16 October 2019

The appeal against a decision of a Judge (The Honourable Justice Blue) of the Supreme Court dismissing an appeal against the disallowance of an objection which refused to recognise South Australian Employers’ Chamber of Commerce and Industry Incorporated (“Business SA”) as exempt from payroll tax under the charitable purpose exemption in section 48 of the Payroll Tax Act 2009 and declined to order a refund of payroll tax paid was unanimously dismissed.

In dismissing Business SA’s appeal, The Honourable Chief Justice Kourakis, The Honourable Justice Stanley and The Honourable Justice Parker of The Full Court of The Supreme Court of South Australia held:

1. The meaning of the term “trade and commerce” is extremely broad, and its participants include businesses, workers, consumers and governments.  The interests of businesses, workers and consumers will not always coincide.  The interests of business are not entirely synonymous with the advancement of trade and commerce.  Blue J did not err by drawing a false dichotomy between the advancements of the interests of business and the advancement of trade and commerce.  The first and second fundamental errors alleged by Business SA are not made out.
2. Where an institution carries on many diverse activities, it will often be necessary at a preliminary stage of the analysis for a judge to divide the functions or activities into discrete but coherent groups.  The approach taken by Blue J was both appropriate and necessary because Business SA carried out a very diverse range of activities.  After Blue J determined whether or not the activity carried on by each functional grouping had a charitable purpose, Blue J proceeded to consider the situation on an overall or holistic basis.  The third fundamental error alleged by Business SA is not made out.
3. The ultimate questions to be decided by the Court were, first, what are the primary or principle purposes of the appellant and, secondly, are those purposes charitable.  The first question was a matter of fact to be decided after a careful assessment of the evidence.  The second question was a matter of law to be decided by the Court.
4. What the President and Chief Executive Officer of Business SA thought about the second question was irrelevant.  Even if the evidence of the President/Chairperson and Chief Executive Officer was admissible in relation to the first question, what they considered to be the primary or principle purposes of Business SA could carry very little weight in comparison to the large volume of documentary evidence concerning the activities of Business SA and the statements it made about its purposes.  Blue J did not err in declining to admit the evidence of those witnesses concerning the purposes for which Business SA carried out its activities.
5. The facts identified by Blue J provided compelling grounds to distinguish Re Chamber of Commerce and Industry of Western Australia Inc v Commissioner of State Revenue (2012) 89 ATR 797.  Blue J did not err in distinguishing that case.
6. Business is only one of several groups that participate in trade and commerce.  A function of or activity that promotes the interests of business may not necessarily advance trade and commerce.  The authorities demonstrate the need to avoid conflating the charitable purpose of promoting trade and commerce with the purpose of advancing the interests of business.  Blue J was correct to distinguish the charitable purpose of advancing trade and commerce from a purpose of promoting the interests of business.
7. Business SA’s contention that business should be recognised as falling within the fourth Pemsel class is rejected.  Its acceptance would effectively abandon the clear distinction drawn in the authorities between the advancement of the personal and private interests of business and the public benefit of the promotion of trade and commerce.

PAYROLL TAX – Payroll Tax Act 2009 - exemption for charities – charitable purposes – other purposes beneficial to public – non-charitable purposes – economic and commercial purposes

South Australian Employers’ Chamber of Commerce and Industry Incorporated v Commissioner of State Taxation [2019] SASCFC 125

31 August 2017

The appeal against the decision of the Minister for Finance to disallow the objection by the South Australian Employers’ Chamber of Commerce and Industry Incorporated (“Business SA”) to a decision made by the Commissioner of State Taxation was dismissed.

In dismissing Business SA’s appeal, the Honourable Justice Blue held:

