Novus Capital Ltd v Chief Commissioner of State Revenue

Novus Capital Ltd v Chief Commissioner of State Revenue - [2018] NSWCATAD 72 - NSWCATAD 2016 case summary — Zoe

[5]

Jurisdiction of the Tribunal

Section 101(1) of the TA Act empowers the Tribunal to confirm or revoke the assessment, to make an assessment in place of the assessment or other decision to which the application relates, make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid, to remit the matter to the Chief Commissioner for determination in accordance with its finding or decision, and to make any further order as to costs or otherwise as it thinks fit.
Section 96(1) of the TA Act provides that a taxpayer may apply to the Tribunal for an administrative review under the Administrative Decisions Review Act 1997 (NSW) (the ADR Act) of a decision of the Chief Commissioner that has been the subject of an objection if the taxpayer is dissatisfied with the objection determination.
The Application sought a review of the Objection Determination, rather than a review of the Assessments. However, the Tribunal's review power relates to a decision which has been the subject of an objection, rather than the Objection Determination itself.
Section 97 of the TA Act, which empowers the Supreme Court to review a decision of the Chief Commissioner, is in similar terms to s 96. In Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184, Basten JA with whom Giles and Campbell JJA agreed said at [28]: It is also important to note that the right of review under s 97 is given by reference to the operative decision of the Chief Commissioner and not to a ruling made on an objection. Although the existence of an objection is a necessary precondition to the power of review by the Court, and it is the taxpayer's dissatisfaction with the determination of the objection which provides standing to seek review, it is the initial decision which is the subject matter of the review.
In Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378, a matter involving a land tax dispute in which the Tribunal's predecessor, the Administrative Decisions Tribunal, had held "the objection decision under review is affirmed", the Court of Appeal said at [10]: The Chief Commissioner's decision that should have been the subject of the application for review by the Tribunal was the decision the subject of the objection, that is, the decision to make the assessment of land tax, not the decision on the objection (Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28] and [53]). Nothing turns on this.
In the circumstances, and notwithstanding the wording of the Application, this matter is dealt with as if it were an application for a review of the Assessments, being reassessments of the 2014 assessments pursuant to s 9 of the TA Act, not a review of the Objection Determination.
In determining the Application, the Tribunal is to decide what the correct and preferable decision is, having regard to the material then before it, including any relevant factual material and any applicable written or unwritten law, s 63 ADR Act.

[6]

Material before the Tribunal

During the hearing, each party tendered thousands of pages of documents. Some of those documents were tendered as evidence, other documents were withdrawn. Several affidavits filed by Novus were not read and, although Mr Afshar stated during the hearing that those affidavits which were not read, would not be relied on, Novus made several written submissions after the hearing, asserting on numerous occasions, that the Tribunal should have regard to their contents.
Each of the parties filed multiple lengthy written submissions after the hearing. Before those submissions were filed, the Tribunal informed the parties that submissions filed after the hearing would replace all written submissions filed before the hearing.
Written submissions to which I have had regard, filed on behalf of Novus are: 1. final submissions in chief dated and filed 14 June 2017 (AS). I note that on 21 August 2017, AS supplement AS by the incorporation by reference of certain specific paragraphs from Novus' written submissions dated 5 December 2016. 2. Novus' submissions in reply dated 31 July 2017, (ASR). 3. further submissions in reply dated 22 September 2017, (AFSR).
Written submissions to which I have had regard, filed on behalf of the Chief Commissioner are: 1. final submissions dated 14 July 2017 (RS). 2. undated submissions filed 4 September 2017, referred to as additional submissions in response to AFSR (RSR).
At [14] Novus provided a "document schedule" and described the materials produced by the parties to the Tribunal as: Exhibit number Document name Transcript Reference A1 FOLDER OF IMPORTANT DOCUMENTS TABBED AND PAGINATED AND COMPRISING 310 PAGES T5:29 A2 MATRIX OF AUTHORISED REPRESENTATIVES T8:6 A3 FOUR TABBED AND PAGINATED VOLUMES OF DOCUMENTS T12:36 A4 FOUR-PAGE DOCUMENT HEADED "NOVUS CAPITAL LTD ROLE PURPOSE STATEMENT MANAGING DIRECTOR" T108:40 A5 AFFIDAVIT OF RUSSELL KRAUSE SWORN 07/12/16 [incorrectly noted as "R5"] T160:27 A6 AFFIDAVIT OF ANDREW WALSH DATED 25/07/16 T294:11 A7 AFFIDAVIT OF STEPHEN STREETER DATED 05/08/16 T294:19 A8 AFFIDAVIT OF NICHOLAS KAPES T294:26 A9 AFFIDAVIT OF WAYNE GOOLEY DATED 06/12/16 T294:31 A10 DOCUMENT ON CHATSWOOD WEALTH MANAGEMENT LETTERHEAD STATED TO BE AN INVOICE NUMBER 1 OF 2014 DATED 15/01/14 ADDRESSED TO ROBERT LU T336:36 A11 DOCUMENT ON CHATSWOOD WEALTH MANAGEMENT LETTERHEAD STATED TO BE INVOICE NUMBER 1 OF 2011 DESCRIPTION BEING ETRADE BROKERAGE IN THE SUM OF $1,500 DATED 05/01/12 TO ROBERT LU T337:26 A12 BUNDLE OF PARLIAMENTARY EXTRINSIC MATERIALS T440:31 A13 SUPPLIER PAYMENT HISTORY By letter dated 2 May 2017 R1 SECTION 58 DOCUMENTS SEVEN VOLUMES T93:3 R2 RESPONDENT'S BUNDLE OF KEY DOCUMENTS T119:37 R3 AFFIDAVIT OF NADYA JUSTINE HADDAD SWORN ON 16/11/16 TOGETHER WITH EXHIBIT NJH1 T126:22 R4 FINANCIAL RECORDS OF THE APPLICANT FOR THE FINANCIAL YEARS ENDING 30/06/04 TO 2008 T144:1 R5 BUNDLE OF NOVUS CAPITAL CORPORATE TRANSACTION DOCUMENTS T190:22 R6 AUTHORISED AGREEMENTS T442:8 R7 LETTER FROM CROWN SOLICITOR'S OFFICE TENDERED T442:21 R8 AGREED STATEMENT OF FACTS T444:3 R9 NOTICE TO PRODUCE AND RESPONSE T444:45 R10 15 AUTHORISED REPRESENTATIVE AUTHORITIES AND CERTIFICATIONS T445:11 R11 EMAILS TENDERED, ADMITTED WITHOUT OBJECTION T446:21

[7]

