Home789 Resources Pty Ltd & others v Chief Commissioner of State Revenue - [2023] NSWCATAD 263 - NSWCATAD 2023 case summary — Zoe

NSWNSWCATAD

Home789 Resources Pty Ltd & others v Chief Commissioner of State Revenue

[2023] NSWCATAD 263

NCAT Administrative and Equal Opportunity|2023-05-18

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At a glance

Source facts

Court

NCAT Administrative and Equal Opportunity

Decision date

2023-05-18

Catchwords

Part 3 Division 7
(1975) 8 ALR 155 Headware v Chief Commissioner of State Revenue [2015] NSWCATAD 166 Jones v Dunkel [1959] HCA 8

Source

Original judgment source is linked above.

Catchwords

Part 3 Division 7(1975) 8 ALR 155 Headware v Chief Commissioner of State Revenue [2015] NSWCATAD 166 Jones v Dunkel [1959] HCA 8

Judgment (75 paragraphs)

[1]

ing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $38.74 (not including penalty tax or interest); and (3) for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Limited by $25.10 (not including penalty tax or interest). 6. The parties are directed to bring in short minutes of orders, which reflect the findings in this decision, including particulars of the variations to payroll tax assessment for the matters referred to in Order 4 and the matters agreed upon as described in Orders 1 and 5, within 28 days of publication of these orders. Catchwords: REVENUE- Payroll tax- Grouping of employers- business groups- real estate industry- discretion in Chief Commissioner to "de-group": Payroll Tax Act 2007, section 79- whether discretion properly exercised. REVENUE- Payroll tax- taxable wages- where each recipient had a connection with member or members of group-whether each recipient an employee - whether payments taxable wages for purposes of the Payroll Tax Act 2007, Part 2, Division 2- whether payments exempt - proper identification of persons under consideration- whether person under consideration ordinarily performs services of that kind to the public generally in relevant financial year. Legislation Cited: Administrative Decisions Review Act 1997 (NSW): sections 9, 58, 63. Civil and Administrative Tribunal Act 2013 (NSW): sections 28, 55. Payroll Tax Act 2007 (NSW): sections 6, 7, 10, 11, 13; Part 3 Division 7; sections 32, 34, 35, 70, 71, 72, 74, 79. Taxation Administration Act 1996 (NSW): sections 96,100. Cases Cited: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSW LR 481 Boston Sales and Marketing Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 139 Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788 Cessnock Tyres v Chief Commissioner of State Revenue [2017] NSWCATAD 368 Chief Commissioner of State Revenue v Paspaley [2008] NSW CA 184 Chief Commissioner of State Revenue v Seovic Civil Engineering Pty Ltd [2014] NSWCATAP 92 Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 Conrad Linings v Chief Commissioner of State Revenue [2013] NSWADTAP 42 Construction Forestry Mining and Energy Union v Personnel Contracting Pty Limited [2022] HCA 1 Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Elanor Operations Pty Ltd v Chief Commissioner of State Revenue [2022] NSWSC 104 Gauci v Federal Commissioner of Taxation (1975) 135 CLR 181; (1975) 8 ALR 155 Headware v Chief Commissioner of State Revenue [2015] NSWCATAD 166 Jones v Dunkel [1959] HCA 8; 101 CLR 248 Levitch Design Associates Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 215 Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42 Neale v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 Novus Capital Ltd v Chief Commissioner of State Revenue [2018] NSWCATAD 72 Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 252 Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] 245 CLR 446 Texts Cited: None cited Category: Principal judgment Parties: Home789 Resources Pty Ltd (First Applicant) Great Fortune Investment Pty Ltd (Second Applicant) UFN Resources Pty Ltd (Third Applicant) Aust Sunshine Marketing Pty Ltd Fourth Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: N Kulkarni (Applicants) S Karagaratnam (Respondent) Solicitors: Dixon Holmes du Pont Lawyers (Applicants) Crown Solicitor (Respondent) File Number(s): 2020/5300, 2020/5302, 2020/5305, 2020/5306, 2020/287512, 2020/287521, 2020/287537, 2020/287546 Publication restriction: Nil

[4]

Partial settlement and withdrawal of some applications

Following discussions between the parties they have agreed that certain of the applications originally made, being applications 2020/287512; 2020/287521; 2020/287537 and 2020/287546 are withdrawn on the basis that: 1. the issue of the amount of payroll tax payable by the Applicants for the period 1 July 2019 to 31 January 2020 is remitted to the Chief Commissioner to consider, and if he deems necessary, to issue a re-assessment following publication of the decision by the Tribunal in applications 2020/5300; 2020/5302; 2020/5305 and 2020/5306; and 2. the Chief Commissioner undertakes not to take enforcement action against the Applicants in respect of any amount of payroll tax owing by the Applicants for the period 1 July 2019- 31 January 2020 whilst proceedings 2020/5300; 2020/5302; 2020/5305 and 2020/5306 remain on foot, without giving 21 days' prior notice before doing so.
I have therefore formally dismissed the applicable applications, being numbers 2020/287512; 2020/287521; 2020/287537 and 2020/287546 under section 55 (1) (a) of the Civil and Administrative Tribunal Act 2013 (NCAT Act) and have noted the Respondent's undertaking set out at [6] (b) above.
The parties have also agreed in the following terms to the remittal to the Chief Commissioner of the assessment of payroll tax for the tax years ended on 30 June 2017, 30 June 2018 and 30 June 2019 and I have ordered accordingly. 1. By consent, the assessment of the Applicants' respective liability for payroll tax is remitted to the Chief Commissioner for reassessment in accordance with the assessments previously issued which are the subject of review, including in respect of interest and penalty tax, subject to the following adjustments 1. In respect of Home789 Resources Pty Ltd 1. for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $13,838.82 (not including penalty tax or interest); 2. for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $15,471.01(not including penalty tax or interest); and 3. for the period 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $10,024.37 (not including penalty tax or interest). 1. In respect of Great Fortune Investment Pty Ltd: 1. for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $30.12 (not including penalty tax or interest); 2. for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $38.74 (not including penalty tax or interest); and 3. for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Limited by $25.10 (not including penalty tax or interest).

[9]

Grouping

Part 5 of the Payroll Tax Act, 2007 (NSW) (PT Act) makes detailed provision for the grouping of employers. Some provisions within that Part, in particular section 73 which deals with groups arising from the "tracing " provisions, are quite complex, but relevantly section 72 provides the foundation for an understanding of the concept of a "group" for the purposes of the Act. Although the section is, of necessity somewhat long, I set it out in full. 72 Groups of commonly controlled businesses (1) If a person or set of persons has a controlling interest in each of 2 businesses, the persons who carry on those businesses constitute a group. (2) For the purposes of this section, a person or set of persons has a controlling interest in a business if-- (a) in the case of 1 person--the person is the sole owner (whether or not as trustee) of the business, or (b) in the case of a set of persons--the persons are together as trustees the sole owners of the business, or (c) in the case of a business carried on by a corporation-- (i) the person or each of the set of persons is a director of the corporation and the person or set of persons is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation, or (ii) a director or set of directors of the corporation that is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation is under an obligation, whether formal or informal, to act in accordance with the direction, instructions or wishes of that person or set of persons, or (d) in the case of a business carried on by a body corporate or unincorporate--that person or set of persons constitute more than 50% of the board of management (by whatever name called) of the body or control the composition of that board, or (e) in the case of a business carried on by a corporation that has a share capital--that person or set of persons can, directly or indirectly, exercise, control the exercise of, or substantially influence the exercise of, more than 50% of the voting power attached to the voting shares, or any class of voting shares, issued by the corporation, or (f) in the case of a business carried on by a partnership--that person or set of persons-- (i) own (whether beneficially or not) more than 50% of the capital of the partnership, or (ii) is entitled (whether beneficially or not) to more than 50% of the profits of the partnership, or (g) in the case of a business carried on under a trust--the person or set of persons (whether or not as a trustee of, or beneficiary under, another trust) is the beneficiary in respect of more than 50% of the value of the interests in the first-mentioned trust. (3) If-- (a) 2 corporations are related bodies corporate within the meaning of the Corporations Act 2001 of the Commonwealth, and (b) 1 of the corporations has a controlling interest in a business, the other corporation has a controlling interest in the business. (4) If-- (a) a person or set of persons has a controlling interest in a business, and (b) a person or set of persons who carry on the business has a controlling interest in another business, the person or set of persons referred to in paragraph (a) has a controlling interest in that other business. (5) If-- (a) a person or set of persons is the beneficiary of a trust in respect of more than 50% of the value of the interests in the trust, and (b) the trustee of the trust (whether alone or together with another trustee or trustees) has a controlling interest in the business of another trust, the person or set of persons has a controlling interest in the business. (6) A person who may benefit from a discretionary trust as a result of the trustee or another person, or the trustee and another person, exercising or failing to exercise a power or discretion, is taken, for the purposes of this Part, to be a beneficiary in respect of more than 50% of the value of the interests in the trust. (7) If-- (a) a person or set of persons has a controlling interest in the business of a trust, and (b) the trustee of the trust (whether alone or together with another trustee or trustees) has a controlling interest in the business of a corporation, the person or set of persons is taken to have a controlling interest in the business of the corporation. (8) If-- (a) a person or set of persons has a controlling interest in the business of a trust, and (b) the trustee of the trust (whether alone or together with another trustee or trustees) has a controlling interest in the business of a partnership, the person or set of persons is taken to have a controlling interest in the business of the partnership.

