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[2026] NSWSC 877
Supreme Court of NSW
2026-07-23
Hmelnitsky J
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Cerisewin Pty Ltd atf Mastercare Administrative Services Trust v Chief Commissioner of State Revenue [2026] NSWSC 877
Hearing dates: 18, 19 and 20 May 2026
Date of orders: 23 July 2026
Decision date: 23 July 2026
Jurisdiction: Equity - Revenue List
Before: Hmelnitsky J
Decision: Summons dismissed with costs
Catchwords: TAXES AND DUTIES — Payroll tax — Liability — Employment agent — Where plaintiff is part of a group of companies that conducts a commercial cleaning business — Where plaintiff is the designated group employer under s 80 of the Payroll Tax Act 2007 (NSW) — Where the main entity in the group (MAPL) entered into contracts with retail, logistics and healthcare clients for the provision of cleaning services — Where another group entity (DCPL) entered into contracts with corporate contractors who supplied workers to perform cleaning services at the clients’ premises — Whether assessments were excessive — Whether contracts with MAPL and/or DCPL were ‘employment agency contracts’ for the purposes of s 37 of the Payroll Tax Act — Whether cleaning services were provided ‘in and for’ the conduct of the clients’ businesses — Whether all amounts paid to corporate contractors are taken to be wages by reason of s 40(1)(a) of the Payroll Tax Act TAXES AND DUTIES — Payroll tax — Assessment — Interest — Whether assessment of interest should be revoked or reduced TAXES AND DUTIES — Payroll tax — Assessment — Penalty tax — Whether assessment of penalty tax should be revoked or reduced
Original judgment source is linked above.
Legislation Cited: Payroll Tax Act 2007 (NSW), ss 37, 38, 39, 40(1)(a) and 80
Taxation Administration Act 1996 (NSW), ss 21, 22, 27, 29 and 97
Cases Cited: Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue; International Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657; (2019) 109 ATR 879
Chief Commissioner of State Revenue (NSW) v Integrated Trolley Management [2023] NSWCA 302
Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259
E Group Security Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1190
HRC Hotel Services v Commissioner of State Revenue [2018] NSWSC 820; (2018) 108 ATR 84
SKG Cleaning Services Pty Ltd v Chief Commissioner of State Revenue [2026] NSWCA 122
SKG Cleaning Services Pty Ltd v Chief Commissioner of State Revenue; Ezko Property Services (Aust) Pty Ltd atf The Ezko Unit Trust v Chief Commissioner of State Revenue [2025] NSWSC 1219
SoClean Pty Ltd v Chief Commissioner of State Revenue [2026] NSWSC 161
UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; (2016) 104 ATR 577
Category: Principal judgment
Parties: Cerisewin Pty Ltd atf Mastercare Administrative Services Trust (Plaintiff)
Chief Commissioner of State Revenue (Defendant)
Representation: Counsel:
D McLure SC / M Bersten / H Cooper (Plaintiff)
S Kanagaratnam / G I Adams (Defendant)
Solicitors:
HWLE Lawyers (Plaintiff)
NSW Crown Solicitor’s Office (Defendant)
File Number(s): 2023/154667
Publication restriction: Nil
The plaintiff, Cerisewin Pty Ltd, is the corporate trustee of the Mastercare Administrative Services Trust and is part of a group of companies known as ‘Mastercare’. Mastercare is a national provider of commercial and industrial cleaning services. Mastercare services clients in a range of sectors including retail, logistics and healthcare.
The plaintiff is the designated group employer of the Mastercare group under s 80 of the Payroll Tax Act 2007 (NSW) (PTA). During a payroll tax audit, the defendant, the Chief Commissioner of State Revenue, identified two Mastercare entities which he determined should be added to the plaintiff’s payroll tax group: Mastercare Australasia Pty Ltd (MAPL) and Daintree Contractors Pty Ltd (DCPL). MAPL is the main entity in the Mastercare group and the sole shareholder of the plaintiff. DCPL is wholly owned by Cerise Contracting Pty Ltd, a company of which the plaintiff is the sole shareholder. Mr Colin Douglas Walker is the Managing Director of the Mastercare group and the sole director of each of the Mastercare entities. Mr Walker is also the secretary of the plaintiff, Cerise Contracting Pty Ltd and DCPL.
During the years ending 30 June 2017 to 30 June 2020 (the relevant period), Mastercare provided cleaning services to over 40 clients pursuant to contracts between MAPL and the clients (the client contracts). MAPL did not employ its own cleaning staff. Rather, with one exception, DCPL entered into contracts with corporate contractors who supplied cleaners to perform the services required under the client contracts. The exception to this practice was that in the years ending 30 June 2019 and 30 June 2020, MAPL contracted directly with corporate contractors for the provision of cleaning services to Woolworths Limited (Woolworths).
In the relevant period, Mastercare (through DCPL and, in respect of its contract with Woolworths in the 2019 and 2020 tax years, MAPL) had contracts with approximately 80 corporate contractors.
On 16 June 2022, the defendant issued the plaintiff with Notices of Assessment for payroll tax for the relevant period (the Assessments). The plaintiff was assessed in respect of payments made by MAPL and DCPL to corporate contractors on the basis that MAPL and DCPL were each employment agents under s 37(1) of the PTA and were therefore taken to be employers by reason of s 38. The defendant assessed penalty tax of 20% as well as interest.
It should be noted that the Assessments excluded payments made by DCPL to corporate contractors that were registered for, and were paying, payroll tax. DCPL only made payments to five such corporate contractors in the relevant period.
The plaintiff lodged an objection against the Assessments on 12 August 2022. The defendant disallowed the objection in full on 15 March 2023. The table below summarises the amounts assessed together with penalty tax and interest as at 12 May 2026. Interest was imposed at the market rate until 7 July 2022 pursuant to s 21 of the Taxation Administration Act 1996 (NSW) (TAA), and thereafter both the market rate and premium interest component were applied in accordance with s 22.
| | Year Ended 30 June 2017 | Year Ended 30 June 2018 | Year Ended 30 June 2019 | Year Ended 30 June 2020 | | NSW wages | $3,684,328.30 | $4,474,618.11 | $5,416,454.96 | $11,188,559.25 | | Threshold entitlement | $374,353.90 | $380,537.88 | $390,734.76 | $317,622.51 | | Primary tax (at 5.45%) | $180,393.60 | $223,127.37 | $273,901.75 | $592,466.05 | | Interest on primary tax | $76,819.29 | $93,294.73 | $102,565.20 | $222,600.96 | | Penalty tax (at 20%) | $31,003.46 | $39,033.06 | $44,741.92 | $98,873.75 | | Interest on penalty tax | $13,945.58 | $17,557.32 | $20,125.23 | $44,474.08 | | Total assessment | $302,161.93 | $373,012.48 | $441,334.10 | $958,414.84 | | Previously paid | $25,376.32 | $27,962.09 | $50,192.16 | $98,097.32 | | Total payable | $276,785.61 | $345,050.39 | $391,141.94 | $860,317.52 |
The plaintiff now seeks review of the Assessments pursuant to s 97 of the TAA. The plaintiff says the Assessments are excessive because neither MAPL nor DCPL were employment agents under s 37(1) of the PTA and therefore those entities should not be taken to be employers under s 38.
If the plaintiff’s case in relation to ss 37(1) and 38 fails, a further issue will arise concerning the quantification of taxable wages under s 40(1)(a) of the PTA. That provision deems as wages ‘any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract’. The plaintiff submits that the Assessments are based on the incorrect premise that all amounts paid by MAPL or DCPL to corporate contractors were taken to be wages by reason of this provision. It submits that this is erroneous because it has resulted in payroll tax being assessed by reference to amounts that were referable to the profit margin earned by the corporate contractors in addition to the amounts paid by the corporate contractors to or for the benefit of the cleaners themselves. The plaintiff submits that, on its proper construction, s 40(1)(a) does not treat amounts paid to the corporate contractors in respect of their own profit margin or in respect of their own overhead expenses as wages.
The defendant accepts that if the Court finds that no amount or a reduced amount of payments to corporate contractors are properly included as deemed wages, then no penalty or interest will apply in respect of those payments, or a reduced penalty tax and interest will apply.
The ultimate issue in dispute is whether the Assessments are excessive. The answer to that question requires consideration of the following:
Whether MAPL and DCPL were employment agents under employment agency contracts within the meaning of s 37(1) of the PTA, such that each is taken to be an employer under s 38 (the Employment Agency Issue).
Whether all amounts paid by MAPL and DCPL to corporate contractors in the relevant period are taken to be wages by reason of the operation of s 40(1)(a) of the PTA (the Deemed Wages Issue).
Whether the assessments of penalty tax and interest should be revoked or reduced (the Penalty and Interest Issue).
The defendant’s primary case was that the client contracts in the 2017 to 2020 tax years were contracts under which MAPL (the employment agent) procured the services of corporate contractors (through DCPL) in and for the conduct of the clients’ businesses. This arrangement was described as ‘Employment Agency Contracts Three’ in the defendant’s Further Amended Appeal Statement (DAS). I will however refer to it as ‘Arrangement A’ to reflect the way the matter was argued.