1. To be a charitable purpose within the meaning of Section 48 of the Payroll Tax Act 2009 (the “PTA”) and under the general law, a purpose must be to provide a public benefit as opposed to a private advantage or benefit and it must fall within a recognised category of charitable purpose by reference to principle and authority.
2. For the purpose of Section 48 of the PTA, the purpose of an institution governed by a board of directors is to be ascertained by reference to the institution’s objects, the institution’s activities, the institution’s communications to members and what is said and done at board meetings. The subjective internal state of mind of individual directors not communicated to the board is irrelevant.
3. To comprise a dominant purpose within the meaning of Section 48 of the PTA, the purpose must be the ruling, prevailing or most influential purpose. A charitable institution can have a non-charitable purpose provided that it is incidental to the charitable purpose. It can have a non-charitable purpose independent of its charitable purpose, but it must be so minor that the charitable purpose remains the ruling, prevailing or most influential purpose.
4. Business SA has failed to prove that, on a stand-alone basis, its policy advocacy, member services or commercial services activities are undertaken for the purpose of advancing trade and commerce in South Australia.
5. Business SA has proved that, on a stand-alone basis, its dominant purpose in undertaking its subsidised programs and apprenticeship activities is to advance trade and commerce in South Australia.
6. On a holistic assessment, Business SA has not proved that its dominant purpose is to advance trade and commerce in South Australia.
7. For the purpose of Sub-Section 48(2) of the PTA, the reference to “work of a kind ordinarily performed” is a reference to work of a kind ordinarily performed by charitable institutions having the same charitable purpose as the institution characterised at the appropriate level of generality or specificity.
8. If Business SA had proved that its dominant purpose is to advance trade and commerce in South Australia, it is likely that it would also have established that all wages were paid to persons engaged exclusively in and for performing work of a kind ordinarily performed in connection with its charitable purpose.  However, it is not necessary or appropriate to decide that question on a hypothetical basis.

PAYROLL TAX – Payroll Tax Act 2009 - exemption for charities – charitable purposes – other purposes beneficial to public – non-charitable purposes – economic and commercial purposes – work of a kind ordinarily performed

South Australian Employers' Chamber of Commerce and Industry Incorporate v Commissioner of State Taxation [2017] SASC 127

2 November 2003

The interviewers were independent contractors and the payments to them were not wages.

PAYROLL TAX - Pay-roll Tax Act 1971 - Wages - Market research interviewers - Whether employees or independent contractors.

Roy Morgan Research Centre Pty Ltd v Commissioner of State Taxation [2003] SASC 342

17 September 2004

Appeal allowed - Assessments of the Commissioner of State Taxation restored - Respondent had level of control of that of employer, agreement created by respondent could not designate the type of relationship - The interviewers were employees and therefore the payments made to them are wages.

PAYROLL TAX - Pay-roll Tax Act 1971 - Wages - Independent contractor versus employer/employee relationship.

The Commissioner of State Taxation v The Roy Morgan Research Centre Pty Ltd [2004] SASC 228

13 May 1980

Appeal dismissed - The critical question in the case is whether the change in the basis of remuneration, which occurred on 1st February 1971, and the consequential changes in the appellant’s methods of operation also changed the status of the salesmen from that of 'employee' to 'independent contractor'.

PAYROLL TAX – Pay-roll Tax Act 1971 - Wages paid to an employee - Whether land salesmen were employees or independent contractors.

Peter F. Burns Pty Ltd v Commissioner of Stamps [1980] SASC 4876

20 December 2023

The appeal by Trinity College Gawler Inc. (“Trinity”) against the decision of the then Treasurer to disallow the objection by Trinity to a decision by the Commissioner of State Taxation (the “Commissioner”) that Trinity is not exempt from payroll tax in respect of wages paid to employees working at its STARplex centre was allowed by The Honourable Justice Blue of the Supreme Court of South Australia.

Trinity operates five schools and one early learning centre and has a total of approximately 3,700 students. It is the largest school in South Australia. Wages paid to its employees other than those working at STARplex are exempt under the education exemption contained at section 49 and Clause 10 of Schedule 2 to the Payroll Tax Act 2009 (the “PTA”). STARplex includes a Swim Centre, Fitness Centre, Courts, Theatre, Shop and Creche.

Trinity staff working at STARplex work in those areas and in reception, membership and promotions, training and management.

Trinity contended that wages paid to its employees working at STARplex are exempt under the education exemption conferred by section 49 of and clause 10 of Schedule 2 to the PTA. The Commissioner contended that this exemption does not apply because the condition that the wages be paid to an employee engaged exclusively in work of a kind ordinarily performed in connection with the conduct of schools or colleges providing education of that kind is not met.

Alternatively Trinity contended that wages paid to STARplex employees other than those working in the Theatre or StarStore are exempt under the health services exemption conferred by section 51 of the PTA. The Commissioner contended that this exemption does not apply because the condition that the wages be paid by an employer who provides health services is not met and alternatively the condition that the employee be engaged exclusively in the provision of health or incidental services is not met.

Alternatively Trinity contended that wages paid to STARplex employees are exempt under the charitable purpose exemption contained in section 48(1)(c) of the PTA. The Commissioner contended that this exemption does not apply because the exception to the exemption applies, namely Trinity is a school or college within the meaning of section 48(1)(c) of the PTA.