[11]

The Division 7 scheme: "relevant contracts" and contractor provisions

Sections 6 and 7 of the PT Act effectively impose payroll tax on the employer by whom taxable wages are made. The major question, which is the basis of the second issue in this case, is the extent and applicability of the term "taxable wages".
Section 11 (1) (a) is the relevant provision and is in these terms: 11 Wages that are taxable in this jurisdiction (1) For the purposes of this Act, wages are taxable in this jurisdiction if-- (a) the wages are paid or payable by an employer for or in relation to services performed by an employee wholly in this jurisdiction, or
Division 7 is titled "Contractor provisions". Relevantly section 32 defines "relevant contract" for the purposes of Division 7, as follows: (1)….a "relevant contract" in relation to a financial year is a contract under which a person(the "designated person" ) during that financial year, in the course of a business carried on by the designated person-- (a) supplies to another person services for or in relation to the performance of work, or (b) has supplied to the designated person the services of persons for or in relation to the performance of work, or (c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for re-supply of the goods to the designated person or, where the designated person is a member of a group, to another member of that group. (2) However, a "relevant contract" does not include a contract of service or a contract under which a person (the designated person) during a financial year in the course of a business carried on by the designated person-- (a) is supplied with services for or in relation to the performance of work that are ancillary to the supply of goods under the contract by the person by whom the services are supplied or to the use of goods which are the property of that person, or (b) is supplied with services for or in relation to the performance of work where-- (i) those services are of a kind not ordinarily required by the designated person and are performed by a person who ordinarily performs services of that kind to the public generally, or (ii) those services are of a kind ordinarily required by the designated person for less than 180 days in a financial year, or (iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services-- (A) provided by a person by whom similar services are provided to the designated person, or (B) for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person, for periods that, in the aggregate, exceed 90 days in that financial year, or (iv) those services are supplied under a contract to which subparagraphs (i)-(iii) do not apply and the Chief Commissioner is satisfied that those services are performed by a person who ordinarily performs services of that kind to the public generally in that financial year
Relevantly, by section 34, a person who during a financial year: (a) performs work for or in relation to which services are supplied to another person under a relevant contract, or (b) being a natural person, under a relevant contract, re-supplies goods to an employer, is taken to be an employee in respect of that financial year.

[20]

Applicants' submissions - business functions of entities, Conjunction Agreements

The Applicants' Core Facts include the following assertions, which unless otherwise stated are made as at all relevant times for the purposes of the relevant assessments of payroll tax. 1. Each of the Applicants operates or has operated in the real estate industry. 2. Home789 Resources carried on a real estate agency business. It acted as an agent, usually for vendors but occasionally for prospective purchasers, in respect of sales of real property. Mr Walton Chu was its sole director and shareholder. 3. Great Fortune Investments Pty Ltd (GFI) provided property management services to owners in respect of the leasing of their property. Mr Chu was its sole director and shareholder. 4. Aust Sunshine Marketing Pty Ltd (ASM) provided project marketing, advisory and related services to property developers. Whitney Jiang and Hui Fang Cao (that is, Mr Chu's wife and mother-in-law respectively) were its directors until July 2016. In July 2016 Whitney Jiang ceased being a director and Hui Fang Cao remained the sole director. 99% of the shares in ASM were held by SWASW Wealth, in its capacity as trustee of the CJ Family Trust. The primary beneficiaries of the CJ Family Trust were Mr Chu, Ms Jiang and their children. 5. ASM generated revenue from the services it provided to property developers. The arrangement was that ASM was remunerated for those services by being appointed as exclusive selling agent for the units being sold by the particular developer. So, ASM's business was directed at securing the custom of developers. All of the dealings with developers were undertaken by Ms Jiang and Ms Cao was occasionally also involved, where the developer was an overseas entity. 6. Although appointed as the "selling agent", in reality ASM did not itself undertake any marketing or sales activities with respect to the units being developed. Rather, it entered into agreements (Conjunction Agreements) with licenced real estate agents for this purpose. 7. Under each Conjunction Agreement, commission flowing from the sale of a home unit was split between ASM and the licensed real estate agent who introduced the sale. It is an important aspect of the Applicants' case in relation to both the De-Grouping issue and the Taxable Wages issue that the marketing and sales activities in respect of units which were to be sold as outlined above was undertaken by these other licensed real estate agents. It is made clear in the Applicants' Core Facts document that, upon sale of a home unit, ASM derived income from that sale (presumably pursuant to the relevant Conjunction Agreement), that income representing a portion of the commission. 8. The Applicants' submission is that Home789 Resources derived revenue from acting as agent in respect of sales of real property and its business was managed and controlled by My Chu; that it had on average only 10-15 employees, each of whom worked at the direction of Mr Chu. Home798 Resources and its employees undertook sales and marketing activities; including online listings, preparing brochures and other advertising material, conducting inspections, liaising with vendors, purchasers and other parties, holding deposits and arranging settlements. 9. Home798 Resources had three distinct lines of real estate business: 1. firstly; it advertised its services to and was engaged by members of the general public and for this purpose maintained its own website as well as a profile on the other major real estate websites such as Domain and real estate.com.au, on which it was listed as an agent for property listings; 2. secondly; it was also one of the licenced real estate agents who acted as agent for the sale of units in development projects of which ASM was appointed as the exclusive selling agent. Like the other agents participating in that arrangement, when in this situation a sale resulted from Home789 Resources' activities in this area, Home789 Resources was entitled to an agreed portion of commission, under a Conjunction Agreement; and 3. thirdly; it also entered into Conjunction Agreements with licenced real estate agents, where it did not have the capacity to undertake sales agent activities at the time. Again, the commission was split between Home789 Resources and the engaged agent who had actually carried out the marketing and sales activity. 1. UFN provided administrative, book-keeping and related services on behalf of foreign investors who had invested or who planned to invest in property development property projects in Sydney. 2. As confirmed in the Applicant's submissions, ASM's business was conducted almost entirely by Ms Whitney Jiang (the wife of Mr Walton Chu) even after she ceased to be a director in July 2016 and 99% of ASM's shares were held by SWASW Wealth Pty Ltd as trustee of the CJ Family Trust.

[21]

Applicants' submissions- pattern of business operations 1. As I understand it, from the Applicants' Core Facts and related documentation, at all relevant times, the Applicants operated in the following way: 1. ASM generated revenue from the services it provided to property developers. It was remunerated by being granted exclusive agency agreements, under which ASM was appointed by the developer as the exclusive selling agent in respect of all units in any particular development. 2. ASM obtained listings of off-the-plan properties from property developers as their exclusive agent and then granted Home789 Resources the status of a "conjunction listing agent". Home789 Resources thereby gained access to such listings. 3. Home789 Resources listed the properties on its database, marketed them and engaged sales agents to sell the listed properties. 4. On settlement of sale of a property, the purchaser paid he property developer. In turn the property developer paid ASM its commission. ASM then paid Home789 Resources and Home789 Resources then paid the individual sales agent. 5. Purchasers who purchased a property from Home789 Resources as an investment could engage GFI to manage the property or relist it for sale by Home789 Resources; and 6. UFN provided administrative, book-keeping and clerical support including to ASM. 7. ASM did not itself undertake any marketing or sales activities with respect to the units. 8. Home789 Resources derived revenue from acting as an agent in respect of sales of real property. It undertook marketing and sales activities. It maintained a website as well as a profile on the Domain and realestate.com.au websites, where it was listed as an agent for property listings. 1. ASM and Home789 Resources entered into a Service Agreement dated 29 December 2013, which governs their relationship and there are no other written agreements between the Applicants. 2. GFI received income from the property management services it provided to owners. 3. Home789 Resources, GFI and ASM leased adjacent commercial suites in Redfern. 4. In the relevant period: 1. approximately 90% of the units of which ASM had been appointed as the exclusive selling agent were sold through the activities of Home789 Resources; 2. the majority of GFI's clients were referred after having had dealings with Home789 Resources; and 3. approximately 60% of the properties managed by GFI were referred by Home789 Resources.