At [11] the Chief Commissioner submitted that a list of affidavits read and not read was set out at Annexure 1 to RS and said: … During the hearing, because five witnesses for Novus were not available to be cross-examined, namely Messrs Yeo, Swarbrick, Mifsud, Mudd and Ireland, discussions took place as to what the status of their affidavits were that were prepared for the hearing and the documents behind each of the affidavits and statements from those witnesses provided to the OSR during the audit and contained in the Section 58 Documents ... Novus's counsel told the Tribunal that the body of the affidavits of [these persons] were not read or relied upon. The annexures to those affidavits were tendered on the basis that it was a question of submissions as to what weight, if any, ought to be given to the annexures …
Both parties relied on oral submissions by counsel during the hearing.
The parties agreed on the facts set out in both Exhibit R8 (AF) and a document of Additional Agreed Facts filed on 12 May 2017 (AAF).
On 12 May 2017 the parties also filed a replacement for Exhibit A2 and a "Supplier Payment History" as Exhibit A13.
I refer below to relevant aspects of AF, AAF, the replaced Exhibit A2 and the Supplier Payment History where appropriate.
As well as considering the written submissions and certain documents in the document schedule, I also considered the transcript of the hearing, which was available to both parties when preparing their written submissions.
Some affidavits by witnesses other than the witnesses whose affidavits were not read have been allocated singular exhibit numbers. Affidavits by all other witness are contained in folders of documents referred to in the document schedule.
Mr Afshar informed the Tribunal that the affidavit of Mr Krause dated 5 August 2016 which was behind tab 2A volume 4 of Exhibit A3 was not relied on and that affidavit and its Annexures should be removed from the folder. I observe that Novus uplifted the affidavit and annexures and they have not been considered for the purpose of these reasons.
On 5 December 2016 the Tribunal received a letter of that date from the solicitors for Novus. With that letter were WG1 (without any of the annexures referred to in that affidavit); a copy of an affidavit by William Mudd made 20 July 2016; and a letter dated 2 April 2015 from John M Kite, to the Office of State Revenue. Mr Kite's letter states it provides comments in response to an Office of State Revenue (OSR) letter of 27 February 2015. Attached to Mr Kite's letter was a bundle of documents said to relate to accounts of Novus including summaries of payments by Novus during the Relevant Period. Mr Afshar said at T11.13 he would tender the spreadsheet. Mr Kite's letter was not separately tendered.
In these reasons, unless stated to the contrary: 1. references to paragraphs of written submissions by the Chief Commissioner are to paragraphs of RS; 2. references to written submissions on behalf of Novus are to paragraphs of AS; 3. references to legislative provisions are to provisions of the Act; 4. extracts of documents reproduced in these reasons do not include footnotes from those documents; 5. WG1 and WG2 refer respectively to affidavits made by Mr Gooley on 29 November 2016 and 6 December 2016; 6. the word "year" means "financial year"; 7. the expression "document schedule" refers to the schedule of documents at [14] in AS which is reproduced at [26] above; 8. references to page numbers of oral evidence and submissions preceded by "T", "TS" or "T/S" are to pages of the transcript of the hearing, and as appropriate to the line number of extracts from relevant pages.
Section 36 of the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act) sets out the guiding principle to be applied to proceedings before the Tribunal. That principle requires the Tribunal to interpret the CAT Act and procedural rules so as to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Having regard to the voluminous documents tendered to the Tribunal, counsel were informed at the commencement of the hearing that they should not assume that any particular page of tendered documents would be considered by the Tribunal unless counsel had expressly referred to the page and given the Tribunal a reason to consider it.
Several thousands of pages of tendered documents were not referred to by counsel or the witnesses. The phrases "no evidence" and "no evidence before the Tribunal" in these reasons means that no relevant evidence was brought to the attention of the Tribunal, whether or not such evidence was included in the documents listed in the document schedule.
Oral submissions during the hearing and written submissions AS, ASR, AFSR, RS and RSR have been considered and are referred to in these reasons as appropriate.

[8]

