Bonner v Chief Commissioner of State Revenue - [2020] NSWCATAD 231 - NSWCATAD 2020 case summary — Zoe

NSWNSWCATAD

Bonner v Chief Commissioner of State Revenue

[2020] NSWCATAD 231

NCAT Administrative and Equal Opportunity|2020-03-24

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Source facts

Court

NCAT Administrative and Equal Opportunity

Decision date

2020-03-24

Source

Original judgment source is linked above.

Judgment (26 paragraphs)

[1]

Background

For many years until 30 June 2015 the first named applicant, Chelsea Bonner as a sole trader and thereafter the second named applicant Bella Management Group Pty Ltd, of which Ms Bonner was at all relevant times the sole director, operated a business that represented models / talent (models) to the Applicants' clients, or sourced models for clients, for a commission on each transaction between a client and a model.
These proceedings concern an application filed with the Tribunal on 24 May 2019 (the Application) on behalf of the Applicants seeking a review of an objection determination (the Determination) dated 26 March 2019 attached to the Application.
The objection, the subject of the Determination, was against tax assessments dated 22 December 2017 issued to the Applicants for the 2014, 2015, 2016 and 2017 financial years and the period 1 July 2017 to 30 November 2017 (collectively referred to as the Relevant Period).
The Determination, issued by the Respondent, substantially disallowed the objection.
The assessments for the 2014 and 2015 financial years were issued to Ms Bonner and the other assessments were issued to Bella Management Group Pty Ltd. The assessments issued for the full financial years included penalty tax and interest.
Unless it is stated to the contrary, all references to "tax" in these reasons are to "payroll tax".
There is no dispute that the Application should have referred to the above assessments rather than the Determination and that these proceedings relate to the assessments for the 2014 to 2017 financial years as reassessed and reissued on 26 March 2019 as well as the assessment for the period 1 July 2017 to 30 November 2017.
I also observe that there is also no dispute that page 2 of the objection form (page 393 of the s 58 documents) states that the objection relates to "Tax years 2014, 2015, 2016, 2017". Those financial years do not include the part-year 1 July 2017 to 30 November 2017, the subject of the Assessment Notice at pages 383 to 385 of the s 58 documents. However, Annexure 2 to the objection form referred to "the current financial year 2017 - 2018" and 35 jobs accounted for as being liable to payroll tax in NSW when the whole of each service was performed outside NSW. Annexure 2B provides accounting information and specifies dates from 10 July 2017 to 29 November 2017.

[9]

The legislative scheme

In Levitch Design Associates Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, Sorensen SM succinctly described the general liability for tax as follows: 18 Under the terms of the Payroll Tax Act, payroll tax is imposed on all "taxable wages" (s 6). Liability for the tax falls upon the employer by whom taxable wages are paid or payable (s 7). "Taxable wages" are wages (excluding exempt wages) taxable in NSW (s 10). The term "wages" as defined in s 13(1) includes an amount that is "taken to be" wages by any other provision of the Act (s 13(1)(e)).
There is no dispute that both Contractor and Employment agency provisions were introduced to tax legislation in New South Wales in 1985 to catch schemes designed to avoid liability for tax. The structure of schemes varied although a common feature was to seek to sever the employer-employee relationship. As schemes changed over time the anti-avoidance legislation was updated.
Unless stated to the contrary, references in these reasons to: 1. the Commissioner's submissions by paragraph number are to paragraphs in RS; 2. the Applicants' submissions by paragraph number are to paragraphs in AS2; and. 3. legislative provisions are to provisions of the PT Act.
Division 7 provides that amounts paid or payable by a person taken to be an employer for or in relation to the performance of work relating to a relevant contract (as defined) by a person taken to be an employee are taken to be wages paid or payable during the relevant financial year.
Division 8 provides that amounts paid or payable by a person taken to be an employer under an employment agency contract (as defined) to or in relation to a person taken to be an employee in respect of the provision of services by that latter person in connection with that contract are taken to be wages for the purposes of the Act.
I observe that the employment agency provisions and the contractor provisions are mutually exclusive. Accordingly, if the Tribunal agrees with the Commissioner's submissions it may affirm the Assessments under either but not both of those provisions.

[11]

Issue 1 Were the applicants "employment agents" for the purposes of s 37 of the PT Act?

