an interim repayment arrangement to repay their tax debts in instalments under section 34 of the Taxation Administration Act 2001 (Qld) (TAA). On March 2014, the Commissioner disallowed the taxpayers' objections to the default assessments. The taxpayers' application to the QCAT to review the Commissioner's decision was rejected for want of jurisdiction under section 69(1) of the TAA, which requires that the taxpayers have paid the whole of the amount of the tax payable under the assessment to which the decision relates, which had not been done. The Taxpayers then applied to the Court to appeal the QCAT decision.

The Taxpayers contended that they had jurisdiction to apply to review the Commissioner's decision in the QCAT as there was no amount payable. The Taxpayers submitted that this is because upon entry into the payment arrangement under section 34 of the TAA, no amount remained payable under the assessment, and that the entry into the arrangement equated to payment of the tax. They argued that the word "payable" in section 69(1) of the TAA applied only where both the liability to pay has arisen and the date for payment has arrived with the payment not having been made. The QCAT, on the other hand, construed the word "payable" as meaning "yet to be paid".

Decision

The Court held that the word "payable" must not be interpreted in isolation but rather, in the context of the reference in the TAA. Having regard to the context, the Court decided that the word had an unambiguous meaning in the TAA and an amount of the assessment is an amount payable which is required to be paid to the Commissioner. Therefore, the taxpayer had no right of review by QCAT as the amount assessed had not been paid.