[22]

The Applicants' case on this issue

The Applicants contend that the Tribunal, standing in the shoes of the Chief Commissioner in respect of actions under section 79 of the PT Act, should de-group certain of the Applicants; in particular Home789 Resources, GFI, ASM and UFN.
That contention is made because, as it is put in the Applicants' written submissions received on 11 April 2021 at [20]: Each of ( Home 789 Resources, GFI, ASM and UFN ) carried on distinct and separate businesses, which were independent and not relevantly connected. In that regard, it is not necessary to show the absence of any connection or inter-relation between the businesses; the connection must be material and involve influence over the conduct of the other business.
The last phrase is submitted in reliance on Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 (Tasty Chicks) and Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42 (Lombard Farms), which are discussed further below.
It is said on behalf of the Applicants that they will demonstrate that the Chief Commissioner's key assertions on this issue lack merit, either because they are unsupported by the evidence or do not indicate an absence of independence. Those "key assertions" are identified as being those made in reliance on factors set out at pages 851-853 of the bundle of documents (the section 58 bundle) which was provided by the Chief Commissioner pursuant to section 58 of the Administrative Decisions Review Act 1997 (NSW) (ADR Act). I understand the Chief Commissioner's key assertions to be that: 1. Mr Chu had significant control and influence over each business; 2. the businesses all operated in the real estate industry; 3. all the businesses are located at the same premises; 4. the businesses market themselves as "a one-stop shop" with "Home789" branding; 5. the Applicants collectively carried on a single business; 6. there was significant financial interdependency; 7. there was shared sales staff; and 8. the businesses had a continuous relationship.
In the written submissions made on behalf of the Applicants those factors are addressed as follows (the numbered sub-paragraphs below corresponding with those in the preceding paragraph and abbreviated sub-headings having been inserted for clarity): 1. (Mr Chu's significant control and influence). Mr Chu did not have significant control and influence over each business. While he did manage Home789 and GFI, Ms Jiang and Ms Cao controlled and managed ASM and UFN respectively. Mr Chu's daily activities involved managing the marketing and sales activities of Home789 and the property management services provided by GFI and he was not involved in the conduct of the business of ASM or UFN. 2. (All businesses operated in the real estate industry). The fact that all the businesses operated in the real estate industry and had dealings with each other is an insufficient basis upon which to group them. There was no structural dependence upon each other; for example, although Home789 had additional stocks of available real estate on its books as a result of its contractual relationships with ASM, it was by no means reliant upon that stock to carry on its business. Similarly, the viability of ASM's business did not depend on the sale of units by Home789: it could and did depend on Conjunction Agreements with other real estate agents to achieve sales. 3. (All businesses are located in same premises). This factor is not expressly admitted but not expressly denied. The Appellants say that the rent payable under the leases for the Redfern office premises were at commercial rates. If a lease had ended that would have required the tenant to vacate the premises, although no indication was given that any such lease did so expire during relevant periods. The leasing by the various allegedly Group entities of adjacent suites was said to be: … a matter of convenience and not indicative of influence over conduct. 1. (Applicants' businesses marketed as a "one-stop shop"). The businesses did not market themselves as a "one-stop shop" under common branding as "Home 789". Home789 Resources did maintain a website which was used to market to the general public: …because that was an important source of work and that was also the case to a lesser extent for GFI and UFN. But ASM did not maintain a website, because its business depended upon establishing and maintaining relationships with large and sophisticated developers and web contact was unnecessary for that. Additionally, although marketing material, such as the property listings on Domain and Real Estate.com referred to "Home789", there was no reference on those sites to the other businesses. 1. (The Applicants collectively carry on a single business). There was more than one overall business carried on. The businesses had distinct operations and were managed and controlled by different people. They derived their income in different ways. 2. (Significant financial interdependency). There was no financial interdependence as alleged. The assertion on behalf of the Chief Commissioner that between 2014 and 2017 Home789 Resources received most of its income from ASM involves a misunderstanding of the nature of the agreement between them, and of Conjunction Agreements. In the Applicants' submission they did not involve the provision of services between the licenced real estate agents who are party to them. Rather, the marketing and sales activities undertaken by an agent were undertaken in the agent's capacity as agent for the vendor. In the Applicants' submission, the fiduciary obligations which arise are owed to the vendor. 3. (Shared sales staff). There was no shared sales staff. ASM and UFN had no sales staff whatsoever. Home789 Resources and GFI did not share staff. There are some individuals who have moved employment from one company within the asserted group to another. 4. (Continuous relationship). From time to time it was commercially beneficial for various Applicants to have dealings with other Applicants. That of itself does not indicate business integration. Such integration was not structurally necessary. It was simply commercially sensible for some Applicants to deal with other Applicants, where appropriate.

[23]

Chief Commissioner's case on this issue

The Chief Commissioner provided detailed written submissions on 13 October 2022 and at the hearing Counsel for the Chief Commissioner handed up a document entitled "Chief Commissioner's Aide Memoire", which comprised two sections, each of which included submissions on particular aspects of the De-Grouping issue, headed respectively: A. Operation of Group and Constituent Applicants; and B. Evidence : why s.79 discretion should be refused.
Broadly, the Chief Commissioner's case in relation to the De-Grouping issue is that the Applicants have failed to demonstrate that the Chief Commissioner erred either in grouping the Applicants under sections 72 (2) and 74 (1) of the PT Act or in failing to de-group any of them by an exercise of the available discretion to do so under section 79 of that Act.
Through Counsel, the Chief Commissioner has emphasised that he bears no onus to demonstrate that the decisions to group and not to de-group were the correct and preferable ones. He relies in the authorities as to the onus of proof discussed above in that regard. He contends on that basis that the onus in respect of these matters rests clearly upon the Applicants.
The Chief Commissioner further contends that when I consider the full and actual corporate and business structure, I will conclude that the Applicants have failed to satisfy the necessary onus and standard of proof and that an application of the recognised principles of law relating to grouping for payroll tax to the evidence will lead me to reach the following conclusions. 1. The Applicants are part of a group of businesses each of which operates in the real estate industry under the brand name "Home 789", the intellectual property in that name being held by SWASW Wealth as the trustee for the CJ Family Trust. 2. The Group is marketed as a "one stop shop" for property investment and development and properties are advertised by the group using the branding "Home789". I am referred to Headware v Chief Commissioner of State Revenue [2015] NSWCATAD 166 (Headware) at [77] and Cessnock Tyres v Chief Commissioner of State Revenue [2017] NSWCATAD 368 (Cessnock Tyres) at [57]. 3. Each of the Applicants is located in common physical premises (which may be adjacent to each other) and each shares common space, facilities, resources, clerical and book-keeping services and use the same legal and accounting representatives. Counsel for the Applicants referred me to Tasty Chicks and Lombard Farms. 4. The rental and utility payments made as between what may be considered Group members are disproportionate with neither ASM nor UFN contributing to these outgoings. 5. Sales staff are shared across the alleged Group. I am referred to Conrad Linings v Chief Commissioner of State Revenue [2013] NSWADTAP 42 (Conrad Linings) at [56]. 6. The Group operates in the real estate industry and the operations of constituent entities are, in the Chief Commissioner's phrase "inextricably linked" and the Applicants have conceded that the businesses are complementary. 7. Mr Chu, his wife Mrs Zhen Jiang and his mother-in-law Ms Hui Fang Co (between them) own the businesses conducted by the Group. There is substantial commonality in such ownership and has been at all relevant times: see Conrad Linings at [53]. The Applicants have conceded that notwithstanding Ms Jiang's resignation as a director of ASM, she continues to be involved in that company's day-to-day operations and decision-making. 8. Mr Chu is able to influence the strategic and financial decisions of each of the businesses in the Group; as to which the Chief Commissioner cites Boston Sales and Marketing Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 139 (Boston Sales and Marketing) at [26] and Conte Mechanical and Electrical Services v Chief Commissioner of State Revenue (2011) 85 ATR 120; [2011] VSC 104 (Conte Mechanical) at [12]. 9. By reason of the matters set out immediately above, any absence of the exclusive listing secured by ASM and provided to Home789 Resources or absence the volume of property management work provided by Home 789 Resources to GFI, would be a significant impairment to GFI. Equally, without the support it has from ASM, UFN, which does not generate income, would be severely financially constrained or insolvent. 10. The close relationship between the members of the Group was continuous in the period 2013 to 2019. The transactions between Group members are not sporadic but regular and continuous. 11. There are no service agreements between ASM, GFI and UFN, despite ASM effectively funding UFN. There are no service agreements between Home789 Resources and GFI and UFN, despite GFI obtaining most of its work from Home789 Resources: see Regis Mutual Management v Chief Commissioner of State Revenue [2015] NSWCATAD 213 at [93]. 12. A substantial percentage by volume and by value of the total business of each relevant Group member arises from the activities of another Group member or members. 13. The matters set out above establish that there are substantial commercial connections and interdependencies between the various businesses.