The payments that were taken to be wages in respect of Arrangement A were payments to the corporate contractors who supplied workers for MAPL’s clients in the industrial, commercial and retail sectors. The parties agreed to confine evidence about Arrangement A to a single representative client for each sector:
Industrial sector – Linfox Australia Pty Ltd (Linfox).
Commercial sector – Linfox’s NSW corporate headquarters in Erskine Park.
Retail sector – Officeworks Ltd (Officeworks).
The defendant says that the effect of the client contracts was that MAPL, either using its own employees or by obtaining the services of subcontractors, was required to procure cleaning services for its clients at the clients’ business premises. He contends that the services were procured in and for the clients’ businesses and that the client contracts were therefore employment agency contracts.
The plaintiff says that the corporate contractors provided services to MAPL, not to MAPL’s clients. It submits that both the client contracts and the contracts between DCPL and the corporate contractors provided for a suite of substantive services and benefits that went beyond the mere provision of cleaning staff to carry out tasks under the direction and control of the client.
Under the client contracts, Mastercare provided its expertise in designing and implementing site-specific cleaning systems for the clients. Mastercare also provided clients with access to the Mastercare Portal, a web-based management system which was one of the means by which clients such as Linfox and Officeworks participated in and remained informed of the conduct of Mastercare’s quality assurance and performance monitoring processes.
Under the contracts with DCPL, the corporate contractors provided various ‘worker management functions’ which Mastercare did not have the resources or expertise to perform on a scale commensurate with the requirements of its client base. Such functions included recruitment, supervision, payroll management, insurance and compliance with industry regulations.
In the alternative to its primary case, the defendant says that the contracts between DCPL and the corporate contractors in the 2017 to 2020 tax years were contracts under which DCPL (the employment agent) procured the services of the corporate contractors in and for the conduct of the business of MAPL (DCPL’s client). DCPL is therefore taken to be the employer under s 38 of the PTA. This arrangement was described as ‘Employment Agency Contracts One’ in the DAS. I will refer to it as ‘Arrangement B’.
The plaintiff submits that MAPL was not the client of DCPL because MAPL and DCPL were ‘associated companies under common ownership and control’ and because there was only one business, being that of MAPL in providing the cleaning services. It says that MAPL cannot, on any sensible interpretation of the word ‘client’ in ss 37(1) and 39 of the PTA, be regarded as the client of DCPL.
The plaintiff further submits that the exclusive function of DCPL and the rationale for its existence is to contract with the corporate contractors, thereby ensuring asset protection for the Mastercare group generally and for MAPL in particular as the primary holder of Mastercare’s assets and profits. It also says that the non-independence of DCPL is reinforced by the reality that it is not carried on for the purpose of earning a profit, nor did it make any substantial profit in the relevant period.
The defendant says in the DAS that Mr Walker set up a group structure in which each entity had a distinct business purpose. According to this reasoning, MAPL contracted with the client to provide cleaning services, while DCPL entered into contracts with large corporate contractors ‘to obtain their cleaning services to fulfil the agreements [MAPL] had with the end client’ (emphasis in original). The defendant further contends:
“Giving the word ‘client’ its ordinary meaning, there is some form of relationship whereby [DCPL] ‘does something on behalf of or at the request of’ [MAPL], being to enter into contracts with large corporation cleaning contractor companies to obtain the cleaning services required by [MAPL] to fulfill the contractual obligations it has with its clients.”
This arrangement is narrow in scope and forms the basis for the Assessments alongside either of Arrangement A or Arrangement B. It deals only with the fact that, in the 2019 and 2020 tax years, MAPL contracted directly with corporate contractors for the provision of cleaning services to Woolworths, without the interposition of DCPL. The defendant says that the contract between MAPL and Woolworths was a contract under which MAPL (the employment agent) procured the services of corporate contractors in and for the conduct of Woolworths’ business at its Distribution Centre in Minchinbury, NSW. This arrangement was described as ‘Employment Agency Contracts Two’ in the DAS. I will refer to it as ‘Arrangement C’.
The arguments in relation to Arrangement C were in substance the same as those advanced in relation to Arrangement A. The defendant says that the effect of the contract between MAPL and Woolworths was that MAPL, either using its own employees or by obtaining the services of subcontractors, was required to procure cleaning services for the Woolworths business.
The plaintiff submits that Arrangement C should fail for essentially the same reasons as it says Arrangement A fails. It says that the absence of DCPL in Arrangement C did not result in any substantive operational difference in relation to the cleaning services provided. That is, the corporate contractors provided their services to MAPL in exactly the same way as they ordinarily would have done had they contracted with DCPL, and MAPL provided its services to Woolworths in exactly the same way as it ordinarily would have done.
The contract with Linfox was titled ‘Contract for the Provision of Services’ (Linfox Contract). It governed MAPL’s provision of cleaning services to the representative client for both the commercial and industrial sectors (see paragraph [14] above). There were two versions of the Linfox Contract in evidence. The first was dated 23 December 2015 and the second was dated 12 November 2020. Neither party suggested that there were any relevant differences between the two contracts, although I note that only the 2015 version of the contract covered the relevant period.
Linfox’s business involves logistics operations. It operates industrial sites such as large warehouses, where its activities include the transportation, storage and distribution of goods. The employees who work at those sites include drivers, warehouse pickers, forklift operators and mechanics. Linfox also has corporate administrative office sites such as the NSW Head Office in Erskine Park.
Under cl 3.1(a) of the Linfox Contract, MAPL agreed to provide the Services described in the Contract Specifics in accordance with the terms of the contract and all Requests for Services submitted by Linfox to MAPL from time to time pursuant to cl 4.
Clause 3.2(c) stated that MAPL must ‘ensure that the Services are provided by, or under the direct supervision of an authorised representative’ of MAPL.
Clause 6.1, headed ‘Value Optimisation Strategies’, imposed an obligation on MAPL to ‘use its best efforts to identify strategies and processes’ to reduce costs and achieve efficiencies in the provision of the Services.
The Services were to be performed in specifically identified areas (described as ‘Building Components’) of the Linfox sites listed in Sch 3 to the Linfox Contract. Clause 12.1(a) required MAPL to ensure that the Services were completed ‘to a standard which satisfies or exceeds the Service Levels’ set out in Sch 2. Clause 12.1(b) provided that Linfox would review MAPL’s compliance with the Service Levels on a sixth-monthly basis.
The Service Levels were quite specific. For example, polished surfaces of walls, skirtings and ceilings were ‘to be kept to a uniform lustre’, doors and doorframes were to be ‘kept free of dust, grit, dirt, lint, soil, film, fingerprints and cobwebs’, and furniture was to be free of ‘distasteful or unpleasant’ odours.
In addition to cleaning specifications, the Service Levels in Annexure A to the Linfox Contract outlined Linfox’s requirements and Key Performance Indicators (KPIs) with respect to matters such as timely completion of service requests, attendance at site meetings, adherence to induction and training requirements, handling of complaints, and compliance with all directions issued by Linfox representatives. A failure to adhere to the applicable Service Levels resulted in Linfox not having to pay for the Services: cl 13(a).
Schedule 3 to the Linfox Contract set out the monthly price payable by Linfox in respect of each of the sites at which the Services were provided. The prices were referable, in part, to the frequency with which cleaning services were to be performed at each site (eg ‘Monday to Friday’, ‘Weekly Tuesday Mornings’).
MAPL was responsible for repairing, replacing, maintaining and ensuring the safety of equipment supplied by it for use in connection with performing the Services: cll 24.2(b)-(c) and 24.3.
Under cl 24.4(a), MAPL was responsible for ‘ensuring the health and safety of its employees, contractors and agents’ who attended Linfox’s premises, including ‘ensuring that they receive induction training and wear personal protective equipment’. MAPL was also charged with ensuring that cleaners attending Linfox’s premises acted in accordance with all relevant safety legislation and with Linfox’s own safety standards and policies, including the work, health, safety and environmental requirements set out in Annexure B to the Linfox Contract: cl 24.6.
The contract with Officeworks was titled ‘Supply of Goods & Services Agreement’ (Officeworks Contract). The contract was apparently executed on 17 June 2019, although services were due to commence on 13 May 2019.
Officeworks’ business involves the sale of office supplies, technology products and furniture to retail clients at physical retail stores, as well as the provision of printing and photocopying services to retail and commercial clients.
Under cl 9 of the Officeworks Contract, MAPL agreed to provide the Services described in the Specifications in accordance with the terms of the contract: cll 9.1(a) and 9.2(a). The Services were to be carried out in specifically identified areas of 167 retail stores, 3 customer fulfilment centres and 2 support offices: Sch 3, cl 1. The contract specified the cleaning services to be performed by site, area (eg stairwells, checkouts, trolley bays, manager’s office), task, description and frequency: Sch 3, cll 2 and 3. Under cl 5.1 in Sch 3, MAPL was required to provide additional ad hoc cleaning services upon request by Officeworks.