In allowing the appeal, The Honourable Justice Blue:

• If wages paid in respect of part of the work performed by an employee are exempt under one exempting provision and wages paid in respect of the balance of the work are exempt under another exempting provision of the PTA, the wages are exempt (at [236]).
• The charitable exemption, the health services exemption and the education exemption in the PTA require exclusive engagement both on a monthly basis in respect or monthly returns and payments and an annual basis in respect of annual returns, payments and adjustments (at [255]).
• The limitation in paragraph (b) of clause 10 of Schedule 2 to the PTA limits the education exemption to those schools below tertiary level that are commonly understood as being part of a general hierarchy that includes (but is not necessarily limited to) primary, secondary and tertiary. However, the limitation does not confine the exemption to the provision of formal, compulsory school education mandated by the Education PTA 1915 (SA) or its successors (at [312]).
• The reference to a "period" in the chaussette to clause 10 of Schedule 2 to the PTA is a reference to the month the subject of monthly returns and payments in the first instance and ultimately to the financial year the subject of annual returns and payments and adjustment under section 83. The test of exclusive engagement therefore ultimately applies to the full financial year (at [347]).
• The word "ordinarily" in the chaussette to clause 10 of Schedule 2 to the PTA means commonly and is used in contradistinction to "extraordinarily" such that the work need not be performed in a majority of other schools (at [384]).
• The word "exclusively" in the chaussette to clause 10 of Schedule 2 to the PTA is subject to the principle that the law does not have regard to trifles such that, if an employee performs a trivial amount of work which is not work of a kind ordinarily performed, that would not prevent the test being satisfied. However, if a significant amount of work is not of a kind ordinarily performed, the test is not satisfied (at [400]-[401]).
• Trinity has established that its employees who work only in the Fitness Centre, the Swim Centre, the Courts and/or the Theatre are engaged exclusively in work of a kind ordinarily performed in connection with the conduct of schools providing education of the kind and are exempt under the education exemption contained in clause 10 of Schedule 2 of the PTA (at [419], [430], [444], [456]).
• Trinity has not established that its employees who work in whole or in part in the Shop, the Creche, reception, membership and promotions, training and/or management are engaged exclusively in work of a kind ordinarily performed in connection with the conduct of schools providing education of the kind or are exempt under the education exemption (at [462], [467], [470]-[472]).
• Paragraph (b) of the definition of health service in clause 11 of Schedule 2 to the PTA encompasses a proactive service designed to afford protection against illness, abnormality or disability but only a specific illness, abnormality or disability or class thereof (at [488]).
• Paragraph (a) of the definition of health service in clause 11 of Schedule 2 to the PTA encompasses a proactive concept of a service whose purpose is to advance a person's good health. It is not confined to health services of a kind commonly provided in hospitals and other health care settings. Although the effect of the service may be evidentially relevant to identifying its purpose, it is the purpose and not the effect which must be established for the exception to apply and beneficial effect on health is neither necessary nor sufficient to establish the exemption (at [516]).
• Trinity has established that it provides a health service to attendees at the Fitness Centre (at [538], [548], [554]).
• Trinity has established that its employees who work only in the Fitness Centre are (other than in providing educational instruction) engaged exclusively in the provision of health services and the wages paid to them are exempt under the health exemption contained in section 51 of the PTA (at [569]).
• Trinity has not established that its employees who work in whole or in part elsewhere at STARplex are engaged exclusively in the provision of health services or that the wages paid to them are exempt under the health exemption contained in section 51 of the PTA (at [587], [598], [604], [607]).
• The reference in section 48 of the PTA to a school or college is a reference to the entity rather than to the endeavour carried on by the entity. Trinity is not eligible for exemption under the charitable purpose exemption contained in section 48(1)(c) of the PTA (at [641], [646]).

PAYROLL TAX – Payroll Tax Act 2009 – EXEMPTIONS – NON-PROFIT ORGANISATIONS – OTHER NON-PROFIT ORGANISATIONS - Exemption for schools (education exemption) – Exemption for health or incidental services (health services exemption) – Exemption for charitable purposes(charitable purpose exemption)

Trinity College Gawler Inc. v Commissioner of State Taxation [2023] SASC 178 (20 December 2023)

10 March 2011

Appeal dismissed - Appeal is a de novo hearing - Legal test under Section 18I(1) of the Pay-roll Tax Act 1971 (SA) involves the satisfaction of two broad tests before appellant can be severed from group - Both tests must be satisfied in relation to each business carried out by each member of the group - There is no satisfaction that the business carried on by the appellant is not substantially connected with the businesses carried on by the other four group members - Not necessary to consider the independence test.