[24]

Relevant principles from the leading cases

In Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] 245 CLR 446, being the appeal from the decision of the NSW Court of Appeal in Tasty Chicks, the High Court at [8] identified the purpose of the grouping provisions as having been designed to counter tax avoidance through the splitting of business activities by the use of additional entities, each attracting a threshold. The Court observed that the provisions were made available to enable the Chief Commissioner to determine that in those circumstances it would be unreasonable allow the 'grouping' provisions to apply.
Those observations were more recently discussed and applied by Ward CJ in Eq (as her Honour then was) in Elanor Operations Pty Limited v Chief Commissioner of State Revenue [2022] NSWSC 104 (Elanor Operations), including by reference to the decision of the Appeal Panel of the NSW Administrative Decisions Tribunal in Lombard Farms. In Elanor Operations, at [57], her Honour said: The question is whether, objectively determined, having regard to the nature of the connections between group businesses, it can be said that the businesses are independent and not connected; that question being one of fact and degree (see Lombard Farms…), no single factor being determinative. In Lombard Farms (at [50]) it was said that '[i]t is not the case that any connection between businesses will disentitle an applicant from de-grouping'; rather, the connection must be material 'and not insignificant or inconsequential' and then connection must affect the business "in some real or practical sense".
Her Honour went on, at [58], to confirm that the relevant question in the case before her was as to whether, and if so to what extent, the business carried on by each plaintiff was carried on independently of, and not in a way that is connected with the carrying on of, a business carried on by another plaintiff. Her Honour concluded that passage by confirming that that issue is to be determined: …having regard to matters such as the nature and degree of ownership and control of the business; and the nature of the relevant businesses.
The result in Elanor Operations demonstrates that even where one person is the sole director of a number of companies and has effective ownership of all or most of the issued shares in each of them, that in itself will not be conclusive of the issue of whether those companies should be 'grouped' for the purposes of the payroll tax legislation. Her Honour found in that case that the sole director, Mr Willis', effective ownership of all or most of the issued shares in the companies was unlike the situation where grouped businesses are essentially separate parts of associated enterprises operated for the benefit of the same persons.
That result obtained because of the particular facts of the case. Each company operated the business of a separate managed investment fund being a property fund and each such fund was owned by a different group of investors. So the result in Elanor Operations obtained because ultimate control and ownership of the businesses rested with the members of each fund. Her Honour appears to have accepted the propositions put by the plaintiffs to the effect that Mr Willis' position as sole owner of the shares and particularly as sole director was constrained by the fiduciary duties which he owed to each plaintiff, so that Mr Willis was bound to act strictly for the benefit of each specific company, without consideration of the benefits (or detriments) that might result to others. The beneficiaries of each fund were the ultimate owners. At [63] Her Honour, in summarising the plaintiff's case (which ultimately prevailed), observed that although under the relevant trust deed the beneficiaries did not have day to day control of any of the businesses, as beneficiaries they could use their common law powers to remove the trustee and: (i)n that critical sense it is said that ultimate control and ownership of the business rests in the members.
Her Honour added, at [155], that Mr Willis, the sole director and shareholder was: …constrained in his ability lawfully to control the direction or conduct of the businesses…once they are sold off to investor syndicates; and those businesses are required to be run in the interests of the members of the particular discrete fund.
Significantly, as Her Honour recognised, the result may well be different where that ultimate control and beneficial ownership does rest with the directors and shareholders. That is the position in the present case.
Her Honour also emphasised, at [57], that in order to attract the grouping provisions, the connection between the corporate entities must affect their business "in some real or practical sense", citing Lombard Farms at [51]. That paragraph [51] in the Lombard Farms decision was, usefully, quoted in full by Her Honour: To say that there can be absolutely no connection between the businesses .sets the bar too high. The question is one of fact and degree…To disentitle an applicant to de-grouping, the connection must be meaningful in a commercial sense and not immaterial or inconsequential to the carrying on of the business…There must be a finding of substantial absence of connection and substantial independence between the businesses to warrant the exercise of the discretion.
Her Honour concluded as follows: Thus the relevant question…is as to whether, and to what extent, the business carried on by each plaintiff is carried on independently of and not in a way that is connected with the carrying on of, of a business carried on by another plaintiff. That issue is to be determined having regard to matters such as the nature and degree of ownership and control of the businesses; and the nature of the businesses.
Boston Sales & Marketing makes it clear at [22] that the fact that the same person owns and controls all of a group's members does not mean a fortiori (without stronger reason) that the businesses are not carried on independently and are unconnected and therefore does not impede a finding to that effect; but: equally, (the fact) that the nature of the businesses in the group are different does not answer the question whether the relevant businesses are not carried on independently and are unconnected.
The focus must be on the overall nature of the connections between the businesses. That was recognised by the Appeal Panel of this Tribunal in Chief Commissioner of State Revenue v Seovic Civil Engineering Pty Ltd [2014] NSWCATAP 92 (Seovic) where it was found that one company, Exell, provided a significant proportion of the workforce of both other companies in the group and provided most of not all the administration and day to day management of staff. The Appeal Panel concluded that it was difficult to see how, without the staff provided by Exell the other business could have functioned; it was not a: ..passing, infrequent or random connection. (The connection) is material and goes to the heart of the carrying on of the business of (the other two companies).
As Lombard Farms and the other authorities cited make clear, the focus is on the connections between the relevant businesses and the nature of the businesses carried on, not on the composition or nature of the entities themselves.
The analysis of the issue in Lombard Farms, as subsequently approved elsewhere, makes it necessary to conduct a practical and commercially realistic investigation of the way in which and the degree to which the businesses under consideration operate in practice in that sector of the commercial world in which they exist. That must involve a commercially realistic assessment of just how each of the relevant businesses operates and interacts within the sphere of commerce in which they exist and whether, on that basis, they can be said to be independent and not connected.
The final important point of principle is as stated Ward CJ in Eq in Elanor Operations at [81], citing the judgment of Meagher JA in the Seovic decision in the Court of Appeal: Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242(Seovic Appeal) at [22] : It may readily be accepted that the broad purpose of the power to exclude is to enable the Chief Commissioner to relieve against the unreasonable operation of the grouping provisions. However the circumstances in which the power to do so is engaged are described in s 79(2). Whilst that description should be construed having regard to that purpose, it nevertheless remains the position that the Commissioner must in terms be satisfied that the business sought to be excluded is not connected with the carrying on of another business.