Onus

Section 100(3) of the TA Act states "The applicant has the onus of proving the applicant's case in an application for review."
Novus conceded its statutory onus at [25] but sought to limit the onus at [26] and [27] by submitting: 26 Novus is not required to prove each fact that underlies its contentions in relation to the application of the Contractor Exemption and, importantly, the 90-day Exemption. … any approach to the contrary would place an undue burden on Novus, the respondent and the Tribunal. For example, Novus is not required to prove what an AR did each and every day over a period of 5 years. It is enough that Novus demonstrates, on the balance of probabilities, that section 32 of the Act does not apply and, if it does, the exemptions thereto are enlivened…. 27. In all the circumstances. Novus contends that it has discharged its onus in relation to all of the disputed matters and should prevail.
Novus relied on B&L Linings Pty Ltd v Chief Commissioner of State Revenue (NSW) [2007] NSWADTAP 32 (B&L Linings) at [105] to [107] in respect of its submission in [26]. The Appeal Panel in that matter said: 105 Implicitly, the Appellants, in basing their claim to exemption on evidence of this nature, invited us to accept the proposition that the requirements of s. 3A(1)(f) could be satisfied with regard to the payments made to all 15 of the relevant entities by showing that the standard practice adopted by L & B and these entities involved arrangements falling within the scope of this provision. To put this point in another way, we have been invited to rule that the Appellants, in seeking to invoke the exemption for all of L & B's payments to these 15 entities, are not inevitably bound to adduce evidence specifically demonstrating that such an arrangement was an attribute of each and every task performed for it by each and every one of these entities. 106 This was not a proposition that Mr Latham specifically addressed, though the general tenor of his submissions was clearly opposed to it. 107 In general terms, we agree with this aspect of the Appellants' argument. From a practical point of view, the provision creating the two-person exemption would be unworkable if a taxpayer seeking to invoke it with respect to a series of payments made to one or more independent contractors was compelled to adduce documentary and/or oral evidence establishing, with regard to each individual payment, both (a) the engagement of one or more identified 'second persons' by the contractor in order to carry out the task that the contractor had agreed to perform for the taxpayer and (b) actual participation in this task by the second person or persons. A case like the present, involving numerous small-scale tasks that were performed by numerous contractors and (allegedly) numerous 'second persons', illustrates clearly why such a requirement would impose an undue burden on taxpayers and, indeed, on the Commissioner. The Commissioner would be bound to scrutinise detailed evidence of this nature before deciding whether any claim for the exemption should be accepted.
In response, the Chief Commissioner relied on ss 100(3) and 119 of the TA Act and case law.
Section 119 of the TA Act states: 119 Evidence of assessment Production of a notice of assessment, or of a document signed by the Chief Commissioner purporting to be a copy of a notice of assessment, is: (a) conclusive evidence of the due making of the assessment, and (b) conclusive evidence that the amount and all particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only.
The Chief Commissioner's submissions included: 6. The appeal panel in Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [30] to [37] said (emphasis added): 30. … The starting position is that the Tribunal must accept that the assessments are correct and that there is no entitlement to an exemption. If neither party adduced any evidence, the assessments would stand. This suggests that the Appellant's case must move the Tribunal away from the starting position. 31. …. In B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; (2008) 74 NSWLR 481 (the Judgment) Allsop P (Giles and Basten JJA agreeing) at [104] held that the requisite standard of proof in such cases is the "balance of probabilities". At [87] of the Judgment Allsop P said: "The Appeal Panel correctly stated that the appellants bore the onus of proof of establishing the facts on which they rely in objecting to the assessments." 32. The Appellant in this case pointed to the fact that in B & L Linings there is no express reference to s 100 of the TAA. However, their Honours were there considering the same statutory regime we are here considering. The reference to the onus of proof must be a reference to s 100(3) of the TAA. 33. Studdert J in Denham Constructions Pty Ltd & Anor v Chief Commissioner of State Revenue (1998) 40 ATR 416 at 425-426 said: "I remind myself of the nature of these proceedings, and of the onus which the plaintiffs bore …. Having so reminded myself, I am not satisfied that a proper basis has been established to disturb the decision of the defendant." 34. In Pharmos Nominees Pty Ltd v Commissioner of State Taxation [2012] SASC 24 at [53]- [54] Gray J said: "Section 97 of the Taxation Administration Act provides: On an appeal, the appellant has the onus of proving the appellant's case. The effect of section 97 is that Pharmos must prove that the amount assessed in fact exceeds its true liability to duty." 35. The Appeal Panel in Chief Commissioner of State Revenue v Mr Espresso Group Pty Limited [2012] NSWADTAP 1 at [9] said: "The [taxpayer] was required to place before the Tribunal below all necessary information to allow a decision to be made in respect of the dispute of fact." 36. These authorities support the proposition that an applicant must prove all matters necessary to enable a Tribunal to answer the statutory question in its favour. In light of the statutory regime and the clear expression in B & L Linings, we have not found it necessary to review the authorities in the Federal jurisdiction. [emphasis by the Chief Commissioner] 7. In Levitch Design Associates Pty Ltd atf Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215 at [27], the Tribunal said (emphasis added): In a review application under Part 10 of the Act, the applicant "has the onus of proving the applicant's case" (s 100(3)). This requires the applicant to prove or establish on the balance (preponderance) of probabilities all matters necessary to enable a tribunal to answer the statutory question in the applicant's favour, and all the facts on which the applicant relies to claim any exemption. The legislation does not place any onus on the Chief Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The burden on the applicant is not necessarily discharged by showing an error by the Chief Commissioner in forming a judgment as to the amount of the assessment. It is for the taxpayer to discharge the burden of proof by establishing what the correct amount of an assessment should be. … However, the taxpayer's evidence is not to be regarded as prima facie unacceptable and "must of course be considered on its merits, in the circumstances of the case, without any prepossession, favourable or unfavourable": McCormack v FCT (1979) 143 CLR 284 at 302 per Gibbs J. 8. At [25] and [26] of Novus's written submissions a suggestion is made by Novus that it only bears the onus of proof "to the extent that Novus proffers a positive case on the points that remain in dispute between the parties", and then at footnote 21 Novus refers to the Objection Determination and seems to suggest that if the Objection Determination does not take issue with certain matters then the Chief Commissioner in these proceedings is not taking issue. This is not correct, for the reasons advanced above. The Chief Commissioner clearly states, as it has at all times in these proceedings, that for the purposes of these proceedings it only agrees the matters expressly agreed in the Agreed Facts documents. 9. As is clear from the above cases, the legislation does not place any onus on the Chief Commissioner to show that the assessments were correctly made. Section 119 of the TAA provides that production of the assessments is prima facie evidence of the amount and all particulars of the assessments. … 10. As to [26] of Novus's written submissions, the Chief Commissioner says that Novus must put enough evidence before the Tribunal for each year in question to prove that the relevant contract provisions in s. 32(1)(b) do not apply between Novus and each AR in question and for each year in question that the exceptions under s. 32(2) apply ... unless there is evidence before the Tribunal that the facts remained the same for all the years in question, the Tribunal has to have sufficient evidence before it for each AR and the way each AR carried out the work for each of the years in issue.
B&L Linings involved the supply and installation of plasterboard (gyprock) linings and cornices in various buildings. Work was carried out by subcontractors. The characterisation of the relationship between subcontractors and one of the applicants in the matter (L&B Linings Pty Ltd) was in dispute between the applicants and the Chief Commissioner. If the subcontractors were properly to be characterised as employees, the applicants were liable for pay-roll tax and the remuneration paid to the subcontractors would be wages and included in the relevant tax. If however they were independent contractors, an exemption from this tax would be available if either or both of two sets of further conditions were satisfied.
I observe that Novus referred specifically to [105] to [107] in B&L Linings to support its submission that it was "not required to prove what an AR did each and every day over a period of 5 years". This assertion was repeated by Novus on several occasions in its written submissions in respect of several ARs when there was a lack of evidence before the Tribunal for Novus to support its case.
However, Novus did not refer to paragraphs [108] and [109] in B&L Linings which included: 108 In the [earlier decisions] we noted a similar recognition within the case law that an employer who wishes to prove that a group of workers whom he/she has engaged in accordance with an established system are independent contractors, not employees, may rely on evidence outlining the key features of the system. The employer need not adduce evidence from each of the workers regarding the specific details of their individual relationships with the employer. 109 On the other hand, what we have called evidence of the standard practice adopted by a taxpayer in dealing with contractors should not prevail in the face of countervailing evidence suggesting that in any particular instance the taxpayer failed to satisfy the requirements of the two-person exemption.
I also observe that in its reply in ASR to RS, Novus made no reference to the Chief Commissioner's submissions at [6] and [7], nor did Novus dispute the validity of, or even mention, any of the authorities relied on by the Chief Commissioner in those paragraphs.
While I agree that "Novus is not required to prove what an AR did each and every day over a period of 5 years", it remains necessary for Novus to support its submissions with probative evidence. In summary, I find that Novus cannot satisfy its onus merely by relying on unsubstantiated submissions without probative evidence.