Division 8 contains ss 37 to ss 42 of the PT Act. Both "contract" and "employment agency contract" are defined in s 37. Generally, a "contract" includes an "agreement, arrangement and undertaking" while an "employment agency contract" is "a contract, whether formal or informal and whether express or implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent".
The Applicants relied on the decision of White J in UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852 in submitting at [40 (e), (f) and (g)] that His Honour held: (e) Instead of a literal construction, his Honour applied a purposive construction … and determined that the definition of an employment agency contract (i.e. a contract under which a person (the employment agent) "... procures the services of another ... for a client of the employment agent" can be read as meaning a contract under which a person procures the services of another person in and for the conduct of the business of the employment agent. This, His Honour said was the intended scope of the provisions, that is, "to confine the operation of the phrase "for a client" in that way, rather than as meaning for the client's benefit": [62]. (f) Whether the worker is to be characterised as an employee or a contractor, the employment agency contract provisions were intended to apply to cases where the employment agent provided individuals who would comprise, or who would be added to, the workforce of the client for the conduct of the client's business (emphasis added): [63]. (g) Where the services of the individual are provided through the intermediary, that is, the employment agent, to help the client conduct its business in the same way, or much the same way, as it would do through an employee, then the arrangement is within the intended scope of the section. But where the services, although provided for the client's benefit, are not provided by the service provider working in the client's business, the arrangement does not fall within the intended scope of the provision: [64]-[65].
At [3] to [13] in UNSW Global His Honour outlined in some detail the manner in which UNSW Global carried on its business. In summary, UNSW Global provided expert opinions from a database of experts comprising academics employed by the University of New South Wales and experts external to the University. At times the expert reports were used in litigation and sometimes the experts were involved in court attendances. The reports were prepared at a time and place of the experts choosing. Other work carried out by experts included laboratory testing as well as consulting projects in Australia and overseas.
His Honour said at [13] "There is no dispute that the experts retained by [UNSW Global] were independent contractors. They were not subject to control or direction by Unisearch in how they were to undertake their engagement."
However, the Applicants did not refer to the nature of the work carried out by the service providers in UNSW Global, nor their expertise nor the independence with which they carried out their work so as to compare or contrast same with the models engaged by the Applicants and their work.
The Respondent relevantly submitted the following, largely without rebuttal by the Applicants: 1. The Applicants acted as intermediaries between the clients and models. They sourced models for their clients and clients for their models: [10] 2. The models entered standard written agreements with the Applicants under which each model appointed the relevant Applicant at the time (Bella) as his or her exclusive agent for all branches of the modelling industry. The agreements required Bella to advise the model, offer career guidance, attempt to find suitable modelling jobs, negotiate modelling contracts between Bella's clients and the model, and administer those modelling contracts by liaising between the client and model. The agency agreements require the model to "perform every [modelling] contract entered by you or on your behalf, fully and to the best of your ability": [12]. 3. Bella operated on a job-by-job basis and the models could accept or decline each job. Once a job had been accepted, and terms agreed with Bella negotiating on the half of the model, a written contract would usually be entered into although on occasions Bella negotiated and confirmed the terms of engagement by email without a formal contract: [13]. 4. The model attended a location determined by the client and worked under the client's supervision and direction. Neither Bella nor the model had any "significant control over the creative, casting or on-set decisions made during a shoot": [14]. 5. After completion of the job, Bella, on behalf of the model, invoiced the client for the model's work. Bella received payment from the client and then paid the model after deducting Bella's commission: [15].
At [27] [28] and [31] the Respondent submitted, and the Applicants conceded: 27 The concept of working "in and for the conduct of the business of the employment agent's client" was explained by Kunc J in JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 at [72]. [The issue of whether individuals are working "in and for the conduct of the business of the employment agent's client"] will be determined by asking whether or not the individuals provided by the employment agents comprise, or are added to, the workforce of the client for the conduct of the client's business [A]re the individual's services provided to help the client conduct its business in the same way, or much the same way, as it would through an employee, or are they services which, although provided for the client's benefit, are not provided by the service provider working in the client's business9 28 The employment agency provisions can apply to independent contractors as well as employees UNSW Global Pty Ltd … [at] [63]; JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391, [73]. … 31 In determining whether a person is working "in and for" a business, it is not relevant whether the person's services are "core" or "incidental" to the business or are provided during normal business hours Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657, [104], Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744, [97].
The Respondent, under the heading "Application of principles", submitted: 32 For the following reasons, the modelling arrangements between Bella, its clients and models (under which Bella's models performed modelling services for its clients) were "employment agency contracts" for the purposes of s 37(1) of the Act (a) The modelling arrangements were "contracts", because a "contract" includes an "arrangement" s 37(3) (b) As part of (and therefore "under") the modelling arrangements, Bella "procured" (brought about by care or effort) the services of others (models). It did this by liaising between Bella's clients and models and negotiating the terms of their engagement (c) Bella's models worked in and for the conduct of its clients' businesses. Applying the Bayton factors … above (i) The models worked on-site - that is, at the same workplaces as Bella's clients. Those workplaces were the sets or locations used by the clients to create advertising or promotional material. (ii) Continuity or regularity has two aspects. Continuity or regularity of staff was likely absent, as "[m]odels are engaged for specific jobs, and there is no expectation of return work from the same clients". However, there was significant continuity or regularity of services: advertising agencies and production companies require modelling services on a day to day basis to create advertising and promotional material. Similarly, Bella's other clients ("brands") were likely to require modelling services as part of their regular advertising and promotional activities. This supports a conclusion that Bella's models worked in its clients' businesses. In the same way, a barista or waiter hired to work a one-off shift at a cafe would clearly be working in and for the cafe's business, because services of that kind are continuously or regularly required by the café. It is also relevant that the services (modelling services in the case of Bella's clients, and coffee making and table waiting services in the case of the cafe) are necessary for the client's business: see Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657, [102] & [105]. (iii) The models worked under the clients' supervision and direction, with Bella and the models having essentially no creative input. 33 Thus, all elements of the definition of "employment agency contract" in s 37 are satisfied. 34 In an employment agency situation, the employment agent (here, Bella) is taken to be an employer under s 38 … and the amounts paid by the employment agent in respect of the relevant services (here, the payments from Bella to the models in respect of modelling services) are taken to be wages under s 40(1)(a) … As deemed wages, they are liable to payroll tax under ss 6, 7 and 13(1)(e) … This was correctly reflected in the reassessments.
In response, the Applicants submitted: 49. The Respondent's contend (at 32) that the provision is satisfied because: (a) the models work on site - they do not. They work on a photo shoot that is not the site of the client. E.g. a store in which clothes are sold is the site. A photo shoot is an irregular and largely irrelevant location to the end user's business. (b) Although accepting no continuity or regularity of models as staff, it is somehow said services were continuous - they were not. The models work ad hoc and on call: there is no expectation of future or further work. Most of them have full time jobs separate to modelling. There is no basis to say there is continuity of service. (c) The models had no creative input - this is also incorrect. The models are the one's performing. The end users can be dissatisfied with the outcome (e.g. where a model turned up intoxicated, late or otherwise not at all) but they cannot control the model's performance. They can only photograph it and accept or reject the outcome. 50. None of the reasons put against the Applicant's [sic] hold up to scrutiny.
I make the following observations and findings in relation to the competing submissions:

[14]

Creative input by the models

The Respondent submitted the models worked under the clients' supervision and direction, with Bella and the models having essentially no creative input. The Applicants submitted this was incorrect, the end users could be dissatisfied where a model turned up inebriated or late or not at all but could not control the model's performance.
I observe that several of the agreements in evidence contained no content in relation to which party could or would provide creative input or was required to observe creative directions, although the agreements commencing at pp 219, 223 and 228 stipulated the role to be played by the model and required attendance at wardrobe/workshop (for an additional hourly fee). I also observe that the pp 223 and 228 agreements required the model to perform his/her obligations in a professional manner being consistent with professional standards of the advertising industry including restrictions on being under the influence of any substance that impairs their ability to participate in the shoot and engaging in negligent or malicious behaviour which results in certain specified results.
The management agreements commencing at pp 232 and 236 require the model to perform every contract entered by him/her fully and to the best of his/her ability.
It seems to me that it is unlikely that the models solely determined for themselves how they would work in a practical sense. However, the evidence is not clear as to where demarcation lines of 'creative' control would lie.
In Bayton Cleaning, Ward CJ in Equity held: 264 … in UNSW Global his Honour accepted that a literal construction of s 37(1) of the Payroll Tax Act in relation to the expression "for a client" would go far beyond the mischief intended to be addressed by that provision (see at [44]; [49]); and applied a purposive construction of that section, reading the word "for" in the phrase "for the client" as meaning "in and for the conduct of the business of the employment agent's client", as distinct from merely "for the client's benefit" (see [62]). … 266 I accept that what is required is a fact sensitive analysis and that there may be nuances in the application of the test, as the plaintiffs submit. However, … I see no basis for reading into the legislation the requirement that the services provided be integral to the client's business or "core" services as opposed to "ancillary" or "incidental" services. I cannot see that the provision of cleaning services after the normal hours of business of a commercial client, for example, is any less the provision of a service "in and for the conduct" of the client's business than the provision of cleaning services during business hours. 267 Insofar as the issue whether individuals are working "in and for the conduct of the business of the employment agent's client" is determined by reference to whether the "individuals provided by the employment agents comprise, or are added to, the workforce of the client for the conduct of the client's business" … or the individuals' services are provided to help the client conduct its business "in the same way, or much the same way, as it would through an employee" … the more meaningful factors, in my opinion, are whether the services are provided on-site, whether they are provided with a degree of continuity or regularity (or are ad hoc), and the extent of interaction and supervision with or by the client's staff …
With respect I observe, and accept as applicable in this matter, Ward CJ in Equity's terminology at [271] in Bayton Cleaning "I consider that, having regard to the evidence as a whole, in a practical sense [the models formed]… an addition to the client's workforce and did provide [their] services in much the same way as the client's staff would otherwise have done had the services not been outsourced."
Having regard to the evidence before me as a whole, and the positive onus on the Applicants, I am not satisfied that the models, as service providers, are not effectively added to the workforce of the client for the conduct of the client's business in circumstances where those models have agreed to provide services to the relevant client in accordance with agreements negotiated between the relevant model and the client and perform work in accordance with those agreements.
Accordingly, I find that, for the purposes of s 37, the Applicants were employment agents, the models were service providers, and the agreements between the Applicants and the models were employment agency contracts (also referred to as agency agreements).