[25]

Consideration- The absence of direct evidence from Mr Chu

I commence my consideration of the De-Grouping issue by commenting on the absence of direct evidence at the hearing from Mr Walton Chu. It appears most likely that Mr Chu's position in the group at relevant times gave him a unique and comprehensive knowledge of the businesses and structures involved, the nature and degree of the real commercial links between the businesses, the real connections between them and the extent to which the viability of a particular business is dependent upon those connections.
The Chief Commissioner has observed and it seems clear that: Mr Chu has significant and indirect interests in each of the (relevant) entities…
Mr Chu's capacity to provide evidence of the important matters mentioned above arises from the key positions he held, which as I understand them, relevantly include, positions as: 1. the sole director and shareholder of Home789 Resources, 2. the sole director and shareholder of GFI, 3. the owner with his wife Ms Whitney Jiang of the vehicle (SWASW Wealth) which as trustee of the family trust owns 99% of ASM as well as 100% of UFN; and 4. the owner of a majority of issued shares in UFN A Epping Pty Limited, which in turn acts as the Trustee of the UFN A Epping Unit Trust.
Those positions provided Mr Chu with insight, which could have been shared with the Tribunal, as to matters which are influential and in some cases vital to the real issues in this case, such as the role of each entity, the extent of the connection between various businesses and entities and the licenced real estate agents with whom there was engagement of some sort and the workings of the Conjunction Agreements. Indeed it might reasonably have been anticipated that he would be the key witness for the Applicant in respect of these matters. Yet he was not called as a witness and did not participate in the hearing.
Counsel for the Chief Commissioner invites me to draw the inference arising from Jones v Dunkel [1959] HCA 8; 101 CLR 248 in respect of this absence of Mr Chu from the hearing.
The "Jones v Dunkel principle" has been expressed in various, slightly varied forms but relevantly it applies where a witness, who appears to be in a particular party's camp is not called upon to give evidence and there is no explanation tendered for that. The principle is that in those circumstances the court or tribunal may assume that that witness' evidence would not have assisted that party's case.
An affidavit by Mr Chu sworn on 9 April 2021 was filed as part of the Applicants' case. So in that sense and in that form, evidence was given by him. He was initially required by the Chief Commissioner to attend for cross-examination on his affidavit, but at the hearing that requirement was not pressed.
Nevertheless, in my view the Jones v Dunkel inference remains available in respect of the lack of evidence from Mr Chu on the De-Grouping issue, because his affidavit of 9 April 2021 is almost entirely devoted to addressing the Taxable Wages issue. Only 3 of its 266 paragraphs relate in any way to the De-Grouping issue and they do so within a very restricted compass. Paragraph 263 of the affidavit merely confirms the acquisition of Home789 Resources by 789 Holdings Limited on 13 August 2018, asserts that Home789 Resources "carries out a property sales business" and that following its acquisition by 789 Holdings Limited Home789 Resources has continued to carry out a property sales business and a property management business in NSW and to derive its revenues from commissions paid by vendors of residential properties for successfully selling their properties and leasing fees and commissions paid to property owners to lease and manage residential and commercial properties on their behalf. Paragraph 264 contains a cross-reference to attached company searches including a search for Home789 Resources. Paragraph 265 simply confirms that there has been no change to ASM's corporate structure and operations.
All that evidence is over two years old. None of the other 263 paragraphs relates to the De-Grouping issue. They are all directly concerned with the Taxable Wages issue.
So Mr Chu's affidavit evidence which related to the De-Grouping issue and in respect of which he was not required for cross-examination was of very limited scope and was largely confirmatory of other evidence adduced as to those matters.
I cannot see that the existence prior to the hearing of that narrow scope of evidence from Mr Chu through his affidavit inhibits the making of a Jones v Dunkel inference in respect of the failure of the Applicants to adduce evidence from him on the De-Grouping issue at the hearing.
I therefore find that evidence at the hearing from Mr Chu in relation to the De-Grouping issue, which would probably be the best evidence available on that subject from the person with the most detailed knowledge of it, would reasonably have been expected to be adduced and I draw a Jones v Dunkel inference in respect of the absence of Mr Chu and his evidence on that issue.

[38]

Chief Commissioner's case on this issue

In summary, the Chief Commissioner contends that in each of the 2013, 2014, 2015, 2016 and 2017 financial years Home789 Resources or GFI made payments to persons which were not included in their respective declared payments of wages and salary for those years and that those payments are "taxable wages". He says that the Applicants have failed to satisfy the onus they bear to establish that that is an incorrect characterisation of the payments.
Through Counsel, the Chief Commissioner asks that I take into account: 1. the fact that the Applicants, in the position of the taxpayers, bear the onus and the burden of proof on the balance of probabilities in relation to this issue and that the Applicants have not discharged that onus; 2. the fact that the Chief Commissioner's case, based as it is on the analysis of the payment information relating to 31 entities or individuals (as described in more detail below), depends largely on information provided to him by the Applicants. Accordingly, to the extent that the Applicants later (up to the conclusion of the hearing) have contended that some other amounts were in fact paid, then the onus remains on them to establish by probative evidence that that is so and to quantify the amounts so paid. 3. the Applicants' onus of proof. They bear the same onus of proving that on the balance of probabilities, that the conditions for exemption from payroll tax have been satisfied for each tax year and for each asserted entity. 4. Counsel for the Chief Commissioner also invites me to draw an inference as to the non-appearance of particular of the persons alleged by the Chief Commissioner to have been employees at relevant times. I have dealt with that request as follows. I have noted below in my analysis of the 31 selected associated persons or entities which commences at [122] those persons who made an affidavit or statutory declaration and were required to attend the hearing for cross-examination but failed to attend. In respect of each such person, as I ruled at the hearing, in the absence of any appropriate explanation for their absence I have had regard to their affidavit or statutory declaration for the purposes of context only but have given the contents no weight. 5. Finally Counsel for the Chief Commissioner contends that certain inferences which I am invited to draw in favour of the Applicants should be treated with caution. I should not draw inference as to the past based on matters in the future; for example, the fact that a particular person held professional indemnity insurance cover for a particular year should not be the basis of the inference that he, she or it had equivalent insurance cover at other times. I think Counsel is correct and I have proceeded on that basis.
The parties have agreed that the issue should be determined by examining the cases of 31 selected associated persons or entities for each relevant financial year. The Chief Commissioner has adopted a particular categorisation of the payments which are purported to have been made to each of those persons or entities. The categorisation is as follows: 1. Category 1: Existing Employees. This covers each individual who was an employee of a group member in the relevant financial year. 2. Category 2: Deemed employees. This cover payments to an individual characterised as a common law employee, who is deemed to be an employee. 3. Category 3: Payment under relevant contracts. This covers payments to individuals deemed to be an employee by the relevant contract provisions in PT Act section 32 (2) who did hold a licence to carry on the activities of a real estate agent- sales, and who was not exempted under sub-paragraph (b)(iv) of the section i.e. was not a person who ordinarily performs services of that kind to the public generally, in the relevant financial year. 4. Category 4: Re-directed payments. This covers payments which were re-directed to an entity associated with an individual who was an employee of a company within the asserted group in the relevant.
Without intending to make a finding at this stage as to the position of any of those entities, I accept the Chief Commissioner's methodology for categorising the 31 selected persons or entities, their respective associated entities and payments as adopted in the table submitted on 18 May 2023, headed "Chief Commissioner's outline of submissions - taxable wages". I did not understand the adoption of that method of categorisation to be the subject of any objection.

[39]

The parties' submissions on the issue

The following written submissions were made on this issue. Each of them analysed the position of some of the 85 entities initially in issue and made submissions as to the taxable wages issue as pertaining to each: 1. the Applicants' made written submissions on 17 June 2022, covering individually the position of 30 entities; 2. the Applicants' made further written submissions on 18 May 2023, covering individually the position of each of 24 entities. They were handed up on the last day of the hearing. Those submissions appear to update the information and submission in relation to some of the entities covered by the earlier submissions of 17 June 2022, but they appear to be analysed in a different order; and 3. the Chief Commissioner also made written submissions dated 18 May 2023 which were also handed up on the last day of the hearing. This covered individually the position of 31 entities. Although those entities were dealt with in a different order that adopted for the Applicants' submissions, the entities covered appear to be identical to those covered by the Applicants in their submissions of 17 June 2022.
As a result I understand the parties' positions to be as follows: 1. the parties have reached agreement in the terms set out at [6] and [8] above; 2. the Chief Commissioner has sought the orders set out at [9] which would involve reduction of the amount of the Applicants' payroll tax liability for the tax year ended 2017 and 2018 and for the period 1 July 2018- 31 January 2019; and 3. those developments reflect that, in relation to the Taxable Wages issue, the Chief Commissioner now relies only on the position of the 31 entities covered by his written submissions dated 18 May 2023.
On that basis I have assessed the taxable wages issue by considering the position of those 31 entities. I have assessed each entity separately by considering the tabulated information presented by each party and in particular the Applicants' detailed written submissions of 17 June 2022 and 18 May 2023, the Chief Commissioner's tabulated submissions of 18 May 2023 and general submissions of 13 October 2022 and the oral submissions by Counsel for each party, together with any further evidence referred to below. I have noted the Category assigned to each entity by the Chief Commissioner for each relevant financial year (FY).