The Officeworks Contract required the Services to be performed in accordance with the cleaning standards outlined in Sch 3. For example, vinyl floors were to be maintained with a ‘deep wet shine look’ such that the reflection of the lights could be seen on the surface of the floor: Sch 3, cl 2.4.1. Air vents, relief grilles and other ventilation outlets were to be ‘kept unblocked and free of dust, grit, soil, film, cobwebs, scuffs and any other marks’: Sch 3, cl 6.6. Schedule 3 also specified the cleaning standards applicable to ad hoc deep cleaning services. For example, the floors of internal doorways were to be ‘pressure-washed to remove dust, grit, litter, bodily fluids, marks and spots, gum, cigarette butts, bird excreta, water and other liquids to a perimeter of two metres from the internal door’: Sch 3, cl 6.7.
The Officeworks Contract also covered waste-handling standards and recycling procedures designed to promote compliance with Officeworks’ target of recycling at least 90% of all waste generated: Sch 3, cl 4.
Schedule 3 to the Officeworks Contract provided that the Services were to be performed Monday to Friday between 6am and 9pm, with additional weekend cleaning as required: Sch 3, cl 3.1. MAPL was required to prepare site-specific cleaning schedules for each of Officeworks’ premises, to be approved by the Officeworks Site Manager prior to commencement: Sch 3, cl 1. Schedule 3 also specified the frequency with which various cleaning tasks were to be performed. For example, high-touch surfaces such as door handles and light switches were to be cleaned daily, bin areas were to be cleaned weekly, glass entrance doors were to be cleaned monthly, dust and cobwebs were to be removed from surfaces above three metres high every six months, and carpets were to be steam cleaned once per year: Sch 3, cl 3.2.
In addition to the task-specific standards referred to above, the Officeworks Contract required MAPL to ensure that the Services were performed in accordance with Officeworks’ KPIs, which dealt with matters such as invoice accuracy, equipment maintenance, health and safety risk assessments, and attendance recording: cl 23.1 and Sch 4. These and other matters were to be monitored and assessed at monthly site walkthroughs and quarterly performance management meetings attended by MAPL representatives: cl 23.2 and Sch 4(a)-(b).
In providing the Services, MAPL was required to comply with all reasonable directions of Officeworks, applicable work health and safety laws and any site-specific safety procedures mandated by Officeworks: cll 9.1(b)-(c); see also Sch 3, cl 8. MAPL was also responsible for ensuring that all cleaning staff completed the site induction training required by Officeworks prior to commencing work: cl 9.1(e). Further, cl 11 in Sch 3 imposed various obligations on MAPL with respect to supervision of cleaning staff, including providing a ‘competent and appropriately qualified supervisor’ at each site, conducting scheduled and unscheduled site visits, responding to complaints regarding the performance of the Services, and conducting training sessions for cleaning staff.
MAPL was responsible for supplying the equipment, chemicals and consumables necessary to perform the Services: Sch 3, cl 13.
In the event of non-compliance with its obligations in respect of the Services, or a failure to remedy non-compliance within a specified period allowed by Officeworks for that purpose, Officeworks could withhold payment, require the Services to be performed again at no cost, or require MAPL to reimburse any fees already paid in relation to the non-compliant Services: cl 9.4.
Clause 7.1 in Sch 3 provided that Officeworks may, ‘at its discretion, but not frivolously or vexatiously’, direct MAPL not to use any particular person to perform the Services. If such a direction was made, the affected person was to cease working at the relevant Officeworks site, and MAPL was required to provide a suitable replacement within 24 hours.
The contract with Woolworths was titled ‘Cleaning Services Agreement’ (Woolworths Contract). The contract was executed by Mr Walker on behalf of MAPL on 8 October 2015, with services due to commence on 19 October 2015.
By cl 3.1, MAPL agreed to provide the Services set out in Sch 1, cl 1 in accordance with the terms of the contract and to meet or exceed the Service Levels in Sch 1, cl 2.
Under the heading ‘Description of Services’, Sch 1, cl 1 referred to an attachment titled ‘EMS Services Manual – Cleaning’ (EMS Manual). The EMS Manual contained detailed cleaning specifications similar to those found in Sch 3 to the Linfox and Officeworks Contracts. For example, stainless steel surfaces between travelators were to be spot cleaned daily using a non-abrasive cleaning cloth and detergent to maintain a ‘uniform shine’. While most cleaning equipment was to be supplied by MAPL, the EMS Manual stated that hard floors could only be cleaned using chemicals provided by Woolworths pursuant to arrangements with its suppliers. The table in Appendix B set out the names and uses of the approved chemicals, along with other details such as dilution rates, coverage rates and drying times. The EMS Manual also contemplated the provision of additional periodic or ‘on request’ cleaning services to be carried out between 5:30pm and 6am on weekdays.
The Service Levels were set out in cl 2 of Sch 1 and covered matters such as invoice accuracy, performance monitoring, issue resolution and attendance at site meetings.
Clause 5.2 described the Performance Management Process, which enabled Woolworths to issue Improvement Notices to MAPL in respect of any non-compliance with its obligations under the contract.
Clause 6 permitted subcontracting by MAPL with Woolworths’ consent, but made it clear that MAPL retained responsibility for ensuring the suitability of the persons engaged through this method.
Clause 7 contained various warranties in relation to the performance of the Services. In particular, cl 7.2(d) provided that MAPL would ‘comply with all reasonable directions of Woolworths’ staff’.
Clause 8.1 imposed an obligation on Woolworths to provide access to its sites as reasonably required to allow MAPL to perform its obligations under the contract.
Clause 9 required MAPL to comply with Woolworths’ workplace health and safety policies and all relevant laws in relation to safety. Clause 9.1(c) provided that MAPL was to ‘complete a full risk assessment in relation to the Services and … implement mitigation actions and contingency plans appropriate for the risks that exist’.
Clause 10.1 charged MAPL with responsibility for ensuring the suitability of the cleaners performing the Services, including with respect to matters such as qualifications, experience and eligibility to work in Australia. MAPL was also required to provide a supervisor at each site who could liaise with the relevant Woolworths personnel in relation to any day-to-day issues.
Clause 10.3 provided that Woolworths may at any time, acting reasonably, request the removal or replacement of a particular cleaner, which request MAPL must comply with at the earliest opportunity.
Under cl 11, MAPL was required to ensure that all cleaners with access to Woolworths’ premises were aware of and complied with Woolworths’ policies, and had completed the relevant safety, health and environment induction modules prior to commencing work.
The cleaning specifications in evidence include several versions of a Scope of Works in relation to the Woolworths Distribution Centre in Minchinbury. The first version appears in the body of a letter from Mastercare to Woolworths dated 5 September 2017 with the subject ‘Cleaning Proposal for Woolworths SRDC Minchinbury NSW’. The second version appears in the body of a letter from Mastercare to Woolworths dated 2 July 2018 with the subject ‘Revised Cleaning Proposal for Woolworths SRDC Minchinbury NSW’. The third version appears in an undated document titled ‘Cleaning specification for Woolworths SRDC Minchinbury NSW’. The Scope of Works details the areas to be cleaned (offices, tea rooms and kitchens, first aid and bathrooms) and the nature and frequency of the tasks to be performed (eg emptying kitchen bins daily, washing bathroom floors with detergent four times daily, dusting furniture and skirting boards in first aid rooms weekly). The Scope of Works also provided for weekly audits to be conducted every Thursday at 3:45pm by representatives of Mastercare and the Minchinbury Distribution Centre.
The precise relationship between the Scope of Works and the Woolworths Contract was not explained in the evidence but there was no doubt that it was an aspect of the arrangement between MAPL and Woolworths in respect of the Woolworths Distribution Centre in Minchinbury.
The parties agreed that evidence of Mastercare’s arrangements with corporate contractors should be confined to two representative corporate contractors:
Clean Slate Services Pty Ltd (Clean Slate); and
IK Facility Services Pty Ltd (IKFS).
The contract between DCPL and Clean Slate was titled ‘Contractor Agreement’ and was dated 1 November 2015 (Clean Slate Contract).
By cll 2.1 and 2.2, DCPL engaged Clean Slate to perform the Cleaning Services set out in Sch 4, which contained details such as ‘the location, times, days, work to be performed and any specific requirements of the Client’.
The term ‘Client’ was defined in cl 1.1(c) to mean a person or entity with whom DCPL has a ‘business relationship’, including but not limited to the entities named in Sch 1, Item 2. LJ Hooker, Primary Health Care, Sanderson Mercedes Benz and Yaffa Publishing were among the Clients listed in Sch 1, Item 2.
Schedule 3 to the Clean Slate Contract specified the monthly and annual value of the contract by Client and site address, with some Clients receiving Cleaning Services at two different locations (eg Primary Health Care in Caringbah and Maroubra). Clean Slate was required to issue invoices to DCPL on a monthly basis in respect of the Cleaning Services it had performed: cl 8.1. Where Clean Slate had performed all of the Cleaning Services required under the contract for each of the Clients, it was entitled to issue an invoice for the agreed monthly value as stipulated in Sch 3: cl 8.2. If any part of the Cleaning Services had not been performed, whether due to Clean Slate’s own acts or omissions or otherwise, Clean Slate was only entitled to invoice DCPL on a pro-rata basis for the Cleaning Services actually performed: cl 8.3.