[17]

Issue 4 Has another employment agent, or another party to a relevant contract, paid payroll tax in respect of amounts paid by the applicants to or in relation to models, so as to relieve the applicants from payroll tax liability under ss 41 or 36 of the PT Act?

Section 36 is within Division 7 and, as such, has been dealt with.
Section 41 is termed "Liability provisions". As the Respondent submitted at [45], s 41 is a "double taxation" provision. In summary s 41 provides that, subject to s 42, … if an employment agent under an employment agency contract … procures the services of a service provider for a client of the employment agent, and …pays payroll tax in respect of an amount … that is, under section 40, taken to be wages paid or payable by the employment agent in respect of the provision of those services … no other person … is liable to pay payroll tax in respect of wages … for … those services …
Section 42 relates to employment agency contracts, the effect of which are to reduce or avoid liability for tax. Neither party made any submissions as to the relevance of s 42 to these proceedings and I make no findings in relation thereto.
The Applicant submitted at ASS: 1 Following production in accordance with various Summonses the Applicants caused to be issued by the Tribunal, $17,041.88 of payroll tax assessed to the Applicants was paid by third parties … … 2. The assessments would therefore be reduced to reflect these payments already having been made to the Chief Commissioner.
The Applicant provided, between ASS [1] and [2], a table of 9 items comprising names of third parties and models, amounts paid and relevant periods. The total amount claimed to be paid is $17,041.88.
In his response, at RSS [19] and [20], the Respondent reproduced the Applicants' table together with a column headed "Response" setting out his reasoning and conclusions. The Respondent conceded partial accuracy of some of the Applicants' items (to the extent of $8,106.59) and rejected the remaining claimed amounts.
I have considered relevant documents produced under summonses and make the following findings (in the column headed "Tribunal Findings") having regard to those documents and the claims of the parties. The below table comprises the Applicants' and Respondent's tables (excluding the names of clients and models) together with an additional column for my reasoning and findings.
I refer to a long-standing legal principle "de minimis non curat lex", known as the "de minimis rule". Roughly translated, the rule means the law shall not concern itself with trifles. In some items in the table below, the differences between the parties' submissions are less than 20 cents. Accordingly in certain items I have applied the de minimis rule and accepted the Applicants' calculations. Item Amount Paid Period Response Tribunal Findings 1 $15,982.72 n/a Conceded as to $1,584.18 for FY 2016 and $5,905.17 for FY 2017. This is based on the spreadsheet produced by [the client] … where each entry contains a "Period Code" that appears to show the year and month - e.g. "201602" appears to mean "February 2016" … I agree with the 2016 and 2017 financial year submission of the Respondent for the reasons given by the Respondent. 2 $244.18 2017 year Conceded as to $244.07 … The de minimis rule applies. I accept the Applicants' amount. 3 $119.36 n/a Not conceded. Documents in packet S-5 (undated "Payroll Tax Record" and I agree with the Respondent for the reasons he has given. There is no evidence before the Tribunal of payment of any relevant tax. corresponding pay slip dated 25 February 2016) do not show payment of payroll tax. The Respondent states $116.30 represents wages, not tax, paid to a named person (the Person) engaged through the Applicant. This is confirmed by documents produced under summons by the client in packet S-8 4 $116.30 2014 year The claimed figure represents wages, not payroll tax (see letter in packet S-8). The wages disclosed by Bella and assessed by the Chief Commissioner were $97: s 58 documents p 284. The amount conceded is therefore $97 (wages) x 5.45% (payroll tax rate) = $5.29. The Chief Commissioner can only concede amounts of payroll tax that were included in Bella's assessments. However, the client's evidence is that an amount of $3,425.27 paid to Revenue NSW (as it is now known) included tax in respect of wages paid to the Person. The Respondent claims $97 wages was paid to the Person and is disclosed at p. 284 of the s 58 documents. However, I find that p. 284 of the 456 pages of those documents makes no mention of either the given name or surname of the Person. The parties agree that the relevant rate of tax is 5.45% of wages. I find from the material before me that tax of $6.34 was paid by the client to the Respondent (being 5.45% of $116.30). 5 $109.00 2016 year Conceded for FY 2017. Records in packet S-3 show the amount was incurred in October 2016. I note that the parties agree on payment of $109.00 on account of tax and find the payment related to the 2017FY. 6 $3.54 2017 year Not conceded. The amount was paid in FY 2018 (July 2017: see packet S-3). Payments to models from third parties (recorded as contractor payments) were not included in the part FY 2018 assessment at pp 383-5 of the s 58 documents - that is, they were not assessed to payroll tax. This is apparent from s 58 documents p 354 (payroll tax calculation spreadsheet showing no amount for "Taxable contractor[s]" in FY 2018) and pp 358-9 (audit finalisation letter does not mention any taxable contractor payments for FY 2018). The Applicant has not provided evidence of any payment of tax for the relevant person and after considering the s 58 documents referred to by the Respondent I agree with the Respondent's submissions. 7 $207.91 2017 year Not conceded. As for item 6. The Applicant has not provided evidence of any payment of tax for the relevant person and, after considering the s 58 documents referred to by the Respondent, I agree with the Respondent's submissions. 8 $109.00 2016 year Conceded for FY 2017. Packet S-3 records show the amount was incurred in October 2016. I note that the parties agree on payment of $109.00 on account of tax and find the payment related to the 2017FY. 9 $149.87 2016 year Conceded for FY 2017 ($149.88). Packet S-3 records show the amount was incurred in October 2016. The de minimis rule applies. Accordingly, I find there was payment of $149.87. I accept the Respondent's submission that payment related to the 2017FY rather than 2016FY.