[42]

Australian Breeze Pty Limited (Aust Breeze) (Category 3 for FY 2016)
The Applicants' submissions in respect of Aust Breeze and Mr Jason Liu who is also known as Mr Jian Liu (Mr Liu) rely substantially on the statutory declaration of Mr Liu which was in evidence. Mr Liu was required to attend the hearing for cross examination on that statutory declaration. He failed to do so. Consistently with my ruling in respect in respect of Ayre, I have had regard to the statutory declaration for context only and have given it minimal weight.
The Applicants' written submissions relied upon a 2016 company tax return and 2 related bank statements (Bank of Queensland and ANZ) as verification of the receipt by Aust Breeze of $32,100 in FY 2016, but no such verification appears at the pages of documents I was referred to or elsewhere so far as I can see.
It is also submitted that, according to the financial report of Aust Breeze for FY 2017, it received $28,946.50 from other sources for "referrals". It is suggested on behalf of the Applicants that that is "one of the ongoing activities of the company".
I do not accept the proposition which, as I understand it, is advanced for the Applicants; namely that evidence of the receipt by any of the entities under consideration of sums from other sources of itself establishes or at least strongly suggests that all sums received by that entity from Home789 Resources or another of the Applicants must be other than wages which are taxable for the purposes of section 11 of the PT Act.
I also accept the proposition put by Counsel for the Chief Commissioner that no weight should be given to the assertion that the sum of $32,100 was actually paid in FY2017, on the basis that the Applicants, who bear the onus of proof, have not provided probative evidence which demonstrates that that is so.
No evidence was adduced by the Applicants to establish the provision of advertising services or the receipt of management fees by Aust Breeze in the relevant financial year and I have seen no evidence to support the contention that the company held any licence to carry out real estate agency business in FYs 2015 or 2017, as requested by summons.
On that basis the Applicants have failed to discharge their onus of establishing that the amounts paid to Aust Breeze in FY2016 were other than wages which are so taxable, for the purposes of the PT Act. The assessments must be upheld.

[48]

Eastern Family Trust (Tao Zheng) (Category 4 for FYs 2014, 2015, 2016, 2017; Category 3 for FYs 2014, 2015 and 2017)
It appears uncontested that Tao Zheng was a beneficiary of the Eastern Family Trust at all relevant times, an employee of Home789 Resources in each of FYs 2014. 2015 and 2016 and an employee of ASM in FY 2017.
It is asserted by the Chief Commissioner that: 1. payments to the Eastern Family Trust, which appear to have come from Home789 Resources, GFI and Bright Austina were redirected payments for the services which Mr Zeng provided to those companies respectively; and 2. there is no evidence of Eastern Family Trust having carried on independently the business of offering real estate services to the public and the Applicants have thereby failed to discharge their onus of proof of this matter.
As to the assertion in (2) above, the Applicants assert that the Eastern Family Trust's earned income from "real estate activities": 1. in FY2016 was $65,487.25, of which $53,756 or approximately 82% was received from the Applicants; and 2. in FY 2017 was $60,005.88, of which $47,549.09, or 79% was received from the Applicants; and, as stated in the Applicants' submissions of 18 May 2023 at [22], it follows that the Eastern Family Trust "ordinarily provided real estate services to parties other than the Applicants" in those two financial years.
I assume this assertion is made in order to attract the "services of that kind to the public generally" exception in section 32 (2) (b) (iv) of the PT Act. However I am not persuaded by that evidence advanced by the Applicants that they have discharged the onus of proof which they bear so as to attract that exemption, particularly in light of the relatively small proportion of the income for those two FYs which was received from sources other the Applicants and the absence of evidence as to the services actually performed for those other sources.
It follows that the amount asserted by the Chief Commissioner to be liable for payroll tax in respect of the financial years under consideration is so taxable and that the assessments must be upheld.

[50]

Great Star Investment Pty Ltd (Sherry Ming Yi He) (Category 4 for FY 2013; Category 3 for FYs 2014, 2015, 2017)
Ms Yi He made a statutory declaration for the purposes of these proceedings, in support of the Applicants' case. She was required to attend the hearing for cross-examination on that statutory declaration. She failed to do so and no reason was given for her failure in that regard. In accordance with the ruling on this point applied to other deponents of declarations who did not appear ( see 116(4) above), I decided to have regard to Ms Yi He's statutory declaration for context only and I gave it minimal weight.
The Applicants' case in relation to this entity is that the business of Great Star Investment Pty Ltd (Great Star) was real estate marketing and sales; that the company ordinarily provided real estate services to parties other than the Applicants in the relevant financial years and that the Tribunal should conclude that services were provided to Home789 Resources by Great Star in circumstances which attract the operation of section 32(2) (c) (i) of the PT Act: so that the arrangement was one which was outside the ambit of the "relevant contract" provisions of that Act.
For the following reasons I am not persuaded that that is the case. 1. The starting point is that a constant element in my assessment in this as with all other issues is the burden of proof which lies with the Applicants, not the Chief Commissioner for the reasons and to the extent discussed above, in particular at [20] -[22]. 2. A related factor is the absence of the explanations and clarifications which Ms Yi might have been able to provide in cross-examination and any re-examination, had she complied with the requirement to attend the hearing and if I thereby had been in a position to give her evidence more that minimal weight. 3. The third reason is that the financial information which the Chief Commissioner has supplied and the submissions which his Counsel has made by detailed reference to that information establish strong grounds for reaching a conclusion other than that suggested on behalf of the Applicants.
The reasoning and evidence relied upon by the Chief Commissioner is as follows: 1. In FYs 2013 Ms Yi He was the sole director of Great Star and an employee of Bright Ausina Pty Ltd which is a group member. There is no evidence before me to establish that in that financial year she held a real estate agent's licence (although she did have one later: it commenced on 20 September 2017). 2. It is said that payments made to Great Star in FY2013 were re-directed payments; that is, they were re-directed to Great Star at the direction of Ms Yi He to compensate for services provided by Ms Yi He and as such are taxable wages. I accept that that is the case, in the absence of any contrary explanation, including one which might have been provided by Ms Yi He herself. 3. In relation to Ms Yi He's position for the FYs 2014, 2015 and 2017,the Chief Commissioner's case is that the relevant evidence, specifically that in the wages spreadsheet at page 2 of Exhibit TM1 to the affidavit of Thomas Millett of 12 October 2022 (Wages Spreadsheet) read with the financial statements of Great Star for each of those financial years (which appear in the affidavit of Ammar Ali sworn 4 May 2022 at Tab 27)respectively, although unsigned, demonstrate that: 1. in FY 2014 100% of Great Star's income of $87,609.55 was derived from payments from Home789 Resources and GFI, so that Great Star could not have provided real estate services to the public generally on that year ; 2. in FY 2015 Great Star's disclosed sales totalled $51,556.37; yet the company received $59,999.91 from Home789 Resources or GFI(between them); so Great Star cannot be entitled to the exemption available under section 32 (2) (b)(iv) because all its income came from Home789 Resources or GFI; and 3. in FY2017 disclosed sales were $82,198,86, being the total income received by Great Star but 86% of that sum, being $ 70,653.40 came from Home789 Resources and/or GFI. That appears to indicate that Great Star did not provide real estate services to the public in FY 2017.
It must follow that the Chief Commissioner's assessments were correct and should be upheld.