Schedule 4, which is headed ‘Details of Cleaning Services to be Provided’, contained a list of cleaning specification documents that were attached to the Clean Slate Contract. For each Client listed in Sch 1, Item 2, a corresponding cleaning specification document was included as part of Sch 4. For example, the document titled ‘LJ Hooker Cleaning Specification’ set out the details of the Cleaning Services to be provided at LJ Hooker’s office site in Alexandria. Much like the schedules to the Linfox, Officeworks and Woolworths Contracts (see paragraphs [31]-[32], [39]-[42] and [50] above), the LJ Hooker Cleaning Specification prescribed the areas to be cleaned, the type of cleaning required and the frequency with which the services were to be performed. For example, carpeted floors in thoroughfares and heavy use areas were to be vacuumed daily, hard floors were to be machine buffed weekly ‘to restore natural shine’, and surfaces above two metres high were to be dusted monthly.
By cl 3.1, Clean Slate agreed to comply with the terms and conditions set out in Sch 2, which relate to the conduct of Clean Slate, and any person engaged by Clean Slate, while performing the Cleaning Services. For example, the Cleaning Services were to be carried out with ‘minimal disruption to the normal business activities at the premises’ of the Client (Sch 2, cl 4), with ‘all reasonable care to avoid causing any damage to the building, fixtures, furnishings and fittings’ (Sch 2, cl 7), and in accordance with all applicable work health and safety legislation, environmental legislation and other statutory regulations, standards and codes (Sch 2, cll 9-10).
Clause 3.2 provided that Clean Slate was engaged by DCPL as an independent contractor.
Clause 4.1 required Clean Slate to provide DCPL with evidence that it holds workers compensation insurance, public liability insurance, an Australian Business Number and a current GST registration. Clause 4.3 entitled DCPL to terminate the contract without notice if any of the items just mentioned were not maintained, or were not maintained to DCPL’s satisfaction.
Clause 4 also dealt with subcontracting. Clean Slate was not permitted to assign or subcontract any portion of the contract to another person or entity except with DCPL’s prior written approval: cl 4.5. If approval was obtained, Clean Slate was responsible for ensuring compliance by assignees or subcontractors with the terms of the Clean Slate Contract: cl 4.6. The contract stated that DCPL may conduct an audit, with or without notice to Clean Slate, to ensure that appropriate levels of insurance cover were in place for work being performed by assignees or subcontractors: cl 4.7.
Clause 5.1 required Clean Slate to ‘provide all of the equipment, facilities and supplies necessary to perform the Cleaning Services’. Clean Slate was also responsible for ensuring that the equipment was ‘properly maintained, in good working order and of an appropriate standard to perform the Cleaning Services’. Clause 5.2 stated that DCPL was not responsible for, and had no liability in respect of, ‘the maintenance, repair, insurance or other outgoings associated with the provision of’ the cleaning equipment.
Subject to meeting the cleaning specifications stipulated in Sch 4, Clean Slate was ‘able to dictate the manner in which the Cleaning Services’ were performed: cl 5.4. However, DCPL had a right to request regular reports from Clean Slate on the progress of the Cleaning Services and to review the Cleaning Services.
The contract between DCPL and IKFS was titled ‘Contractor Agreement’ and was dated 13 July 2019 (IKFS Contract).
The IKFS Contract was substantially similar to the Clean Slate Contract. However, the IKFS Contract included a clause dealing with the Mastercare Portal and associated app. Another difference between the Clean Slate Contract and the IKFS Contract is that the latter contained a definition of ‘Audit Documents’ in cl 1.1(a) and cl 4.7 granted DCPL more extensive auditing rights in respect of work performed by subcontractors or assignees compared to the Clean Slate Contract.
The definition of ‘Client’ in cl 1.1(d) was identical to cl 1.1(c) of the Clean Slate Contract in that it referred to the Clients listed in Sch 1, Item 2. In the case of the IKFS Contract, Kmart Australia Limited (Kmart) was the only Client named in the schedule. The pricing table in Sch 3 identified seven Kmart stores where Cleaning Services were to be provided pursuant to the IKFS Contract.
Clause 2.2 provided that IKFS was to perform the Cleaning Services as set out in Sch 4. That schedule contained the details of the Cleaning Services to be performed at the relevant Kmart stores by reference to an attachment titled ‘Kmart Store Cleaning Specification’. The attachment was omitted from the version of the IKFS Contract in evidence, although the cross-examination of Mr Josh Lee (the sole director and shareholder of IKFS at the time the IKFS Contract was entered into) proceeded on the basis that the attachment was the same as the specifications in Sch 3 to a contract between MAPL and Kmart which commenced on 1 April 2019 (Kmart Client Contract). Schedule 3 to the Kmart Client Contract comprised a matrix with five categories of cleaning specifications: Super, High, Medium, Low and Very Low. The cleaning tasks in each category were identical; the only difference between the categories was the frequency with which those tasks were to be performed. For example, vinyl floors were to be buffed with a high-speed buffer seven days per week at stores in the Super category, but only on Mondays, Wednesdays and Fridays at stores in the Very Low category. The pricing table in Sch 4 to the Kmart Client Contract identified which cleaning specification category applied to each of the seven Kmart stores covered by the IKFS Contract.
Clause 1 in Sch 2 of the IKFS Contract dealt with the Mastercare app. It provided as follows:
“[IKFS] agrees, in providing the Cleaning Services or while [IKFS] is on [DCPL’s] premises, that:
- [IKFS] will ensure that all persons engaged to provide the Cleaning Services have smart phones and down load [sic] [DCPL’s] app to their phones and have their phones turned on from the time of their arrival to provide Cleaning Services up to the time of their departure from the site where the Cleaning Services have been provided; …”
Designing the cleaning arrangements for a particular client was a key part of Mastercare’s role in the lead-up to the commencement of cleaning services under MAPL’s client contracts. The process typically involved Mastercare personnel attending site visits to determine exactly how the required cleaning services should be performed, including the frequency of cleaning, the times at which cleaning should occur, the number of cleaning staff required, the equipment to be used and whether any specific standards or techniques would need to be employed (such as medical grade cleaning or food hygiene protocols). Site visits were also used to gather client-specific information relevant to the implementation of MAPL’s contract with the client, such as the facilities present on site and the schedules observed by the client’s own workforce (because it was preferable for cleaning services to be carried out at times that would cause minimal disruption to the client’s business).
At the end of the scoping and design process described in the preceding paragraph, Mr Gregory Brown (General Manager of the Mastercare group) would prepare a Contract Implementation Plan outlining each of the tasks that needed to be completed prior to the contract becoming operational. A Contract Implementation Plan typically covered matters such as demobilisation of existing cleaning contracts, determining staffing needs, the staff induction process, and establishing arrangements for the supply of equipment and materials.
Prior to the commencement of work under a contract between DCPL and a corporate contractor, the representative officer of the corporate contractor (usually the CEO or someone in a similar management position) would be provided with what was known within Mastercare as the ‘Subcontractor Pack’. The Subcontractor Pack comprised the following documents:
Specialist Service Provider Pack – Contractors Work Health & Safety and Environment Handbook;
Food Hygiene Policy;
Mastercare Property Services P/L – Quality Policy;
WHS Policy;
Work Health & Food Safety Policy;
Site Specific Work Health, Safety and Environmental Management Plan (this document was adapted to the particular site that was the subject of a contract with a corporate contractor);
Harassment & Coercion Policy;
Taking Action Against Harassment;
Respect for Diversity Policy, Human Rights and Anti Discrimination Policy;
Responsible Employment Policy; and
Code of Ethical Business Conduct.
In addition to providing corporate contractors with the documents mentioned above, an induction presentation would be conducted by Mr Brown or the relevant Mastercare Area Manager. The location of the induction presentation varied – it could be held at Mastercare’s offices in Lane Cove, at the corporate contractor’s office or at the site of MAPL’s client where the cleaning services were to be performed. Individual cleaners were also provided with an Induction Bundle containing documents outlining Mastercare’s operations and policies, and they were required to complete a Site Safety Induction Training Checklist.
After the induction program was completed and cleaners had begun working at their assigned site(s), Mastercare would oversee the provision of ongoing training sessions known as ‘Toolbox Talks’. The Toolbox Talks covered subjects such as safe lifting techniques and managing chemical-related hazards. The substance of the sessions was formulated by Ms Helen Weston, a WHS consultant engaged by Mastercare. Since the introduction of the Mastercare Portal in about April 2017, about 25% of the Toolbox Talks were available online through the Mastercare Portal. The remaining 75% were conducted in-person and were presented by the relevant Mastercare Area Manager. It was common for the representative officer of the corporate contractor to attend Toolbox Talks as well to ensure they understood the instructions and training that their employees were receiving.
The provisions by which payments to subcontractors may be treated as ‘taxable wages’ for the purposes of the PTA are contained in Part 3, Division 8.
Section 37 is as follows:
(1) For the purposes of this Act, 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.
(2) However, a contract is not an employment agency contract for the purposes of this Act if it is, or results in the creation of, a contract of employment between the service provider and the client.
(3) In this section—
contract includes agreement, arrangement and undertaking.
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.