[19]

Issue 5 Were the applicants in "tax default" for the purposes of ss 21 and 26 of the Taxation Administration Act 1996 (NSW) in respect of the primary tax in the assessments/reassessments?

The TA Act defines "tax default" at s 3 as "a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay".
The Applicants submit at [64] that the existence of tax defaults is in issue and "for the reasons above the tribunal would conclude there are none".
I take "the reasons above" to be those set out at [62] and [63] in ASR2 which are: 1. certain amounts were "wages paid by third parties, who were properly assessable and assessed on them, to some of the models/talent"; and 2. the Chief Commissioner cannot assess the Applicants to amounts properly assessable to third parties as that would be double recovery and such assessments would not be bona fide.
I find firstly, that amounts paid by third parties were dealt with at Issue 4. Accordingly the Applicants have not shown that there would be any relevant double payment once the Assessments are amended in accordance with my findings as set out in the above table.
As the Applicants are well aware, the evidence before the Tribunal indicates that the amounts paid by third parties represent only a small fraction of the amounts actually paid to or for relevant models during the Relevant Tax Period.
I also observe that the PT Act provides: 38 Persons taken to be employers For the purposes of this Act, the employment agent under an employment agency contract is taken to be an employer. 39 Persons taken to be employees For the purposes of this Act, the person who performs work for or in relation to which services are supplied to the client under an employment agency contract is taken to be an employee of the employment agent.
I found at Issue 1 that the Applicants were employment agents, the models were service providers, and the agreements between the Applicants and the models were employment agency contracts.
Sections 26 and 21 and of the TA Act respectively provide that if a tax default occurs a taxpayer is liable to: 1. pay penalty tax in addition to the amount of tax unpaid; and also 2. pay interest calculated on the amount of tax unpaid and on the amount of any penalty tax imposed.
Accordingly, insofar as relevant payroll tax was not paid by (or for) the Applicants, I find the Applicants have committed tax defaults for the purposes of ss 21 and 26.

[20]

Issue 6 Should penalty tax be remitted under s 27(3) of the TAA on the basis the applicants took reasonable care to comply with the taxation law and/or on the basis the tax default occurred solely because of circumstances beyond their control (other than financial incapacity)?