[52]

Hao Wang (Category 2 for FY 2014, Category 1 for FY 2015, 2016, category 3 for FY 2017)
At AB Vo 4 362 there is a letter from Mr Wang, written when producing documents under summons, in which he states that: I have been working with Home 789 Resources from September 2013 to September 2019,(sic) during this period almost all my earned income (over 99%) was from Home 789.
There is also an unsigned statement by an unidentified person entitled "statement of discovery" at AB Vol 4 Tab 9 4465 which appears to be relevant to the status of Mr Wang. I accept the submission by Counsel for the Chief Commissioner that it is not evidence and I give it no weight.
The Applicants rely upon the following qualifications, registrations and other actions as indications that Mr Wang intended to carry on business Mr Wang's attainment of qualification as a licensed real estate agent on 5 October 2016 [AB 4469], his professional indemnity insurance cover [AB 4469] under a policy which had effect from the same date, and his obtaining an ABN and GST registration and business name registration [AB 4470] and his income tax return for 2017 [AB 401-403] showing business income of $382,264.
In relation to the position in FY 2017, the Applicants rely particularly on the Licence Agreement between Mr Wang and Home789 Resources dated 5 October 2016 (AB 4471). The Applicants' case is of course that Mr Wang did in fact provide real estate services to the public generally in this financial year.
Having reviewed the relevant documents and heard Counsel for each party, I am satisfied and find that: 1. Mr Wang did not receive a fixed amount for his work in this financial year. He received a share of the sales produced from his efforts and so worked to produce a given result, generally in the manner described by the High Court (Dixon CJ, McTiernan, Webb, Kitto and Taylor JJ]) in Neale v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at 425; 2. on balance it seems that Mr Wang was not subject to ongoing control by Home789Resources, but was required to perform particular work as it arose from time to time; 3. as a result of the licence agreement Mr Wang was at liberty to undertake work for other parties and to work in his own manner; and 4. he was free to work in the manner he chose.
I therefore conclude that Mr Wang did provide real estate services to the public generally in FY2017 so that section 32 (2) (b)(iv) of the PT Act is attracted. His income for that financial year is not properly characterised as taxable wages.
I reach that conclusion notwithstanding the existence of Mr Wang's letter referred to at [154] above. I discount the value of that letter as evidence which should be subjected to strict construction, because there is a real possibility that English was not Mr Wang's first language; and even if I am wrong as to that, he says that he was working "with" Home789 Resources, not working "for" that company and the second phrase after "during" (which someone with a more complete command of English may have expressed as a new sentence) may be regarded as a general statement as to the ultimate source of the income.

[53]

Hong Ju Ko (EZY Connect Pty Ltd) [AB4679] (Category 2 for FY 2014, Category 1 for FYs 2015 and 2016, Category 3 for FY 2017)
Ms Ju Ko is the sole director of EZY Connect Pty Limited (AB 4690). Ms Ju Ko made a statutory declaration dated 21 July 2020 (AB 4679) for the purposes of these proceedings in support of the Applicants' case.
The Chief Commissioner gave notice that she was required for cross-examination on her statutory declaration. She failed to do so and no reason was given for her failure in that regard. In accordance with the ruling on this point applied to other deponents of declarations who did not appear explained at [116] (4) above, I have had regard to Ms Ju Ko's statutory declaration for context only and I give it no weight.
In relation to FY 2014, I accept the Chief Commissioner's contention that Ms Ju Ko did not have a real estate licence which allowed her to carry on the activities of a real estate agent (AB 4683) and that her licence came into effect only in October 2014 so outside the relevant period. I am also satisfied that she held no professional indemnity insurance in relation to real estate business until FY 2019 and of course the fact that she obtained it at that later stage is irrelevant to my consideration of her position for FY 2014.
The Applicants, through Counsel, assert that she complied with the formal requirements of establishing an independent business including establishing a bank account for her real estate work (AB 2988) but I cannot see that this was effective for FY 2014.
The fact that she held professional indemnity insurance by FY 2019 is of course irrelevant to the position as to insurance in earlier years.
I find that in relation to FY 2014 it has not been established that she was an independent contractor or that payments made to her that year were not treatable as payments to a common law employee.
In relation to FYs 2015 and 2016, the Chief Commissioner asserts that: 1. Ms Ju Ko was an employee of Home789 Resources, by reference to the PAYG summary and employee list, as shown in the Section 58 bundle page 65. (All further references to pages in the Section 58 bundle will be to "s58,.." and a page number.) 2. She signed a casual employment agreement with Home789 Resources dated 20 August 2014 and was described as "casual staff for office display (s58, p27 and pp236-7)
In the absence of any persuasive evidence to the contrary I conclude that for FYs 2015 and 2016 Ms Ju Ko was an employee of Home789 Resources.
In relation to FY 2017, the licence, or referral, agreement dated 9 February 2017 (AB 4359) is relevant. The Chief Commissioner asserts firstly that the combined effect of clauses 6 and 7 of that agreement is that Home789 will have the right to direct the referee which properties are to be sold and the sale price and the secondly that the effect of clause 7.5 is that the referee will have no right to any payment until Home789 Resources has been paid all agent's fees and other proper amounts.
The Chief Commissioner contends that those provisions are the hallmarks of a relationship of employment rather than one between independent parties and that in anu case, there is no persuasive indication that any of the payments received by Ms Ju Ko are referrable to this agreement.
It is clear from Ms Ju Ko's tax return for FY 2017 that she declared income of $106,669 from real estate services (AB 2962). It is agreed that in that financial year Home789 Resources paid $84,523.83 (just under 80% of the above sum) to Ms Ko and $54,995.59 to Ezy Connect.
Having considered the closing submissions on behalf of the Applicants in relation to the position of Ms Ju Ko, I have concluded that the Applicants have not discharged the onus which they bear to rebut the Chief Commissioner's assessment that Ms Ju Ko was for relevant periods an employee and not an independent contractor and that the amounts in dispute in relation to her were taxable wages. The assessments must be upheld.

[56]

Jinglu Lu ( Income for FYs 2015 and 2016)
Ms Lu made a statutory declaration dated 24 December 2020 [AB Vol 4, 4568]. She attended the hearing and was examined and cross-examined on her declaration. In both examination and cross-examination her testimony was at times inconsistent and somewhat halting on significant matters. For example, when taken by Counsel for the Applicants to the documentation which might verify her income of $172, 673.50 for FY 2016 and asked in effect whether that derived from real estate business, Ms Lu responded: That was the calculation at that time.
In response to follow-up questions she was uncertain, saying at one stage that she "couldn't remember these figures" and when subsequently asked if the figures were correct she responded that they: ..appear to be right but I don't know.
When taken to the document marked as MFI-3 in cross-examination, Ms Lu was uncertain and somewhat prevaricative as to the composition and accuracy of the total income of $113,198 for FY 2016, as shown in the account statement referred to in MFI-3. She was asked whether that figure reflected her purported total income from "marketing contracts with Home 789". She initially responded: It may not be correct. Some of it may have been added on.
When asked in cross-examination whether, at the time she signed the statutory declaration she saw the annexure, Ms Lu answered: When I signed the document they were filling out the form at the end.
When asked to identify "they" she replied initially that she couldn't remember but the person was a manager and when asked to identify the manager she confirmed it was: The manager from 789
I allowed further cross-examination, under which Ms Lu conceded that the figure representing her income "as real estate agent" by reference to sales for FY 2016 was $127,672 differed from the figure she had affirmed in her statutory declaration at paragraph 6(b) . She thought that "may have been a typing error". When Counsel in cross-examination pointed out that the figure she gave was inconsistent with that in a bank statement which she had verified in examination-in-chief of $113,198, her answer was somewhat confusing. I recorded it as: This one I also have to take into account the after-tax income and an amount I had to pay to someone else.
Even making some allowance for the fact that Ms Lu (who otherwise spoke clearly in English) may have some elements of ongoing difficulties with the subtleties of the English language, I found her evidence at times to be prevaricative or otherwise inconsistent in important areas and therefore unsatisfactory and unreliable. I gave her oral evidence very little weight.
I agree with the summation provided in the Chief Commissioner's outline submissions handed up on the final hearing day, to the effect that: 1. Ms Lu's evidence as to both FYs 2015 and 2016 was unsatisfactory. 2. Even if it were to be accepted that Ms Lu generated sales from non-Home789 entities in FY 2016 of $31,275 ( as appears from paragraph 7 of her statutory declaration in evidence), that is only approximately 18% of her total business income in 2016 and that does not support a conclusion that in that year she was an independent contractor providing real estate services to the public generally. 3. There is no evidence that the payments made by Home789 Resources to Ms Lu in FYs 2015 and 2016 was in any way referable to the Conjunction Agreement dated 29 April 2014 (AB 4575) 4. The document titled "conjunction agreement" dated 20 September 2017 ( AB 4577) is not relevant to the issues before me: it postdates the relevant periods.
As a result the Applicants have not discharged the onus they bear to the standard of proof required so as to persuade me that Ms Lu provided real estate services to the public generally in FY 2015 or FY 2016, so as to attract the exemption from payroll tax undersection 32 (2) (b)(iv) of the PT Act, the assessments must be upheld.