[9]

Credit of Novus' witnesses and weight to be given to Novus' evidence

Novus submitted at [6] and [15] and at ASR [9.4] that the credit of its witnesses was not in issue in the proceedings and their evidence ought to be given its full weight. On the other hand, the Chief Commissioner submitted at [14(d)] "The credit of the witnesses is in issue" and made specific submissions concerning the credit of certain witnesses.
The Chief Commissioner had, prior to the hearing, requested that sixteen of the persons who provided affidavits in support of Novus be made available for cross-examination. A consideration of the transcript indicates that of the 16 witnesses, at least part of the written or oral evidence of at least seven witnesses, namely Ms Lu and Messrs Moloney, Gable, Glover, Kapes, Gooley and Krause, was challenged by the Commissioner during cross examination. Five of the witnesses who had been called did not attend for cross-examination.
On the last day of the hearing Mr Afshar conceded that his instructions were that all five of the ARs who did not attend for cross-examination "were not only informed that they were required but also given the dates of this hearing", TS396.21. A short time later Mr Afshar informed the Tribunal that affidavits tendered in respect of all of the five ARs were not read and would not be relied on by Novus for the purpose of the proceedings, TS435.
Shortly before Mr Afshar's statement that the five specific affidavits not be relied on, counsel for the parties had discussed the admissibility of the documents that sat "behind the affidavits" which were not being read. Mr Afshar submitted that the evidence of the documents ought not to be excluded and if it was a question of weight then the parties could make submissions about that weight. Mr Afshar said "There is no question that these documents are authentic", TS399.1 and at TS404: It is not unfair to the Commissioner to have to deal with invoices and other documentation that have been previously provided in circumstances where no cross examination is able to occur. It's not unfairly prejudicial to the Commissioner, it's a matter that can be dealt with in relation to weight and the parties' submissions can deal with that.
A short adjournment took place to enable Mr Kimber to obtain instructions in relation to the admissibility of those documents. Mr Kimber then informed the Tribunal that his instructions were that the Chief Commissioner did not oppose the approach that Mr Afshar had adopted subject to certain matters. Those matters related to Novus' capacity to obtain the attendance of its witnesses for cross-examination; that those individuals who were within Australia responded in the months prior to the hearing to notices to produce by producing materials; that in relation to "business records" they would ordinarily go into evidence unless the prejudice was "red hot" and these would be "exceptions rather than the rule". The Chief Commissioner acceded "to allow the documentary material to go in subject to later assessment of weight". Mr Kimber referred to purported invoices as an example of documents which may concern the Chief Commissioner and said at T405-406: … should there be any doubt about an invoice being an invoice or any doubt about the adequacy of the descriptor or within any invoice then obviously that is a problem for the applicant and not for us. We don't bear the onus and if they haven't called people to explain documents that are ambiguous in their own right … when we have concerns that would be their problem and the Tribunal should take that seriously into account when you come to assess the material … we will have some serious things to say about what weight should be attended to them ...
As it happened, Novus in its written post-hearing submissions, sought to renege on Mr Afshar's express concession concerning affidavits not being read or relied on and sought to rely on the unread affidavits. I deal below with admissibility, and as appropriate, weight, in respect of each relevant affidavit and the documents which sat "behind the affidavits".
Mr Gooley's evidence in relation to invoices said to have been sent by Cennlen to Novus and payments by Novus to Cennlen was dealt with extensively in Mr Gooley's cross-examination and referred to in some detail at [308] to [310] in RS. No specific reference to this evidence was made in Novus' submissions in reply other than that Novus relied on the Licence Agreement and invoices from Cennlen to Novus and "Novus submits that witnesses' (especially the ARs') credibility was not squarely challenged in cross-examination. As such, the respondent has not discharged its obligations under Browne v Dunn."
There is no doubt from my consideration during the hearing, and from reading the transcript of Mr Gooley's cross-examination that several aspects of Mr Gooley's evidence were subject to direct challenge during cross-examination on various occasions, and I so find.

[10]

Outline of the Division 7 scheme generally regarding "independent contractors"

There is no dispute that "contractor" provisions were introduced to payroll tax legislation in New South Wales in 1985 to catch schemes designed to avoid payroll tax. The structure of targeted schemes has varied since 1985 and as schemes changed over time, the anti-avoidance legislation has been updated.
The Chief Commissioner described the legislative history of s 32 as follows: 21 … The predecessor to s. 32 of the PRTA was s. 3A of the Pay-roll Tax Act 1971 ("the PRTA 1971"). Section 3A of the PRTA 1971 was cast in identical terms to s. 32 of the PRTA. 22. Section 3A of the PRTA 1971 (and therefore s. 32) had its origins in s. 3C of the Pay roll Tax Act 1971 (Vic). The provisions were intended as an anti-avoidance measure aimed at catching arrangements designed to avoid payroll tax, by severing the employer-employee relationship through the use of contractors to replace wages staff:
This description was not challenged by Novus and I accept it.
There is also no dispute that the Act was introduced with effect from 1 July 2007 as part of inter-state harmonisation of payroll tax legislation.
Both parties agreed that the Parliamentary intention in respect of the contractor provisions included the principle that bona fide independent contractors would not be caught by the legislation. One of the issues between the parties is the extent to which the ARs are "independent contractors" in the context in which the Minister for Employment and Minister for Finance used that phrase in the second reading speech on 13 November 1985.
Both parties relied to an extent on the decision of Gzell J in Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788 (Bridges Financial Services). In that matter the applicant (Bridges), which was a stockbroker, an agent for various life insurance companies and authorised to deal in securities, authorised 79 people based in New South Wales to act as its representatives. His Honour said: 2 … Bridges paid commission and brokerage and some fees with respect to transactions initiated by the representatives. It did not include those amounts in its returns of wages and, in consequence, did not pay pay-roll tax with respect to those amounts under the Pay-roll Tax Act 1971. 3 The Chief Commissioner issued notices of assessment to Bridges on the basis that the amounts were wages paid to employees as such or, alternatively, on the basis that the representatives were deemed to be employees. 4 From an adverse decision of the Chief Commissioner on its notice of objection, Bridges applied to this court for a review of the Chief Commissioner's decision under the Taxation Administration Act 1996, s 97(1)(a). …. 219 Section 3A of the Pay-roll Tax Act 1971 was introduced by the Pay-roll Tax (Amendment) Act 1985. In his second reading speech, the Minister for Employment and the Minister for Finance said that bona fide independent contractors would not be caught by the legislation (Hansard, Legislative Assembly, 13 November 1985 at 9558). 220 It was submitted on behalf of the plaintiff that s 3A(1)(b) of the Pay-roll Tax Act 1971 should be confined to circumstances in which nothing other than the supply of services to the designated person was involved. It was submitted that in this way the purpose of the legislation, as recorded in the second reading speeches, would be achieved. It was submitted that on this basis the provision did not apply to the representatives because the arrangements between Bridges and them achieved more than the mere provision of the services of the representatives and amounted, in effect, to a joint venture between Bridges and the representatives under which each conducted a business co-operatively or, alternatively, a joint venture under which the representatives introduced capital assets represented by their interests in trail commissions from previous clients. 221 I reject that submission. The structure of the Pay-roll 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 exceptions, that the legislation does not catch bona fide independent contractors. 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. If s 3A(1)(b) were confined in the manner submitted on behalf of Bridges, there would be little scope for the operation of the exceptions. 222 It was also submitted that the provision did not apply because the contract with the representatives did not oblige them to provide any financial advice on behalf of Bridges to any clients. They could do so if they chose. I reject that submission. Once a representative chose to supply Bridges with services, those services were provided under the contractual arrangements between the representative and Bridges.
Division 7 states "amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract …. are taken to be wages paid or payable during that financial year", s 35.