PAYROLL TAX - Grouping - Discretion to de-group members of a payroll tax group – Section 18I(1) of the Pay-roll Tax Act 1971 (SA) - Carried on substantially independently of - Not substantially connected with.

Port Augusta Medical Centre Pty Ltd v Commissioner of State Taxation [2011] SASC 31

13 August 1997

Appeal allowed – The taxpayers constituted a group under section 18c(a) of the Pay-roll Tax Act 1971 - Section 18C(b) also operated to constitute the taxpayers as a group - Section 18I directs attention in particular to the ownership and control of the two businesses and to the nature of the businesses, which is taken to be a reference to the activities comprising the businesses. The interrelation of business activities, and participation by a person in a position of influence in one business, in the management and decision making of the other business were considered to be relevant matters - Neither practice company should be excluded from the group.

PAYROLL TAX - Pay-roll Tax Act 1971 - Arrangements affecting liability to tax - Grouping provisions - Group of companies and businesses - Common control - Exclusion from group - Whether supplying labour to company in group - Whether performing duties solely for or in connection with a business carried on by practice company - Whether substantially independent of and not substantially connected with other businesses - Exclusion.

Commissioner of Stamps v Garrett F Hunter Pty Ltd, Meldrick House Pty Ltd and Geoffrey S Vercoe Pty Ltd [1997] SASC 6304

30 June 2000

Appeal dismissed - Repromed cannot satisfy the requirement that the institution is not conducted for individual profit or gain, therefore not a public benevolent institution.

PAYROLL TAX - Pay-roll Tax Act 1971 - Employer is a provider of health services - Appeal from refusal of Treasurer to allow exemption - Whether employer is "public benevolent institution" - Whether employer provides health services "otherwise than for the purpose of profit or gain" - Whether exempt.

Repromed P/L v Lucas & The Commissioner of State Taxation [2000] SASC 203

1 March 2002

The Commissioner erred, that the appeal should be allowed and that the assessment or assessments should be revoked.

PAYROLL TAX - Pay-roll Tax Act 1971 - Wages - Payment of money to a superannuation fund - Setting apart of money as a superannuation fund - Amounts credited by the trustee of a superannuation fund to the accounts of members of the fund.

Hills Industries Ltd & Anor v Commissioner of State Taxation& Anor [2002] SASC 67

27 September 2023

The Supreme Court held that the Respondent’s application for a permanent stay of proceedings be dismissed.

The Applicant, the Commissioner of State Taxation, brought a monetary claim against the Respondent, Marmota Ltd, for unpaid payroll and penalty tax plus interest for the period, 1 July 2010 to 20 June 2015 inclusive.

The Applicant alleged that this tax arose from a partnership between Marmota Ltd and Monax Mining Ltd. The Respondent denied such a partnership existed at law and as such disputed the tax assessments.

On 19 September 2022, the Applicant filed an interlocutory application seeking summary judgment.

On 26 September 2022, the Respondent filed an interlocutory application for a permanent stay of proceedings.

The Honourable Justice McIntyre of the Supreme Court of South Australia held:

1. The Respondent’s application for a permanent stay of proceedings is dismissed.
2. The Respondent’s defence constitutes a challenge to the validity or correctness of an assessment in respect of which rights of objection and appeal are conferred under Part 10 of the Taxation Administration Act 1996 (“TAA”).

   Section 100 of the TAA prevents those challenges being mounted in the context of debt recovery proceedings.

3. The proper course for ventilating such a challenge is limited to the avenue provided by Part 10 or alternatively the bringing of judicial review proceedings.
4. Section 100 of the TAA is not an unlawful privative clause as contended by the respondent.

Taxes and duties – payroll tax – assessment, collection and recovery of payroll tax

Taxes and duties – payroll tax – objections, appeals and reviews

Procedure – State And Territory courts: jurisdiction, powers and generally – inherent and general statutory powers – to stay or dismiss orders or proceedings generally

Procedure – civil proceedings in state and territory courts – ending proceedings early – summary disposal – summary judgment for plaintiff or applicant – generally

Commissioner of State Taxation v Marmota Ltd [2023] SASC 134