40 Amounts taken to be wages
(1) For the purposes of this Act, the following are taken to be wages paid or payable by the employment agent under an employment agency contract—
(a) any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract,
(b) the value of any benefit provided for or in relation to the provision of services in connection with the employment agency contract that would be a fringe benefit if provided to a person in the capacity of an employee,
(c) any payment made in relation to the service provider that would be a superannuation contribution if made in relation to a person in the capacity of an employee.
(2) Subsection (1) does not apply to an employment agency contract to the extent that an amount, benefit or payment referred to in that subsection would be exempt from payroll tax under Part 4 (other than under section 50 or Division 4 or 5 of that Part), or Part 3 of Schedule 2 (other than clause 5 or 13A), had the service provider performed the services as an employee of the client, if the client has given a declaration to that effect, in the form approved by the Chief Commissioner, to the employment agent.
41 Liability provisions
Subject to section 42, if an employment agent under an employment agency contract—
(a) by arrangement procures the services of a service provider for a client of the employment agent, and
(b) pays payroll tax in respect of an amount, benefit or payment that is, under section 40, taken to be wages paid or payable by the employment agent in respect of the provision of those services in connection with that contract,
no other person (including any other person engaged to procure the services of the service provider for the employment agent’s client as part of the arrangement) is liable to pay payroll tax in respect of wages paid or payable for the procurement or performance of those services by the service provider for the client.
As I did in SKG Cleaning Services Pty Ltd v Chief Commissioner of State Revenue; Ezko Property Services (Aust) Pty Ltd atf The Ezko Unit Trust v Chief Commissioner of State Revenue [2025] NSWSC 1219 (‘SKG’) and SoClean Pty Ltd v Chief Commissioner of State Revenue [2026] NSWSC 161 (‘SoClean’), I refer to the helpful conspectus of the employment agency provisions by Basten AJA (Ward P and Payne JA agreeing) in Chief Commissioner of State Revenue (NSW) v Integrated Trolley Management [2023] NSWCA 302 (‘Integrated Trolley Management’) at [23]-[26].
In SKG Cleaning Services Pty Ltd v Chief Commissioner of State Revenue [2026] NSWCA 122 (‘SKG Appeal’) at [45], Ball JA (Leeming and Free JJA agreeing) said:
“It is now accepted that the expression ‘for a client’ [in s 37(1)] carries with it the concept that the services must be provided in and for the client’s business. It is the connection between the ordinary activities of the client’s business and the services that are provided under the contract that gives the contract the necessary character.”
Whether this connection exists is a question of fact and degree: SKG Appeal at [46]. In that case, as in Integrated Trolley Management, the relevant connection between the ordinary activities of the client’s business and the regular cleaning services provided by the putative employment agent was readily apparent. As Ball JA said in SKG Appeal at [56], ‘the cleaning of premises occupied by a business is typically part of the ordinary activities of that business’.
I note at the outset that the plaintiff’s argument bears some similarity to arguments rejected in both Integrated Trolley Management and in SKG Appeal.
Its argument commenced by noting that the mischief to which the employment agency provisions are directed is that identified by White J in UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; (2016) 104 ATR 577 (‘UNSW Global’) at [41]:
“… [T]he mischief against which the employment agency contract provisions w[ere] directed was the avoidance of payroll tax through the interposition of an agent to give the appearance of a contractor relationship where one did not exist in substance. The mischief to which the provisions were directed was not where the service provider was a genuine independent contractor whose services were provided to a client through an intermediary. …”
“… I wish to make clear that my understanding of the ‘in and for’ test is that it requires an analysis as to whether the workers in question were integrated into the client’s business (or added in effect to its workforce), not whether the workers or the provision of their services were integral or essential (as opposed to ancillary) to the client’s business or workforce; nor whether the client could itself have performed the relevant tasks. …”
“Recognising the difference between a worker being integrated into a business, as distinct from the services being integral to the business, is essential to understanding the correct operation of the [PTA].”
“In addressing the application of the statutory test, as explained in UNSW Global and accepted by this Court in E Group Security, the Chief Commissioner emphasised that the individuals who worked for the client should do so in much the same way as would an employee of the client. That meant that the business would involve work having a degree of regularity and continuity, and where the nature of the work was to a significant degree under the control and direction of the client. So long as the qualifiers are maintained, this approach should be accepted.”
“In other words, to engage the Act it is not enough that the work is regular and continuous; nor is it enough that the work is essential to the client’s business. To engage the Act, the worker must be integrated into the client’s business. In most cases, the requisite level of integration will not be reached unless the client has a significant degree of control and direction over the worker (as distinct from merely specifying the work).” (emphasis in original)
“Importantly, the focus of the test is not whether the services performed by the service provider are integral to the client’s business, in the sense that the business could not operate without those services, but whether the workers were incorporated, or added, into the business and workforce of the client … . It is not correct to ask whether or not the client is able to operate its business without the services provided by the service provider. … The focus of the inquiry is on the manner in which the service provider provides the services, and whether that manner of provision of services is indicative of the service provider being integrated into the client’s workforce and working in much the same manner as the client’s employees.” (emphasis in original)
“Each of the phrases (or indicia) relied upon by the respondent may be identified in a decision of a single judge in explaining his or her reasoning for reaching a particular conclusion. But the reasoning by the primary judge does not turn upon a distinction between the nature of the service and the manner in which it was provided. If the terminology referred to in fact demands a focus on ‘the manner in which the service [provider] provides the services’, that is an unjustified gloss on the statutory text. However, it may be doubted that the judgments in which such language was adopted carried any such implication.”
“Suggestions in earlier cases that wearing a distinctive uniform was a factor demonstrating that the persons were not ‘integrated into’ the client’s workforce tend to demonstrate the inappropriateness of using the term ‘integrated into’ in relation to a client’s business. As already noted, the purpose of the employment agency provisions is to impose liability for payroll tax with respect to payments to persons who are not employees. There is no explanation in the cases as to why that purpose is not properly served where it is made clear to third parties that the persons are not employees. That they are not employees of the client is a condition of the application of Pt 3, Div 8; an express indication of that fact can hardly be an indicator of its non-application. In short, the wearing of a distinctive uniform is an example of an indicium developed in the cases which finds no support in the statutory language or the statutory purpose, and should be avoided.”
I have said that his Honour ‘all but’ rejected the respondent’s submission on this point in Integrated Trolley Management because, as his Honour said at [84], there may be no difficulty with the concept of a worker being ‘integrated into’ the business of the client provided one does not take that expression to suggest that the focus is on the manner (his Honour’s emphasis) in which services are provided.
A similar argument was rejected in SKG Appeal. The appellant’s main argument in that case was that the necessary connection between the ordinary activities of the client’s business and the services that are provided under the contract ‘can only exist if the client has a sufficient degree of control over the way in which the activities to be undertaken by the service provider are to be carried out so that it can be said that the nature of the relationship between the client and service provider is akin to that of employer and employee’: at [46].
That argument was rejected as being overly narrow: at [47]. The Court rejected the submission that the critical question concerns the ‘degree of control and direction the client … had over the work performed by the cleaners’: at [54].
The plaintiff’s argument in this case is difficult to reconcile with Integrated Trolley Management and SKG Appeal. As explained in those cases, it is an error to approach the construction of s 37 on the basis that it is principally concerned with the ability of the client to control and direct the workers supplied by the putative employment agent. It is similarly erroneous to assume that the section is principally concerned with the degree to which workers are ‘integrated into’ the business of the client.
In the light of Integrated Trolley Management and SKG Appeal, it would be an error to treat the concept of the individual cleaners here being ‘integrated into’ the business of the MAPL clients as the main criterion of liability under s 37.
I will instead approach the matter as I did in SKG. I will determine the character of the contracts from their terms and from the context in which they operate: SKG Appeal at [44]; Integrated Trolley Management at [111]. Whether or not those contracts have the necessary character to bring them within the scope of s 37 must depend on the connection between the ordinary activities of the client’s business and the services provided under the contracts: SKG Appeal at [45].
Under the Linfox Contract, MAPL was required to provide certain defined Services in accordance with the contract and any Requests for Services made by Linfox under the contract.
The Services were required to be performed according to detailed standards set out in Sch 2. The cleaning tasks were all of the routine tasks one might expect a business such as Linfox to need in its day-to-day operations: cleaning floors and windows; emptying bins; cleaning toilets and bathrooms; cleaning furniture and internal fixtures. The frequency with which the Services were to be performed was specified in the contract and varied by location and by the areas to be cleaned.
The plaintiff sought to downplay the significance of the cleaning specifications by emphasising that they were no more than the cleaning ‘outcomes’ required by Linfox under the contract. It submitted:
“Ultimately these matters are directed towards cleaning outcomes which Linfox requires Mastercare to ensure are achieved for it; that does not tell one anything meaningful as to the position as between Linfox and the individual cleaners who perform the Services, and in particular whether those cleaners are integrated into Linfox’s workforce or under the command and control of Linfox.”
“… Each of these contracts contained detailed specifications governing the nature of the services to be delivered, where and when they were to be delivered and how much time was to be spent delivering them. In this way, each contract reveals a close and relevant connection between the services to be performed (being the work described in the specification) and the ordinary conduct of the business of the client (which necessarily governed the content of the specification). Although the services were provided to a wide range of clients across a wide range of industries and government sectors, each client sought essentially the same thing: a cleaning service appropriate to the routine requirements of its particular business.”