[11]

Relevant contract issue

Section 32(1) provides the definition of "relevant contract" as follows: (1) In this Division, 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) ….
Section 32(2) states what is not a relevant contract for the purposes of the Act: (2) … 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: … (b) is supplied with services for or in relation to the performance of work where: … (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) … or (c) is supplied by a person (the "contractor") with services for or in relation to the performance of work under a contract … where the work to which the services relate is performed: (i) by two or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or … (iii) where the contractor is a natural person, by the contractor and one or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, …
Sections 33 and 34 define employer and employee as follows: 1. s 33(1)(b) states: … a person to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work … is taken to be an employer in respect of that financial year. 1. s 34 (a) states: … a person who during a financial year performs work for or in relation to which services are supplied to another person under a relevant contract … is taken to be an employee in respect of that financial year.
Novus describes the s 32(2)(b)(iii) exemption as the "90 day exemption" while the Chief Commissioner describes it as the "90 day exception". Novus describes the s 32(2)(c) exemption as the "contractor exemption" while the Chief Commissioner describes it as the "two person exception". For uniformity I use the expressions "90-day exemption" and "two-person exemption" for ss 32(2)(b)(iii) and 32(2)(c) respectively.
Novus makes numerous claims in AS including [7] to [9], [208] and [209] that there is no relevant contract between Novus and any AR. In the alternative, Novus claims that even if there is otherwise a relevant contract either or both of the exemptions in s 32(2)(b)(iii) and s 32(2)(c) apply so that the particular contract which would otherwise be caught by the Act is excluded from the s 32(1) meaning of "relevant contract".
Novus submitted: 7. In issue in this proceeding is the interpretation and correct application of the relevant provisions of the Act to the contracts between Novus and each of the ARs and the way, in which each of the ARs conducted his/her business. Based on the evidence, the Tribunal would find that the ARs are truly independent contractors (in the form of small business owners) and that the contract between each of them (as individuals) and Novus (AR Agreements) does not constitute a "relevant contract" pursuant to s 32(1) of the Act. … …. Section 32(1) and relevant contract … 186. There are many types of AR Agreements in evidence in this case but there is no substantive difference between their terms as they pertain to payments to ARs. … … 188. A "Client" is defined in the AR Agreements as a person who is "introduced" to Novus, by clear inference, by the ARs. 189. "Authorised Representative" is defined by reference to the Corps Act as a person who "is to provide financial services on behalf of the Licensee". 190. "Services" means "provision of Financial Product Advice, Dealing in a Financial Product, and Arranging for a person to Deal in a Financial Product and includes but is not necessarily limited to making a recommendation in respect of the issue, variance, termination or disposal of a Financial Product or Financial Product Advice, or arranging or facilitating the issue, variation termination of disposal of a Financial Product or financial services, or providing any other service of a kind approved by the Licensee in writing". 191. The ARs are to "provide the Services". In consideration for providing the Services and acting in accordance with AR Agreements, Novus is required by the IARA to pay "the brokerage and other fee splits... after deduction of any facilities charges, professional indemnity insurance contribution or other costs as set out in Schedule 2 and any other costs incurred on behalf of the Authorised Representative...". … 204. When one analyses the AR Agreements in context …There are no "services" that ARs provide to Novus under the AR Agreements. … there are no services that flow from Novus to the ARs either. No consideration flows from Novus to the ARs; the respondent has not pointed out any. The real consideration flows from the ARs' client by way of fees or brokerage to the ARs. Novus receives money for the use of its AFSL … 205. In Bridges, by the terms of the parties' agreement, consideration flowed from Bridges to the representative in the form of a portion of revenue generated by the representatives from selling Bridges' products, or other products, to clients of Bridges and clients from Bridges' referral sources. There is no such consideration in this case. … 207 … the AR Agreement is a licensing agreement for ARs to provide services to their clients in compliance with the requirements of the Corps Act.
The Chief Commissioner's response to Novus' contention includes: 19 … Relevant Contracts exist, pursuant to s. 32(1)(b) of PRTA, between Novus and each of the 15 ARs in issue. This is because a "contract" (which involves looking at the whole arrangement) exists between Novus and each of the ARs under which Novus, in the course of its business of operating a financial services business, is provided with the "work-related" services of the ARs, who render services to the clients on behalf of Novus. Novus' Contentions 20. In its written submissions, Novus contends that s 32(1)(b) of the PRTA is not engaged, so there is no relevant contract, for the following reasons: (a) Neither the services nor the remuneration pertaining thereto have been identified by the Chief Commissioner (at [183]). (b) Were the Tribunal to identify the services and the remuneration, it would conclude that no consideration flowed from Novus to the ARs and that the ARs did not provide work-related services to Novus (at [185]). (c) The "client" referred to in the various authorised representative agreements is not the client of Novus but the client of the AR (at [192]). …. 23. Gzell J in Bridges Financial Services v Chief Commissioner of State Revenue (2006) 222 ALR 599 ("Bridges Financial Services") at [218]-[219] said of s. 3A of the PRTA 1971 (emphasis added): "In introducing the bill to the Victorian Legislative Assembly, the Treasurer, in his second reading speech, stated the objective of the legislation to be to catch relationships where a subcontractor worked exclusively, or primarily, for the one person and the object was to obtain his labour. At Hansard, Legislative Assembly, 27 October 1983, p 1581 the Treasurer said: 'In essence, the legislation is intended to catch those relationships where the sub-contractor works exclusively for or primarily for the one person and where the object of the contract between the parties is to obtain the labour of the sub-contractor. … In his second speech, the Minister for Employment and the Minister for Finance said that bona fide independent contractors would not be caught by the legislation: Hansard, Legislative Assembly, 13 November 1985, p 9558." 24. Subsequent to its inclusion in the Pay-roll Tax Act 1971 (Vic), s. 3C was "transposed" and enacted as s. 9 of the Accident Compensation Act 1985 (Victoria). The legislative objective in enacting the "Relevant Contract" provisions in the payroll tax legislation was described by Murphy J in the Victorian Supreme Court in Mayne Nickless Ltd v Mackintosh [1989] VR 878 at 882 ("Mayne Nickless") as follows: "S.9 of the Act was introduced into the Accident Compensation Act 1985, being taken from the Pay-roll Tax (Amendment) Act 1983 which had inserted s.3C into the Principal Act. Its purpose in that Pay-roll Tax Act was to counter avoidance by employers of the payment of pay-roll tax by the engagement of new staff as contractors rather than as employees … It was intended to operate 'to remedy' this situation and was designed 'to ensure that all the required transactions are caught and also to combat tax avoidance'. The emphasis throughout the explanatory memorandum is laid on casting a wide net in order to catch all those workers or employers, who might seek by a stratagem to avoid the payment of pay-roll tax, otherwise applicable to an employer/employee relationship. The emphasis is placed upon the stratagem, whether initiated by the 'worker' or by the 'employer', and thus there are included exemptions designed to exempt, what I may broadly call, certain normal business transactions." 