Section 27 of the TA Act deals with the amount of penalty tax payable in respect of a tax default.
Section 27(3) relevantly authorises the Chief Commissioner to: … determine that no penalty tax is payable in respect of a tax default if the Chief Commissioner is satisfied that: (a) the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the taxation law, or (b) the tax default occurred solely because of circumstances beyond the taxpayer's control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person's or the taxpayer's control) but not amounting to financial incapacity.
The Chief Commissioner stated in RS: 50 The applicants contend that penalty tax should be remitted to nil under TAA s 27(3)(a) on the grounds they "took reasonable care to comply with the taxation law" 51 In such cases it is for the taxpayer to show, with evidence, that it took reasonable care to comply with the taxation law Boston Sales and Marketing Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 139, [68].
Ms Bonner gave evidence that on about 14 March 2016, she and her business' financial controller, Maria Pollard, met with a named accountant who Ms Bonner understood was a specialist in the fashion industry (the first accountant). The business was soon to transition from a sole trader to a corporate entity and she wanted to make sure that the transition happened smoothly. Ms Pollard asked the first accountant about payroll tax liability. The first accountant's advice was that payroll tax was only payable in respect of office staff, there was no liability for payroll tax in respect of models. Ms Bonner's evidence was that following that conversation she proceeded on the basis that the business was compliant with its tax obligations.
However, Ms Bonner also gave evidence that, following the above conversation, she consulted a second named accountant and informed him that she had received advice "that as modelling agents, we don't need to pay payroll tax, because it's like an art gallery owner and selling paintings for a commission. Is that right?" Ms Bonner's evidence is that the second accountant said: Yes, you don't pay payroll tax on your models. They aren't employed - they just pay you a commission for finding them work
The Applicants submitted that they had used all reasonable care by relying on Ms Bonner's recounting of the above two conversations.
I observe that: 1. Ms Pollard's affidavit evidence made no reference to the part of the conversation with the first accountant on 14 March 2016 referred to by Ms Bonner nor was she cross-examined regarding any advice he gave in response to her question(s) as to payroll tax liability. 2. No evidence was provided to the Tribunal by either the first or the second accountant. 3. No evidence was provided to the Tribunal that the first accountant was not available to corroborate the oral advice attributed to him; and 4. No evidence was provided to the Tribunal that the second accountant, who Ms Bonner informed the Tribunal was her current tax agent, was not available to corroborate the oral advice attributed to him.
In a hearing on the papers, the late Judicial Member A Verick in RV Enterprises Pty Ltd as trustee of the R M O'Mara Family Trust v Chief Commissioner of State Revenue [2004] NSWADT 64 said at (23) when considering s 27(3) of the TA Act: … it is essentially a question of fact whether the taxpayer has taken reasonable care in attending to its tax obligations. Factors that would indicate that a taxpayer took reasonable care include reasonable attempts to comply with the tax law, reasonable professional and other inquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law.
Both parties relied on that excerpt, which has been cited with approval on numerous occasions including in Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227 at [95]; HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820 at [184]; and Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 at [114].
Notwithstanding the above analysis, the Chief Commissioner stated in RSS: 16. Having regard to Ms Bonner's oral evidence, the Chief Commissioner accepts that on 14 March 2016 Bella received professional advice from [the first accountant] a registered tax agent, that Bella was not liable to payroll tax. The Chief Commissioner therefore accepts that from 14 March 2016 Bella took reasonable care to comply with the taxation law, and that penalty tax should be remitted from that date under s 27(3)(a) of the [TA Act]. The result is that, for the financial year ended 30 June 2016, penalty tax should only be imposed for 257 of 366 days (from 1 July 2015 to 13 March 2016), and penalty tax should be remitted in full for the financial year ended 30 June 2017.
I refer to the long-standing anti-avoidance deeming provisions of Divisions 7 and 8 of the PT Act, to take certain payments to be wages. I observed with some surprise the professional advice to the contrary claimed by Ms Bonner to have been received from two apparently experienced accountants. I also observed the Respondent's determination to not make any submissions as to the unexplained failure by the Applicants to call either accountant to corroborate details of the advice Ms Bonner said they gave her, and the Respondent's acceptance, without cross-examination, of Ms Bonner's evidence.
I have regard to the Chief Commissioner's above concession at RSS [16] as to penalty tax from 14 March 2016 on the basis that he accepts the Applicants "took reasonable care to comply with the taxation law, and that penalty tax should be remitted from that date". Having regard to my above observations and to Issue 7 and s 33 of the TA Act outlined below, I make no finding to the contrary of the concession in relation to Issue 6.

[21]

Issue 7 Should penalty tax be remitted (and if so by what amount) under s 33 of the TAA?