The same can be said of the Linfox Contract. The fact that MAPL has an active role in deciding how best to ensure Linfox’s premises are kept clean does not cause me to reach any different conclusion about the connection between the ordinary requirements of Linfox’s business, on the one hand, and the cleaning services to be performed by cleaners pursuant to the Linfox Contract, on the other. In my view, that connection is close and relevant. It is not materially different to the connection identified in SKG.
I do accept that MAPL retained a relatively high degree of ‘command and control’ over the individual workers. Clause 3.2(c) of the Linfox Contract provided that MAPL must ‘ensure that the Services are provided by, or under the direct supervision of an authorised representative of [MAPL]’. The requirement to maintain what the plaintiff described as Mastercare’s ‘positive, active role in formulating and shaping the Services’ was also to be found in cl 6, which required MAPL to use its best efforts to ‘identify strategies and processes’ to reduce costs and achieve efficiencies in the way the Services were provided.
The Linfox Contract also mandated the way in which the Services were to be performed by requiring MAPL to meet specific Service Levels and KPIs. These included requirements for MAPL to be fully responsive to Linfox’s cleaning needs, attendance at site meetings, compliance with occupational health and safety requirements and so on.
These considerations are relevant, but they have very little bearing on my ultimate conclusion, which is that there is a close and relevant connection between the ordinary requirements of the Linfox business and the cleaning services supplied by MAPL. All of the work to be done under the contract was exactly the kind of regular, day-to-day cleaning work that Linfox might otherwise have done using its own employees.
Mr Christopher John Anderson was the Group Procurement Manager for Linfox during the relevant period. He was responsible for the procurement process that led to the entry into the Linfox Contract. He explained that Linfox has not employed cleaners in the time he has been with the company and that his aim in engaging MAPL was:
“… for a ‘turn-key’ solution, meaning, an external company would provide all of Linfox’s cleaning needs nationally, with that company having complete responsibility for all elements of the service.”
Linfox had sound reasons for deciding to engage MAPL which the defendant does not dispute. However, the fact remains that the work done by MAPL’s contracted cleaners under the Linfox Contract was the regular cleaning work required on a day-to-day basis by Linfox.
The plaintiff submitted that the Mastercare business could not be compared to the business of the plaintiffs considered in SKG. In that case, I said at [96]:
“… In the case of the cleaning services supplied by the plaintiffs in these proceedings, the clients may not have control over the workers in the sense of having a contractual right to control or direct them as employees, but they remain entirely in command of the services to be provided by those workers. In every case, it is the clients who decide what services are provided and when they are provided. These are matters that are inevitably governed by the exigencies of the client’s business, not by the plaintiffs. They are matters that find expression in even the simplest contract specifications.”
The plaintiff submitted that here, unlike in SKG, the client contracts made clear that the control and management of the cleaners was assigned to MAPL and not the client. It also relied on the fact that it was MAPL and not the client that determined the cleaning schedule. In this respect the plaintiff emphasised MAPL’s value-adding role in designing and implementing the cleaning services for its clients.
I see two related difficulties with these submissions. The first is that they focus on the client’s ability to control and direct the workers as opposed to its ability to determine the cleaning services provided to it. It is the latter form of control that particularly matters. That is why in SKG I said that the plaintiffs remained ‘in command of the services to be provided by those workers’: at [96] (emphasis added). It was not an observation about the plaintiffs’ ability to direct the workers as employees. The second difficulty is that MAPL’s value-adding role in tailoring the cleaning services to a client’s particular needs – the importance of which I do not at all seek to diminish – is something that relates directly to the same subject matter, namely the cleaning services provided under the contract. What MAPL relevantly provides to its clients is a better, more cost-effective delivery of the cleaning services. That does not make the cleaning services provided by MAPL any different to the cleaning services provided by the plaintiffs in SKG to their clients. In both cases, the services are closely tailored to the needs of the clients’ businesses and in both cases the services reflect basic exigencies of those businesses.
The plaintiff submitted that the manner in which the Linfox Contract was implemented also supported a conclusion that the contract was not an employment agency contract. It relied on evidence to show that the entities in the Mastercare group used their expertise in commercial and industrial grade cleaning to develop customised cleaning systems for each client. Mr Brown provided an in-depth description of the scoping and design process which resulted in the preparation of a Contract Implementation Plan: see paragraphs [79]-[83] above. His evidence about this issue, which I accept, was that MAPL provides a valuable service to clients by designing and implementing systems that enable the delivery of the cleaning services required by its clients.
The plaintiff also relied on the existence of the Mastercare Portal (see paragraph [17] above) which MAPL requires clients and cleaners to use. It similarly relied on the Mastercare app in those cases and during those periods where it was used.
I do not consider that these matters make a difference to whether the cleaning services procured by MAPL for Linfox were ‘in and for’ the business of Linfox. That is not to say that MAPL does not add value in the way it implements client contracts. It is clear that it does. Both the portal and the app facilitated communication in a way that would have been important to the parties to the contract and to the cleaners themselves. Both would have facilitated the management by MAPL of the cleaners who were performing the work. But neither the portal nor the app, nor the other ways in which the contracts were performed, supply a reason to reach any different conclusion about the relationship between the cleaning services themselves and the client’s business.
The same may be said about the provision of induction and training for cleaning staff, which is undertaken by MAPL, and the provision of cleaning equipment, which is supplied by MAPL. For completeness, the fact that Mastercare cleaners were required to wear Mastercare uniforms makes no difference to my overall conclusion.
The defendant relied on the fact that there were some instances in which Linfox staff had direct communications with individual Mastercare cleaners (regarding missed shifts and unsatisfactory cleaning, for example) despite the terms of the Linfox Contract, which required such matters to be raised with MAPL. He submitted that these instances tended to show that Linfox had a power of direction or control over the cleaners akin to that of an employer. Similar evidence existed and similar submissions were made in relation to the other client contracts also.
I place very little weight on the fact that members of the client’s own staff had these kinds of communications with cleaners from time to time. These were isolated instances in the conduct of a very large contract for cleaning of numerous sites over a number of years. I am not prepared to draw sweeping conclusions about the ability of Linfox (or the other clients) to control Mastercare cleaners on the basis of these limited occurrences.
That is not to say that the evidence was entirely irrelevant. Although it does not count for much, it does tend to underscore the point that the cleaning services supplied by MAPL were an obvious and basic part of the day-to-day running of the clients’ businesses. Given the nature of the services, it is hardly surprising that client managers occasionally had views about how the work should be performed. Nor is it surprising that from time to time they would say something about it to the cleaners, such as when they were dissatisfied about dirty floors or overflowing bins. Instances such as these tend to reveal the fundamentally close connection between the services supplied by MAPL and the businesses conducted by its clients on a day-to-day basis.
In my view, the Linfox Contract was an employment agency contract within the meaning of s 37 of the PTA.
These same observations can all be made about the Officeworks Contract. Although MAPL was obliged to prepare site-specific cleaning schedules (see paragraph [42] above) and to perform other important tasks under the contract, all cleaning services and the schedule according to which they were to be provided were matters ultimately governed by the exigencies of the Officeworks business, to which they were very closely tailored, just as they were with the Linfox Contract.
The Officeworks Contract was in this respect even more prescriptive than the Linfox Contract: see paragraphs [40]-[42] above. In addition to the matters mentioned above, it is relevant to note that the contract sometimes even specified how tasks were to be performed. Clause 2.4.2 of Sch 3, for example, required carpets to be vacuumed using a vacuum with a rotating brush, and provided that best results were to be obtained by using the ‘Fast forward – Slow back’ method. It may well be that this level of specificity reflected work done by MAPL to tailor the schedule to Officeworks’ requirements. Even so, the result was a contract under which cleaners were procured in order to provide services that could not have been more carefully tailored to the particular requirements of the Officeworks business.
I note that the matters relied on by MAPL concerning the performance of the Officeworks Contract do not differ in a material way from the matters relied on in relation to the Linfox Contract. As in the case of the Linfox Contract, I do not consider that there is anything about the way the Officeworks Contract was performed that tends against the conclusion that it was an employment agency contract.
As with Linfox, there was also evidence about occasional attempts by Officeworks managers to give directions to individual Mastercare cleaners, contrary to the regime set up by the contract. I make the same observations about that evidence as I made in the context of the Linfox Contract. I place very little weight on it.
I accept, as I did with Linfox, that MAPL was required to perform a number of important functions in relation to the provision of cleaning services. This included the procuring, training and management of cleaners. I accept that MAPL also had an important role in designing the roster of cleaning services in a way that was tailored to the various requirements of the many Officeworks sites at which they were to be performed. However, the result was as it was with Linfox: a contract under which MAPL was required to procure cleaning services that were very closely tailored to the ordinary business requirements of its client. Officeworks got the benefit of a cleaning workforce that could not have suited its business better even if it had employed the cleaners directly.
In my view, the Officeworks Contract was an employment agency contract within the meaning of s 37 of the PTA.
The conclusions I have reached concerning Arrangement A make it strictly unnecessary to deal with Arrangement B. However, in case I am wrong about whether MAPL’s client contracts are employment agency contracts under which MAPL is an employment agent, I will state my conclusions in relation to the defendant’s alternative argument.