25. That statement by Murphy J in Mayne Nickless was subsequently approved of by Ashley JA with whom Dodds-Streeton JA agreed in DSG Ltd v Victorian Workcover Authority [2008] VSCA 42 at [32] ("DSG v Victorian Workcover"): see also Re Zuccala Homes Pty Ltd and the Commissioner of State Revenue (Vic) (1994) 38 ATR 1326 at 1326 ("Zuccala Homes"). 26. For the purposes of s. 32, s. 31 defines "contract" as "includes an agreement, arrangement or undertaking, whether formal or informal and whether express or implied". … in Newton v FCT (1958) 98 CLR 1, Lord Denning speaking for the Privy Council said of the word arrangement at 7-8: the word "arrangement" is apt to describe something less than a binding contract or agreement, something in the nature of an understanding between two or more persons - a plan arranged between them which may not be enforceable at law. But it must in this section comprehend, not only the initial plan, but also all the transactions by which it is carried into effect. 27. For present purposes, the Supreme Court decision in Bridges Financial Services is the critical decision - being a case involving s. 3A(1)(b) of the PRTA 1971. In Bridges Financial Services, Gzell J said that the structure of s. 3A(1) of the PRTA 1971 (and, now s. 32(1) of the PRTA) is, in the first instance, to define in wide terms a "Relevant Contract" and then to determine, as the second step, whether any of the exceptions apply. Gzell J held that it was the work of the exceptions contained within s. 32(2) of the PRTA, rather than the general definition of Relevant Contract, to narrow the definition of "Relevant Contract", so that the legislation does not catch bona fide independent contractors: Bridges Financial Services at [221] … … 31. Justice Gzell … said of the structure of s. 3A of the PRTA 1971 at [221]: " … It is because of the exceptions, that the legislation does not catch bona fide independent contractors. 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 … " 32. In Bridges Financial Services, referencing Accident Compensation Commission v Odco Pty Ltd (1990) 95 ALR 641 at 650-51, Justice Gzell, at [225], held that the reference to "services for or in relation to the performance of work" is no more than a requirement that the services be "work-related". 33. Justice Gzell held that s. 3A(1) of the PRTA 1971 was satisfied in the circumstances in that a Relevant Contract did prima facie exist, because in providing services to clients of Bridges, the representatives, under the terms of the representatives agreement, provided services to Bridges. In this regard, at [226], Gzell J held: "When a representative chose to recommend a financial plan to a client, and upon the client's instructions lodged documentation to buy or sell securities in the name of Bridges as the authorised dealer, the representative supplied Bridges with services and that was done in terms of the representatives and agents agreement [the representative's agreement] or in terms of the arrangements that agreement recorded. And the services were work-related and Bridges were supplied with them in the course of carrying on its business." (emphasis and annotation added) 34. In Bridges Financial Services, Justice Gzell also quoted approvingly from the decision of the Victorian Administrative Appeals Tribunal in Re D & D Tolhurst Pty Ltd and Cmr of State Revenue (Vic) 1997 ATC 2179 ("D & D Tolhurst"). D & D Tolhurst was a case involving a stockbroker and licensed dealer who engaged investment advisors who wrote business in the name of the stockbroker who retained 60% of the brokerage fees earned by the advisors. The Tribunal (constituted by Mr Nettle) concluded that the advisors supplied Tolhurst with services under a contract. He said (quoted approvingly by Gzell J in Bridges Financial Services): "There can be no doubt that there was an agreement or arrangement or understanding between Tolhurst and each of the advisors that the advisors would render services to the clients as the agent of Tolhurst, at the client's request. In my view it follows, as a matter of plain language, that the advisors supplied services to Tolhurst by servicing the needs of the clients. By doing so they supplied services to Tolhurst for the purpose of its business, notwithstanding that they also at the same time supplied services to the clients." (emphasis added). 35. The Chief Commissioner submits that the case of Novus is relevantly indistinguishable from Bridges Financial Services with respect to the "relevant contract" issue. The arguments that have been advanced in this case against a finding of "relevant contract" were advanced but rejected by Gzell J in Bridges, namely that: (a) the clients were clients of the ARs and not clients of the "designated person"; (b) accordingly, the ARs did not provide any "services" to the designated person (Bridges and Novus, respectively) but only provided services to "their" own clients; (c) insofar as the ARs had contracts with the designated person and not with each individual client, it was only a reflection of the statutory regime for regulating the financial services industry - the designated person, as the AFSL holder, did not provide any services to clients in its own right and merely served as the vehicle / conduit by which the ARs operated their own financial services businesses; and (d) the ARs were never obliged by their contracts to provide any services on behalf of the designated person to any clients.
In its response in ASR, Novus repeats its submissions in AS "in particular [80] ff." Paragraph [80] contains submissions by Novus in respect of what it calls "the business model of Novus". Novus substantially relies, for its description of that business model, on Mr Gooley's evidence and what it states at [80] as the sharing of that understanding of the business model by all the ARs. I comment below on both Mr Gooley's evidence and the understanding allegedly held by the ARs as evidenced by both their affidavits and oral evidence.
In ASR at [13.3] Novus contends that the words "on behalf of the licensee" in the AR agreements, which the Chief Commissioner submits mean what they say, that is that for the purpose of the agreements, each AR is an agent of Novus, do not mean what they clearly state. Novus submits at [13] that the words in s 916A of the Corporations Act 2001 (Cth) which state that a financial services licensee may give an authorised representative a written notice authorising that person, "for the purposes of this Chapter, to provide a specified financial service … on behalf of the licensee" does not [expressly] specify "that the ARs are acting on behalf of the licensee for other purposes (e.g. for contract law purposes) ... the authorisation is analogous to a drivers' licence - it merely enables the AR (driver) to carry on its business (driving) lawfully under a licence granted by the licensee".
Novus continues at ASR [13.4] to state: …. an authority given under section 916A is "to provide a specified financial service or financial services on behalf of the licensee" …. the phrase "on behalf of the licensee" is not specially defined. The context in section 916A(1) includes the limiting words "for the purposes of this Chapter".
The relevant Chapter of the Corporations Act is Chapter 7 which encompasses the very wide field of "Financial services and markets". Novus has not shown that the Corporations Act requires that the phrase "on behalf of the licensee" must be included in the AR agreements nor that the phrase applies only for the Chapter's purpose. Novus has provided no legislative or caselaw authority in support of its restrictive interpretation of the words "on behalf of the licensee". In the circumstances I do not find that Novus has satisfied its onus in relation to its interpretation of the phrase. Accordingly, I find that the phrase is to be given its ordinary contractual meaning in addition to any relevant requirements of the Corporations Act.
In summary, and having regard to the onus which Novus bears, I am not satisfied that: 1. there is no relevant contract for the purposes of Division 7 between each AR and Novus for any part of the Relevant Period during which each AR was a Novus AR, and. 2. for contractual purposes, the ARs were not agents of Novus as stated in the AR agreements.
I find that each AR agreement between Novus and an AR is a relevant contract for the purpose of Division 7 in relation to each year of the Relevant Period from the date that contract commenced until the date, if any, on which such contract was terminated. I also find that each AR was the agent of Novus for the contractual purposes of each AR agreement.