Section 33 of the TA Act states "The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit penalty tax by any amount."
The Chief Commissioner's remission decision is noted in the above consideration of Issue 6. Following the above excerpt from [16] in RSS the Chief Commissioner submitted: 17 Bella has not shown special or exceptional circumstances to justify the remission of any other penalty tax or the market rate of interest: see Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126, [150] (Bathurst CJ; Macfarlan and Meagher JJA agreeing); Lease A Leaf Property Pty Ltd v Chief Commissioner of State Revenue [2011] NSWADTAP 41, [34]-[35].
Other than the remission referred to above, penalty tax has been imposed at the rate of 20% of the amount of tax unpaid.
Section 27 of the TA Act provides a base penalty of 25% of the unpaid tax. The penalty may be: 1. increased to 75% if the Chief Commissioner is satisfied the tax default was caused by the intentional disregard by the taxpayer of a taxation law (s 27(2)); or 2. reduced to nil if the Chief Commissioner is satisfied the taxpayer took reasonable care to comply with the taxation law (s 27(3)(a)), as was the Chief Commissioner's opinion in relation to the period from 14 March 2016.
Sections 28 to 30 respectively provide for reduction of 80% of penalty tax for disclosure of relevant information before an investigation; reduction of 20% of penalty tax for disclosure of relevant information during an investigation; and increase in penalty tax by 20% for concealment to prevent or hinder an investigation.
The Chief Commissioner's broad remission power in s 33 is set out above.
The Applicants confirmed at [34] that they bear the onus of proving their case in accordance with s 100(3) of the TA Act and at [66] "that penalty tax is prima facie payable where a tax default occurs." These principles are not disputed by the Chief Commissioner.
The Applicants also submitted: Reasonable care: 27(3)(a) … 69 … the applicants have numerous factors in favour of taking reasonable care and none against it. For instance, they have: (a) engaging, and relying on, internal and external professional advisors; and (b) maintained appropriate and accurate records. 70 … the relevant contractor provisions are complex … 71 It submitted that the applicants took reasonable care such that s 27(3)(a) of the Administration Act is available and should be applied Taxpayer's Control: s 27(3)(b) … 73 … the Chief Commissioner's policy is relevant to the Tribunal's determination. Section 64 of the Administrative Decisions Review Act 1997 (NSW) provides: 64 Application of Government policy (1) … the Tribunal must give effect to any relevant Government policy in force at the time the administratively reviewable decision was made except to the extent that the policy is contrary to law or the policy produces an unjust decision in the circumstances of the case. (2) The Premier or any other Minister may certify, in writing, that a particular policy was Government policy in relation to a particular matter. (3) The certificate is evidence of the Government policy concerned and the Tribunal is to take judicial notice of the contents of that certificate. (4) In determining an application for an administrative review under this Act of an administratively reviewable decision, the Tribunal may have regard to any other policy applied by the administrator in relation to the matter concerned except to the extent that the policy is contrary to Government policy or to law or the policy produces an unjust decision in the circumstances of the case. (5) In this section: Government policy means a policy adopted by: (a) the Cabinet, or (b) the Premier or any other Minister, that is to be applied in the exercise of discretionary powers by administrators 74. These examples show that whee [sic] outside influences or factors play an operative role the discretion is enlivened. Here, there can be no suggestion that the applicants have done otherwise than: (a) assist in the Chief Commissioner in his investigations; and (b) promptly attend to their assessed payroll tax liabilities. 75. The Tribunal would conclude s 27(3)(b) of the Administration Act also applies
The Applicants agreed with RS [50] and [51] which stated: 50 The applicants contend that penalty tax should be remitted to nil under TAA s 27(3)(a) on the grounds they "took reasonable care to comply with the taxation law" 51 In such cases it is for the taxpayer to show, with evidence, that it took reasonable care to comply with the taxation law Boston Sales and Marketing Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 139, [68]
The concept of "reasonable care" has been dealt with in Issue 6 above.
I find no evidence was brought to the Tribunal's notice that the Applicants sought relevant professional internal or external advice before 14 March 2016.
The Chief Commissioner submitted at [54] and [57]: [54] "… reasonable care is not established. It is not enough that the applicants assumed their accountant would tell them if payroll tax were payable an assumption that payroll tax is not payable does not amount to taking reasonable care"; and [57] "… there is no "special circumstance to warrant the exercise of the discretion" absent reasonable care Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657,
In Bayton, Ward CJ in Eq said: 297 I have noted above the explanation given to the concept of taking "reasonable care to comply with the taxation law" in Qualweld (at [95]). The factors that were there recognised as factors that would indicate the taking by a taxpayer of reasonable care to comply with the taxation law included: reasonable attempts to comply with the tax law; reasonable professional and other inquiries to ensure compliance; and reliance on professional advice or on official published views of the tax law. Factors that it was recognised would indicate that a taxpayer failed to take reasonable care included: oversight or forgetfulness to meet with obligations; failure to maintain adequate records and procedures to prevent errors from occurring; and not seeking professional advice and errors in complying with the law. … 300 … co-operation with the Office of State Revenue in its investigation into the payroll tax issue is commendable, but it does not to my mind establish the taking or (sic) reasonable care to comply with the taxation law in the first place. 301 I am therefore not persuaded that the plaintiffs have discharged their onus in relation to this issue so as to warrant a remission of the penalty tax pursuant to ss 25, 27(3)(a), 29(1) and 33 of the Administration Act. As to the alternative bases (the cascading submissions as to remission) put forward by the plaintiffs, I accept the Chief Commissioner's submission as to the inapplicability of s 29(1) due to the failure of the plaintiffs to pay the tax on the due date (see s 29(2)(b)); and, as to the application for remission under s 33 of the Administration Act the general discretion to remit, I do not consider that this general discretion should be exercised where there has been a finding that reasonable care has not been established and in the absence of some special circumstance to warrant the exercise of the discretion notwithstanding the absence of a finding of reasonable care. 302 Thus, I have concluded that the application for remission of the penalty tax in part or in full should be dismissed. In those circumstances, so too should be the application for remission of the market rate of interest (particularly having regard to what was said in Lease a Leaf - see [255] above).
On the evidence before me I am not satisfied on the balance of probability that the Applicants took reasonable care to comply with tax law other than to the extent that the Chief Commissioner expressed himself satisfied.