Although never mentioned in his written submissions, the inspiration for this aspect of the defendant’s case was the decision of the Court of Appeal in Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 (‘E Group (No 2)’).
In that case, the plaintiff, E Group Security Pty Ltd (E Group Security), supplied the services of licenced security guards to clients in a variety of industries. For the years in dispute, the entity which contracted with third-party clients was E Group Security. It entered into the equivalent of what, in the present case, have been called ‘client contracts’, being contracts with businesses in need of security guard services. E Group Security, in turn, contracted with third-party suppliers of security guard services in order to meet its obligations under the client contracts. These were the equivalent of what, in the present case, have been described as contracts with ‘corporate contractors’, being the entities which engaged the workers to do the work.
However, during some of the years in dispute, E Group Security caused one or other of its related entities to contract with third-party suppliers of security guard services in order to procure security guards to do work at the clients’ premises. Although this was described as a ‘payroll’ arrangement, the evidence showed that there was an intercompany charge to E Group Security in respect of this function: E Group (No 2) at [16] (Brereton JA) and [87]-[88] (Griffiths AJA, Simpson AJA agreeing). Either way, however, the security guards themselves were procured from unrelated contractors under contracts of a similar kind to the ‘corporate contractor’ contracts in this case. The main difference was that during some periods the guards were procured by E Group Security and in other periods they were procured by a related entity.
As in this case, the defendant sought to support the assessments on alternative bases corresponding with Arrangement A and Arrangement B. The first argument was that the client contracts (that is, the contracts between E Group Security and the third-party clients for the supply of security guards) were employment agency contracts. The alternative argument was that even if the client contracts were not employment agency contracts, the arrangements for those periods in which the security guards were procured by a related entity as opposed to E Group Security were employment agency contracts on the footing that the related entities were procuring security guards in and for the business of E Group Security.
At trial, Ward CJ in Eq rejected both of these arguments. Her Honour found that the client contracts (that is, the contracts between E Group Security and the third-party clients for the supply of security guards) were not employment agency contracts within the meaning of s 37: E Group at [329]. Her Honour also found that the arrangements between the plaintiff and its related entities to supply workers in respect of those identical client contracts – the equivalent of Arrangement B here – were not employment agency contracts: at [340].
The appeal in E Group (No 2) related only to the Chief Commissioner’s alternative argument. There was therefore no suggestion that the contracts between E Group Security and its clients were arrangements whereby security guards were supplied in and for the businesses of those clients. This was for all of the reasons explained by Ward CJ in Eq (in E Group at [331]-[338]), which were not challenged.
The Court of Appeal found that the arrangements between E Group Security and certain closely related group companies whereby those companies performed the function of engaging security guards were employment agency contracts: E Group (No 2) at [96] Griffiths AJA (Brereton JA and Simpson AJA agreeing). It found that under these arrangements, E Group Security was the ‘client’ of its related entities within the meaning of s 37.
The principal issue considered in the reasons of Griffiths AJA (Brereton JA and Simpson AJA agreeing) was a factual one, namely whether there in fact existed an arrangement between E Group Security and the so-called ‘Grouped Entities’ for the latter to supply workers to the former in connection with the performance by the former of its client contracts: E Group (No 2) at [78]-[89] (Griffiths AJA, Simpson AJA agreeing); see also [7], [20] (Brereton JA). The difficulty was that the primary judge had found, in reliance on certain Group Payroll Agreements and on the unchallenged evidence of the principal of the group, Mr Chamoun, that the Grouped Entities did not actually engage contractors but instead only performed a so-called ‘payroll’ function.
Griffiths AJA explained that despite the absence of challenge to this evidence, other documents in evidence supported a conclusion that the Grouped Entities procured third-parties to supply the security guards in relation to the client contracts entered into by E Group Security. His Honour concluded at [96]:
“The combined effect of the various categories of documents described above is sufficient to uphold the Chief Commissioner’s central contention that, notwithstanding the terms of the Group Payroll Agreements, there was an arrangement that operated during the Relevant Years whereby the Grouped Entities performed more than a payroll function and extended to them procuring security guards for their client, E Group Security.”
Having found that such an arrangement existed, his Honour concluded that the arrangement was an employment agency contract within the meaning of s 37 of the PTA. Implicit in this conclusion was an acceptance of the Chief Commissioner’s argument in relation to ground 5(a) of his appeal (see [43]) and a corresponding rejection of the conclusions reached on this issue by the primary judge in E Group at [340]. Her Honour had there said (among other things) that E Group Security was not the ‘client’ of its subsidiaries and that such arrangements as existed ‘were instances of compliance by the subsidiary with a direction from the parent company’.
These matters make it very difficult to distinguish the arrangement considered in E Group (No 2) from Arrangement B in the present case. Just like in E Group (No 2), Arrangement B involves one group company entering into contracts with third-party clients to supply services and a second group company entering into contracts with third-party suppliers of labour to procure workers to enable the first company to perform its client contracts. Whether the second company is a parent or sibling of the first is nothing to the point. In both cases, the second company charges a fee to the first company for performing the function I have just described. Remembering that this issue only arises if the plaintiff has otherwise succeeded in showing that Arrangement A did not give rise to an employment agency contract, both cases involve third-party client contracts under which the relevant workers are not provided for the businesses of those clients within the meaning of s 37. In both cases, the same underlying third-party client contracts were sometimes fulfilled with workers procured by the first company and sometimes with workers procured by the second, there being no suggestion that the change in internal group arrangements for procuring workers had anything to do with avoiding payroll tax.
The plaintiff submitted that Arrangement B differed from the arrangement considered in E Group (No 2) in that DCPL does not charge a profit margin for performing its function of procuring cleaners for MAPL. I do not however see that this makes any difference. There was no suggestion in E Group (No 2) that the Grouped Entities were charging a profit margin. Even if they were, there is nothing in the reasons of Griffiths AJA to suggest that this made any difference to the ultimate conclusion.
The plaintiff also submitted that the expression ‘client’ in s 37(1) was inapt to describe the role of MAPL under Arrangement B. It pointed out that the client contracts were all with third-parties and that the workers were all involved in cleaning those clients’ premises. It submitted that MAPL was not a ‘client’ of DCPL within the ordinary meaning of that expression, especially when the nature of the overall arrangement was taken into account. The plaintiff referred in this respect to what Ward CJ in Eq said in E Group at [340]. It further submitted:
“It appears to be common ground that this is the correct approach to the term ‘client’ … and nothing in the Court of Appeal’s decision from her Honour’s first instance decision cast[s] doubt on this particular aspect of her Honour’s reasoning. Also of relevance, and also not disturbed by the Court of Appeal, her Honour indicated that a ‘client’ relationship will not exist where the nature of the relationship consists of ‘compliance by a subsidiary with a direction from the parent company’: at [340] (cited by the Court of Appeal at [42(1)] without disapproval). Approached on this footing, the plaintiff submits that on no reasonable view of the ordinary meaning of the term ‘client’ could MAPL be described as the client of DCPL.”
The difficulty with this submission is that in relevantly identical circumstances to the present, the Court of Appeal concluded that one group company was the ‘client’ of another group company within the meaning of s 37 by reason of the fact that there was an arrangement whereby the second company would procure the workers in return for a payment.
It is true that there was no written agreement between MAPL and DCPL for DCPL to enter into the contracts with corporate contractors or for DCPL to be paid a fee for doing so. Furthermore, the fee for performing this function was only raised as a matter of accounting. But so what? It could not be the case that the provisions apply to those cases in which an entity procures workers for cash but not where the entity is paid by book entry. Nor could it be the case that the provisions apply to those cases in which the group companies formally agree to such an arrangement but not where the second group company performs its function at the direction of the first. This would put form above substance in a way that would be wholly inappropriate for provisions such as these.
It is also true that, as the plaintiff submitted, ‘[i]n substance and reality, [MAPL and DCPL] are carrying on the same business under common ownership and control’. It was on this basis that the plaintiff submitted that ‘MAPL cannot on any sensible interpretation of the word “client” in ss 37(1) and 39 be described as the client of DCPL’. That, however, was the very conclusion reached in E Group (No 2) despite the fact that, just like in this case, the taxpayer and the other group entities were ‘in substance and reality carrying on the same business under common ownership and control’.
Had it been necessary for me to decide the question, I would therefore have found that Arrangement B was an employment agency contract.
The difference between Arrangement A and Arrangement C is that in Arrangement A the corporate contractors who provided cleaners to perform cleaning services for MAPL’s clients were engaged by DCPL, whereas in Arrangement C they were engaged by MAPL.
This difference does not have any meaningful effect on the outcome. The relationship between the cleaning work procured by MAPL and the business of Woolworths is basically the same as the relationship between the cleaning work procured by DCPL and the businesses of Officeworks and Linfox under Arrangement A. The services procured for and supplied to Woolworths including at its Minchinbury Distribution Centre under Arrangement C were ongoing, routine cleaning services of a kind that Woolworths might otherwise have employed cleaning staff to perform.