[58]

Kostralia & Associates Pty Ltd(Kostralia) (Hun Ja Kim) (Category 3- FYs 2016, 2017)
Ms Hun Ja Kim, a director of Kostralia, made a statutory declaration [AB 4495] for the purposes of these proceedings in support of the Applicants' case. The Chief Commissioner gave notice that she was required to attend the hearing for cross-examination on that declaration. She failed to do so and no reason was given for her failure. In accordance with my observations at 116 above I have had regard to Ms Kim's statutory declaration for context only and I give it no weight.
The Chief Commissioner confirms that a Licence Agreement [AB 3890] was entered into on 15 December 2016. The Agreement appears to be formally deficient as to a basic requirement: it is not clear that Kostralia is a party for these reasons: 1. The front page describes the Licensee as "Hyun Ja Kim trading name Kostralia & Associates"; 2. On the front page next to "Trading name" the words and symbol "Kostralia & Associates" appear 3. The space for the ACN of any corporate party is left blank. 4. On the execution page, page 10, in the 3rd execution space , no party or other person is identified. The space next to the words "Signed by" is blank. A signature appears. It appears to be somewhat similar to Ms Lim's signature above, but it is not identified. 5. The 3rd execution clause wording is as follows: SIGNED BY: [blank space] Pursuant to the authority in s127 of the Corporations Act 2001.
The Applicants appear to concede in their submissions of 18 May 2023 at [66] that the position is unclear. They say the Agreement was executed under section 127 of the Corporations Act (2001) and "it may be inferred that Kostralia was indeed a party". But the Applicants bear the burden of proof and for the reasons explained above I am not prepared so to infer.
I conclude on this aspect that it has not been established on the balance of probabilities that Kostralia was a party to the Licence Agreement.
The Applicants further submit that, in any case, the agreement was on the same terms as that entered into by Hao Wang. That may be the case but of course it does not follow that I must reach the same conclusion I did in relation to Hao Wang ( which is set out at heading 12 above).
Counsel for the Applicants relied upon the recent decision of the High Court in Construction Forestry Mining and Energy Union v Personnel Contracting Pty Limited [2022] HCA 1. In that case, Gordon J, in the plurality, in relation to determination of issues such as the present one, warned at [181] against being distracted from the relevant analysis, which must be based on …whether the totality of the relationship created by contract between the person and a purported employer is one of employee and employer.
Her Honour went on, at [183] to formulate the issue in this way: The better question to ask is whether, by construction of the terms of the contract, the person is contracted to work in the business or enterprise of the purported employer. That question is focused on the contract, the nature of the relationship disclosed by the contract and, in this context, whether the contract discloses that the person is working in the business of the purported employer. ….where the contract is oral, or partly oral and partly in writing, subsequent conduct may be admissible in specific circumstances for specific purposes - to objectively determine the point at which the contract was formed, the contractual terms that were agreed or whether the contract has been varied or discharged.
With specific reference to the payroll tax legislation, Gzell J in Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788 (Bridges) made pertinent observations directly specifically at the payroll tax legislation and its application to particular facts. His Honour said, at [221] : The structure of the Payroll Tax Act 1971, s 3A is to define, in broad terms, a relevant contract. If an arrangement answers that description, the second step is to determine whether any of the exceptions apply…It is because of the non-application of an exception that the object of taxing the putative subcontractor who works exclusively, or primarily, for one person under a contract whose object is to obtain the labour of that person, is achieved.
An application of those principles to the position of Ms Kim and Kostralia as revealed by the facts of the present case, and the need to focus on "totality of the relationship" in the manner described by Gordon J, must begin with the Licence Agreement and the significant fact that, whatever the intent of the relevant parties, Kostralia was in fact not a party to that agreement.
I add that Ms Kim would have been the primary witness as to many of the factual issues arising from consideration of this entity, including the execution and possible application of the Licence Agreement. Her evidence in chief and under cross-examination may well have been significant in assisting the Applicants to satisfy the onus of proof which they bear.
I am satisfied that there was a corporate entity "Kostralia Pty Limited". That company's company tax returns for FY 2016 and FY 2017 which are contained in Mr Millett's affidavit , Exhibit TM-1 at, respectively, pages 24-26 and 37-49 (and which are unsigned) describe the company's main business activity as "Real Estate Services" and demonstrate that in FY 2016 100% of the company's income (ignoring anomalous reporting) was derived from payments from Home789 Resources and/or GFI; and in FY 2017 99% of its income was represented by payments from Home789 Resources and/or GFI.
Notwithstanding those matters I agree with the Chief Commissioner' summation of the facts and I find that: 1. there is no evidence that Kostralia held a real estate licence in FYs 2016 or 2017; 2. the licence held by Ms Kim commenced only on 20 October 2016 and so is not relevant when considering the position in FY 2016; 3. there is no evidence that any payment by Home789 Resources to Kostralia in FY 2017 is referrable to the Licence Agreement dated 15 December 2016
In relation to FYs 2016 and 2017 I am satisfied on the basis of the evidence and the Chief Commissioner's written submissions and in light of the evidentiary burden which lies completely upon the Applicants and the gaps in the evidence left by them, that the conclusion which I must come to is that during those financial years Kostralia was not providing real estate services to the public generally so as to attract the exemption from payroll tax undersection 32 (2) (b)(iv) of the PT Act and accordingly the payments to Kostralia by Home789 Resources are taxable wages. The assessments must be upheld.

[73]

Orders 1. In respect of applications 2020/287512; 2020/287521; 2020/287537 and 2020/287546, the applications are dismissed under section 55 (1) (a) of the Civil and Administrative Tribunal Act 2013 on the basis that the applications have been withdrawn. The Tribunal notes that those applications were withdrawal on the basis of agreement between the relevant parties that: 1. the issue of the amount of payroll tax payable by the Applicants for the period 1 July 2019 to 31 January 2020 is remitted to the Respondent to consider, and if he deems necessary, to issue a re-assessment following publication of the decision by the Tribunal in applications 2020/5300; 2020/5302; 2020/5305 and 2020/5306; and 2. the Respondent undertakes not to take enforcement action against the Applicants in respect of any amount of payroll tax owing by the Applicants in respect the period 1 July 2019- 31 January 2020 whilst proceedings 2020/5300; 2020/5302; 2020/5305 and 2020/5306 remain on foot, without giving 21 days' prior notice before doing so. 1. The decision of the Chief Commissioner on 15 March 2019 to group Home 789 Resources Pty Ltd with the other applicants and with Bright Austina Pty Ltd, SWASW Wealth Pty Ltd as trustee for the CJ Family Trust, and UFN A Epping Pty Limited as trustee for the UFN A Epping Unit Trust, ("the group") is affirmed. 2. The decision of the Chief Commissioner on 15 March 2019 to disallow an application for exclusion from the group is affirmed. 3. With the exception of the payroll tax assessments for Daegeun Hwang (No.6 in the Tribunal's reasons for decision); Hao Wang (No.12 in the Tribunal's reasons for decision) and Yong Fang Chia (No 28 in the Tribunal's reasons for decision), which are varied in accordance with the Tribunal's reasons for decision, each of the payroll tax assessments issued to the Applicants for the tax years ended on 30 June 2013, 30 June 2014, 30 June 2015 and 30 June 2016 is confirmed. 4. In respect of the tax years ended on 30 June 2017, 30 June 2018 and 30 June 2019, by consent, the assessment of the Applicants' respective liability for payroll tax is remitted to the Chief Commissioner for reassessment in accordance with the assessments previously issued which are the subject of review, including in respect of interest and penalty tax, subject to the following adjustments: In respect of Home789 Resources Pty Ltd: 1. for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $13,838.82 (not including penalty tax or interest); 2. for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $15,471.01(not including penalty tax or interest); and 3. for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Home789 Resources Pty Limited by $10,024.37 (not including penalty tax or interest). In respect of Great Fortune Investment Pty Ltd: 1. for the financial year ended 30 June 2017, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $30.12 (not including penalty tax or interest); 2. for the financial year ended 30 June 2018, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Ltd by $38.74 (not including penalty tax or interest); and 3. for the 1 July 2018- 31 January 2019, by reducing the amount of payroll tax payable by Great Fortune Investment Pty Limited by $25.10 (not including penalty tax or interest). 1. The parties are directed to bring in short minutes of orders, which reflect the findings in this decision, including particulars of the variations to payroll tax assessment for the matters referred to in Order 4 and the matters agreed upon as described in Orders 1 and 5, within 28 days of publication of these orders.

Home789 Resources Pty Ltd & others v Chief Commissioner of State Revenue

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