[22]

Issue 8 Should the market rate component of interest be remitted (and if so by what amount) under s 25 of the TAA?

Division 1 of Part 5 of the TA Act deals with interest, in particular, the imposition of interest calculated on the amount of tax unpaid in the event of a tax default (s 21). The interest rate is the sum of the market rate component and the premium component. The market rate component is defined in the TA Act at s 22(2). The premium rate component is not relevant to these proceedings.
Section 25 of the TA Act I styled "Remission of interest" and states "The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount."
The Applicants submitted at [81] - [82]: 81 … paragraphs 72 and 73, relating to the Chief Commissioner's policy and why the Tribunal must take it into account, bear on this question. Remission is to be granted in circumstances such as the present case. 82. The Tribunal would remit the interest to nil
Paragraphs 72 and 73 refer to Revenue Ruling PTA026 and state the Ruling contains examples of what the Chief Commissioner considers to be circumstances which are beyond the control of a taxpayer for the purposes of s 27(3)(b) of the TA Act and "provide guidance of the significance of the event required to take it outside the applicant's control". Relevant extracts from paragraph 73 are at [109] above under the sub-heading Taxpayer's Control: s 27(3)(b).
Paragraph 73 leads on to paragraph 74 which details s 64 of the ADR Act which itself deals with Government Policy. That Policy is defined in s 64(5) and means "a policy adopted by: (a) the Cabinet, or (b) the Premier or any other Minister, that is to be applied in the exercise of discretionary powers by administrators".
PTA026 was issued by the Chief Commissioner and is not "Government Policy" as defined by statute.
Accordingly, Ruling PTA026 may well be a policy of the Chief Commissioner, who is an administrator, and to that extent s 64(4) may apply and "the Tribunal may have regard" to that policy.
I have considered PTA026, the title of which is "Employment agency contracts: declaration by exempt clients" and its possible application in favour of the Applicants. I find that no required declaration has been brought to my attention; none of the provisions of the PT Act said to apply to the Ruling are relevant to these proceedings; and none of the organisations described in the Ruling, (which are exempt from payroll tax) are relevant to these proceedings
The Respondent submitted as follows: 60 … the market rate of interest can only be remitted in exceptional circumstances. As the Appeal Panel held in Lease A Leaf Property Pty Ltd v Chief Commissioner of State Revenue [2011] NSWADTAP 41 at [34]-[35] (emphasis added) 34 … [T]he market rate interest ... could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. 35 Accordingly where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. We think only a very narrow category of circumstances would justify any remission. These, without setting out any exhaustive list of circumstances, would in addition to cases where the 'tax default' is entirely due to a fault of the Chief Commissioner include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes) 61 There are no exceptional circumstances to justify remitting the market rate of interest
I agree with the Respondent on this point. I am not satisfied that there are circumstances before me which would in any sense be so exceptional as to require remission of the market rate of interest.

[23]

Application of the Entertainment Industry Act 2013 (NSW)

The Applicants briefly submitted that the Entertainment Act applied to the relationship between the Applicants and the persons who comprised models (the entertainment submissions). The submissions were as follows: 20. The Applicants are also subject to the provisions Division 1 of Part 2 of the Entertainment Industry Act 2013 (NSW), a copy of which is enclosed with these submissions. Section 5 of that legislation confirms that the "talent" (e.g. the models) are not employees of the applicants. … 37. It is convenient to consider Division 8 (Employment Agents) before considering Division 7 (Contractor Provisions). 38. Before doing so, however, it is worth noting that the mechanism of the Entertainment Industry Act 2013 (NSW) (see paragraph 20 above) supports the applicants' contentions otherwise set out in these submissions. This is because the industry is regulated on the premise that there is no employment, or wage, relationship between the applicants and the talent.
I observe that: 1. The Applicants provided no authorities to support their submissions, in particular, the unsupported submission that "the industry is regulated on the premise that there is no employment, or wage, relationship between the applicants and the talent." 2. I found at Issue 1 that for the purposes of s 37 the Applicants were employment agents, the models were service providers, and the agreements between the Applicants and the models were employment agency contracts. Accordingly, having regard to ss 38 and 39, the Applicants were taken to be employers of the models and the models were taken to be employees of the Applicants.
Ms Pollard stated in her oral evidence that income derived from work by models was paid by the Applicants into a Bella Management general account to which she and Ms Bonner were signatories. Ms Pollard conceded that no trust account was operated by the Applicants. Accordingly I find that the Applicants did not operate any trust account kept exclusively on behalf of the models as required by s 6 of the Entertainment Act if Division 1 of Part 2 of that Act was to apply as the Applicants submit.
Having regard to the material before me, I reject the entertainment submissions.

Bonner v Chief Commissioner of State Revenue

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Judgment (26 paragraphs)

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