[13]

The 90-day exemption - s 32(2)(b)(iii) general issues

The exemption provided by s 32(2)(b)(iii) requires that services to Novus be provided in each relevant year for periods that in the aggregate do not exceed 90 days in that year.
Novus claimed that the 90-day exemption applied to Messrs Ireland, Mifsud, Mudd, Streeter and Swarbrick. Novus made Mr Streeter available for cross-examination. The remaining ARs did not attend the hearing and were not cross-examined.
Novus submitted at [9] that the Chief Commissioner's approach "in the Objection Decision … namely to determine the 90 days by reference to the provision of "services", that is, especially in relation to the traders, the number of days, on which trades occurred, ought to be followed by the Tribunal."
Novus also submitted at [209] that "… the approach … ought to be by reference to the objective materials that are in evidence."
However, Novus also submitted: 26. Novus is not required to prove each fact that underlies its contentions in relation to the application of … the 90-day Exemption. In this kind of litigation, given the scope of the Relevant Years and given the diffuse nature of the relationship between Novus and the ARs, any approach to the contrary would place an undue burden on Novus, the respondent and the Tribunal … … 61 … The Tribunal must identify the "services" and then consider the evidence to determine whether the 90-day Exemption is satisfied. It is important to note the following. The approach taken by the Appeal Panel in B&L Linings v Chief Commissioner of State Revenue (No 3) [2007] NSWADTAP 32, at [62] should be adopted. It is sensible and principled. Novus cannot be required to provide a detailed account of each day its relevant ARs worked during the course of five financial years ...
I have already rejected Novus' implied argument that providing evidence as to work carried out or services supplied by or to the ARS is a requirement to provide a detailed account of each day's work over a period of five years. That is not correct. Novus' statutory onus requires that it provide probative evidence in support of its submissions, not merely unsubstantiated submissions.
There is no evidence to support Novus's submission that in relation to "execution only" ARs, no relevant work was performed by any AR other than on the days on which trades took place. I reject that submission.
The Chief Commissioner's submission at [81] is that whether the 90-day exemption applies depends on Novus discharging its onus of proving "as required by s. 100(3) of the TAA, that the said ARs, or any of them, provided the services to Novus for a period not exceeding 90 days in any of the relevant financial years". That submission is based on the clear wording of the statute and on judicial authority referred to by the Chief Commissioner as noted above. I accept that submission.
The Chief Commissioner submitted at [87] that in the context of this issue: the word "day" means calendar day (i.e. 24 hours commencing at midnight) (refer Prowse v McIntyre (1961) 111 CLR 264 per Windeyer J at 278; refer definition of "midnight" in Interpretation Act 1987 (NSW) s 21(1)).
Novus did not dispute the submission and I accept it.
The Chief Commissioner submitted that the best evidence as to the number of days on which the ARs performed work for Novus would be the "client files" each AR was contractually bound to keep. However, none of the five ARs who claimed low annual work levels annexed client files to their affidavits, merely relying on assertions that from their perusal of their own records they believed they worked for less than 90 days for Novus in certain financial years.
To the extent that client files were properly maintained by ARs it may well be that those files would constitute probative evidence. Novus, correctly in my opinion, submitted that it was open to the Tribunal "to make findings, on the balance of probabilities, both on evidence and inferences that are reasonably open to it based on that evidence."
The Chief Commissioner submitted that in relation to the 90-day exemption and separate from the individual circumstances of the ARs considered: 1. Novus was on notice from January 2016 that strict proof would be required in relation to all ARs; 2. the best evidence as to the number of days on which the ARs performed work for Novus would be the "client files" which each AR was contractually bound to keep. However, none of the five ARs who asserted low annual work levels annexed client files to their affidavits, merely relying on assertions that from their perusal of their own records they believe they worked for less than 90 days for Novus in certain financial years; 3. the evidence shows that in addition to the transaction "trades" and the focused work required for each trade, additional preparatory and administration was required to be performed by each AR in initially setting up each client before the first trade could be transacted for that client.

[14]

The amount of work required of ARs and client files

To the extent that: 1. the AR agreements required that ARs maintain client files detailing work done for each client; 2. the client files referred to in the AR agreements contained information concerning the work carried out by each AR for each client; 3. Novus conceded that it was entitled to require that the ARs provide their client files to it; 4. Novus was on notice for nearly 2 years prior to the hearing that the client files were required for the hearing; and 5. no client files were produced,
I do not accept that statements by the ARs that they had consulted their records, which presumably included the client files, and that those records confirmed that the ARs had carried out less than 90 days' relevant work in each year, by themselves satisfied Novus' onus on this point.
Mr Krause is a director of Novus. His affidavit in evidence included at [4] to [7] the work involved of an AR in setting up an account for a client with ETrade and at [8] to [16] the work of both an AR and ETrade in effecting a trade.
Mr Krause informed the Tribunal at TS164.23 that it was absolutely true that to get a particular client account up and running properly might involve a substantial amount of work. At TS165.5 he agreed that a lot of work could be associated with any particular trade before a decision was made, including providing recommendations and a statement of advice.
Mr Krause, as a Novus director, said the client files were required to be kept available for seven years. Mr Kimber put to Mr Krause the proposition that the primary record that would be the most reliable record to assist Novus to discern how much work an AR had done for any client would be the client file. Mr Krause responded at TS 179.29 "The client file, email, yes".
Mr Kapes, an AR, said in cross-examination that for the purpose of his contract with Novus he was required to keep client files and that those files would be the best record of indicating what work he was doing for a particular client on a particular day or point in time.
Novus said at [61]: … there is evidence, and agreed facts, as to the days, on which trades were executed by those ARs. Given that the "services" were "execution only" trading services, then the record of trades ought to satisfy the requirement of "services" being provided for "periods" that do not exceed 90 days.
Contrary to Novus implied submission that there is an obligation on the Chief Commissioner to establish the details of what "any client file would contain", the onus lies on Novus to prove its case. Novus provided no satisfactory explanation for the failure to provide any client files or other evidence Objection Determination work carried out by the five ARs in respect of whom it claimed the 90-day exemption applied..
I find that Novus' general submissions concerning the days' worked by these ARs does not satisfy its onus to provide probative evidence as to how much work was performed and services were provided by any AR in addition to the number of agreed days on which trades occurred. Accordingly, I reject Novus' blanket submissions that all five ARs in respect of whom the 90-day exemption was claimed had provided relevant services which in aggregate did not exceed 90 days in any relevant year.
I do not disagree that the approach taken by the Appeal Panel was sensible and should be adopted. However, that approach is based on data having been provided to the Appeal Panel and the Panel not merely relying on unsupported assertions.
Novus statement at [209] that the "Exemption ought to be by reference to the objective materials that are in evidence" is accepted. However, in this regard, Novus has not provided "objective materials … in evidence" rather it has at times relied on unsupported assertions or evidence as to the number of days on which trades took place, comprising only one aspect of work performed.
Novus is not being requested to prove "each fact that underlies its contentions". However, in order for it to succeed it is required to prove its case on the basis of probative evidence and the balance of probability. I deal below with the evidence before the Tribunal of each of the five ARs in respect of whom the 90-day exemption is claimed.
Novus submitted at [60]: … The Tribunal must identify the "services" and then consider the evidence to determine whether the 90-day Exemption is satisfied. It is important to note the following. The approach taken by the Appeal Panel in B&L Linings v Chief Commissioner of State Revenue (No 3) [2007] NSWADTAP 32, at [62] should be adopted. It is sensible and principled. …
There is requirement that the Tribunal must proceed in the manner asserted by Novus. I also note that the Appeal Panel at [62] in B&L Linings No 3 relied on documentary evidence regarding the number of days worked in a three-year period and that the evidence was corroborated by evidence from a tax return and accounting records. At [64] the Appeal Panel stated that it agreed with the submission that the data provided by the company sufficiently showed that services were provided for a period that did not exceed 90 days. This is substantially different to assertions by ARs that they had checked their own records without those records having been provided to the Tribunal.