The ‘Services’ were identified in Sch 1, cl 1 of the Woolworths Contract: see paragraph [49] above. The EMS Manual to which that schedule referred contained detailed specifications that were similar to those found in Sch 3 to the Linfox and Officeworks Contracts. As in those other contracts, the specifications prescribed the frequency and timing of cleaning tasks, the materials or chemicals to be used and the standard to be maintained: see paragraph [50] above.
The other features of the Woolworths Contract which I identified at paragraphs [51]-[60] above tend only to confirm the conclusion that the cleaning services were procured ‘in and for’ the Woolworths business. They show that the work to be done and its ongoing management is closely tailored to the ordinary operation of the Woolworths business.
What I have said about the Linfox and Officeworks Contracts in the context of Arrangement A otherwise applies equally to the Woolworths Contract. In my view, it was an employment agency contract within the meaning of s 37 of the PTA.
In stating my conclusions in relation to the three arrangements, I have said very little about the role of the corporate contractors, Clean Slate and IKFS.
The arrangements between MAPL or DCPL and the corporate contractors were such that they were required to supply cleaning services at the premises of MAPL’s clients in a way that was closely tied to MAPL’s obligations to procure those services. That is, the services procured by MAPL or DCPL from Clean Slate or IKFS were, in substance, the services which MAPL had agreed to procure for its clients. However, although Clean Slate and IKFS would have been provided with detailed schedules of the work to be performed, there was only very limited evidence of this. One example, which falls outside the ‘arrangements’ between Mastercare and the representative clients considered above, was in relation to LJ Hooker: see paragraph [67] above. In that case, the Clean Slate Contract included a detailed schedule of services to be performed at a particular LJ Hooker office. That schedule was drawn from the contract between MAPL and LJ Hooker. Similarly, the Kmart Store Cleaning Specification attached to the IKFS Contract was drawn from MAPL’s contract with Kmart: see paragraph [77] above. I infer in the absence of evidence about this matter that similar arrangements were in place with the corporate contractors generally. I infer that the services procured by MAPL or DCPL from the corporate contractors were the very services which MAPL had agreed to procure on behalf of its clients and that this was the case in relation to the Linfox, Officeworks and Woolworths Contracts.
The Assessments have been calculated on the basis that all amounts paid by DCPL or MAPL to the corporate contractors are taken to be wages by reason of s 40(1)(a) of the PTA. That provision is reproduced at paragraph [86] above.
The plaintiff contends that this is incorrect and has resulted in an over-assessment of payroll tax. It submits that the reference in s 40(1)(a) to the ‘service provider’ is to the person who actually performs the work, being the individual cleaners in this case. It submits that the ‘amount paid or payable to or in relation to the service provider in respect of the provision of’ cleaning services does not include the whole of the amount paid to the corporate contractors. Specifically, it does not include the amount of any profit margins or overhead expenses charged by the corporate contractors themselves.
If, however, the ‘service provider’ is the person who procures the services of the cleaners, being the corporate contractors in this case, the amounts taken to be wages will include the amounts paid to cover the corporate contractors’ overheads and profit margins. The plaintiff submits that this construction would not be consistent with the proposition that the employment agency provisions were ‘intended to secure and not to broaden the traditional tax base’, as White J said in UNSW Global at [40]. This is because the ‘traditional tax base’ should be conceived of as one in which the clients employ the cleaners directly, in which case tax would only be payable on the wages paid to the cleaners.
This issue is one which Ward CJ in Eq had occasion to consider in HRC Hotel Services v Commissioner of State Revenue [2018] NSWSC 820; (2018) 108 ATR 84 (‘HRC Hotel Services’) and then again in Bayton Cleaning Co**mpany Pty Ltd v Chief Commissioner of State Revenue*; International Hotel Services Pty Ltd* v Chief Commissioner of State Revenue [2019] NSWSC 657; (2019) 109 ATR 879 (‘Bayton Cleaning’).
In HRC Hotel Services, her Honour said:
“[180] It is not necessary to explore the question whether, for the purposes of s 40(1)(a) the service provider in the present case is the third party sub-contractor (the primary contention advanced by the Chief Commissioner on this issue). That is because even if the service providers procured for the purpose of the employment agency contracts in this case are the housekeepers sourced through the sub-contractors, the same result would in my opinion follow.
[181] In this regard, it is significant in my opinion that the construction advanced by the plaintiffs gives no work for the words ‘in relation to’ to do in s 40(1)(a) of the Payroll Tax Act. Those are words recognised to be of considerable breadth (as was accepted in the course of argument as to the narrower ambit of the words ‘under which’ in s 37(1)). In my opinion, those words expand the reach of the deemed wages under s 40(1)(a) beyond the actual amounts paid to the additional housekeeping staff. Were it otherwise, the section could simply have referred to wages or amounts paid to the service provider without the inclusion of the words ‘in relation to’. Accordingly, I consider that the amounts paid to Platinum/SWCA have been correctly identified as the amounts in respect of which payroll tax is payable and the assessments should be confirmed in this regard.”
“The plaintiffs argue that the preferred construction of s 40, in light of s 37 read together with s 39, is that, for the purposes of s 40, the amounts that are ‘in relation to’ are only those amounts that are ‘in respect of’ the ‘provision of services’ in connection with the employment agency contract: i.e., those amounts that are paid for the natural person who provides the labour connection with the ‘employment agency contract’ in s 37, and who is, therefore, the deemed employee of the employment agent under s 39.”
As in this case, the plaintiffs in Bayton Cleaning called in aid the fact that the provision was introduced to protect the integrity of provisions that would otherwise apply to the wages of employees: see [141]. They also pointed out that even on their preferred construction, and despite what her Honour had said in HRC Hotel Services, the words ‘in relation to’ still had work to do: see [147].
Her Honour rejected these submissions. At [295] her Honour said:
“As noted above, I considered in HRC Hotel Services (see from [180]ff) that the construction advanced by the plaintiffs in that case gave no work for the words ‘in relation to’ to do in s 40(1)(a) of the Payroll Tax Act; and that those words expanded the reach of the deemed wages under s 40(1)(a) beyond the actual amounts paid to the additional housekeeping staff. I accept that, on the construction advanced by the plaintiffs in the present case there is some work for the words ‘in relation to’ to do. Nevertheless, I do not accept that the breadth of ‘in relation to’ should be read down as the plaintiffs contend. In other words I do not see ‘in respect of’ as relevantly limiting the breadth of ‘in relation to’. Nor do I see that the consequence of expanding the reach of the deemed wages goes beyond the mischief sought to be addressed by the legislature.”
The plaintiff in the present case invited me to consider this same question afresh. It submitted that in the absence of appellate authority on the point, it is open to me to do so.
I do not see a good reason to depart from the approach taken by Ward CJ in Eq in both HRC Hotel Services and Bayton Cleaning. Although it is correct to say that the derivation of profit by a third-party (that is, by an entity other than the person who performed the physical work) is something that lies outside the traditional payroll tax base, the proposition that the employment agency provisions were not intended to expand the traditional tax base is one that can only be taken so far. In the end, the provisions must be construed on their own terms having regard to considerations of text, context and statutory purpose. In that regard, I respectfully agree with what Ward CJ in Eq said about s 40(1)(a) in Bayton Cleaning.
I also note that the construction for which the plaintiff contends is one that is not easily expressed as a positive proposition. It is one thing to say that the amount referred to in s 40(1)(a) should not include the amount of profits earned by an intermediate contractor. It is another thing to say positively what, on this construction, should be taken to be wages. It cannot be that the section is only concerned to identify amounts actually paid to individual workers because, even on the plaintiff’s construction, s 40(1)(a) also applies to amounts paid ‘in relation to’ such a worker ‘in respect of the provision of services’ by them. This must include amounts paid to, say, a company or trustee which has engaged that worker, and it must do so where the worker has not received any direct remuneration. The problem is not really resolved by saying that the ‘service provider’ is the worker, because a worker may cause one or more entities to stand between him or her and the employment agent, each of whom may receive payment of an amount in relation to his or her provision of services. The amount may result in the entity receiving a ‘profit’ but, at the same time, be an amount paid in respect of the provision of services. These considerations further support the construction explained by Ward CJ in Eq in Bayton Cleaning.
I therefore consider that the whole of the amount paid to the corporate contractors was correctly taken to be included in the plaintiff’s taxable wages.
Although raised as a contention in its Further Amended Appeal Statement, the plaintiff led no evidence and made no submissions in relation to the remission of penalties and interest.
The Assessments were issued on 16 June 2022 and, as at the date of the hearing, had only been partly paid. There was and continues to be a tax default within the meaning of s 3(1) of the TAA.
The defendant applied penalty tax of 20% pursuant to s 27 of the TAA, reduced from 25% pursuant to s 29 by reason of the plaintiff’s voluntary disclosure. Interest has been applied at the market rate pursuant to s 21 of the TAA until 7 July 2022 and thereafter at market and premium rates, calculated in accordance with s 22 of the TAA.
The plaintiff’s challenge to the substantive Assessments has failed. There is no reason for penalty tax to be further remitted. Nor is there a reason for interest to be remitted.
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Cerisewin Pty Ltd atf Mastercare Administrative Services Trust
Chief Commissioner of State Revenue