[16]

Ireland, Jon (90-day exemption)

The parties agreed at AF [4] that Mr Ireland had "entered into an Authorised Representatives Agreement [Ireland ARA] for share trading with Novus" in respect of relevant years.
I find that the Ireland ARA comprised a relevant agreement for the purpose of Division 7. Novus submits, and I accept, that the only year in dispute is 2012.
The issue is whether the 90-day exemption applied in 2012.
Novus agreed with the Chief Commissioner at AAF [1] that from "1 July 2011 to 30 June 2012 [Mr Ireland] placed trades for clients to purchase or sell shares on the execution and settlement services platform on 90 days".
Novus claimed at [123] that Mr Ireland stated in his affidavit that "he provided services on fewer than 90 days during" 2012. I accept that this claim was made at [10] in Mr Ireland's affidavit where he said that he had "reviewed all of my records" in making the claim.
Notwithstanding Mr Afshar's statement during the hearing that Mr Ireland's affidavit would not be relied on, Novus, in its post-hearing submissions sought to rely on that affidavit. If Novus had not attempted after the hearing to rely on Mr Ireland's affidavit I would not have had regard to its contents in these reasons. However, as Novus has sought to rely on the affidavit I am satisfied that it is appropriate for the affidavit's contents to be used as evidence against Novus.
I adopt the same approach throughout these reasons in respect of other affidavits which Novus sought to rely on in post-hearing submissions, although the affidavits were not read, because the deponents were not made available by Novus for cross-examination, and Mr Afshar informed the Tribunal that the affidavits would not be relied on.
I note that, notwithstanding Novus conceding that Mr Ireland placed trades on 90 days in 2012, Mr Ireland deposed to having reviewed all his records which showed that he had provided services on fewer than 90 days. Accordingly I am not satisfied that Mr Ireland's affidavit is completely accurate.
Novus claimed at [123] that Mr Ireland had "provided "Execution-Only" services to his clients, which involved receiving orders from "a small number of clients that I had retained", placing those orders … and then checking and confirming the orders." I accept that words to that effect were included in Mr Ireland's affidavit, at [7] and [8].
At [8] Mr Ireland provided some detail in relation to the manner in which he serviced his clients. He said that his clients provided him with trading orders. He placed the orders onto an order pad which was sent to a third-party. A trading representative of the third-party received the order and checked and confirmed the details. Once satisfied with the order, the representative placed the order on the stock market which executed a trade. At [7] Mr Ireland said he was not required to prepare any advice documents [in relation to the service he provided to his clients].
However, at [4] Mr Ireland said he "provided Share Advisory Services to a small number of clients that [he] had retained." The discrepancy between the statement at [4] and the statements at [7] and [8] as to whether Mr Ireland provided any advice was not explained to the Tribunal nor was evidence provided as to when that advice was provided, nor as to how much time was involved in carrying out research and providing that advice.
Novus claims at [124] that Mr Ireland received $43,716 during 2012 and the Chief Commissioner claims at [113] that by reference to Annexure B to the Objection Determination the amount (from which the Assessments were calculated) is $48,292.
Mr Ireland said at [1] that he was "the Director of Felton East Pty Ltd" and at [3] he confirmed "that payments that were made by Novus to me, through my Service Company, Felton East Pty Ltd, have formed part of the" disputed Assessments.
It may be a matter of drafting rather than a matter of substance, but it appears to me that Mr Ireland conceded at [1] that the amount Novus paid his company was the amount included by the Chief Commissioner in the Assessments, not the amount claimed by Novus.
Novus submitted: 124. Only the 2012 year is in dispute in relation to Mr Ireland. He received $43,716.39 during that year. The parties agree that Mr Ireland placed trades for his clients on 90 days during 2012. The starting point is the objective evidence. The days, on which Mr Ireland traded support the submission that he falls within the 90-day Exemption. The amount of money he received - which on any view is minimal and very close to the figure the respondent accepted as the threshold - also support the proposition that Mr Ireland's activities were minimal. Furthermore, the list of trades provided to the Tribunal demonstrates that Mr Ireland was placing one, and only occasionally more than one, trade on any of the days he traded. Even if the Tribunal is minded to allow some preparation time for the placement of trades, it would accept that that preparation work would have been performed during the rest of the 90 days, when Mr Ireland was not trading. Given the matters above, which support Mr Ireland's statements, the Tribunal would accept that he satisfies the 90-day Exemption.
Novus submitted at [124] that "the list of trades provided to the Tribunal demonstrates that Mr Ireland was placing one, and only occasionally more than one, trade on any of the days he traded."
I have no recollection of the "list of trades" of Mr Ireland referred to by Novus at [124], or of any other AR of Novus, being brought to the Tribunal's attention at any time. The expression "list of trades" does not appear in any of the transcript, AS (other than at [124]), ASR or AFSR.
The transcript at page 2 indicates that some documents were produced by certain persons, including Mr Ireland, pursuant to the issue of summonses. The documents were made available to both parties. At T42 both parties indicated that those documents were not required. The Chief Commissioner indicates in footnote 26 that a summons was issued to Mr Ireland and trading days were produced. It may be that the list was in those documents.
However, there is no evidence before me of any such trading list. Accordingly, I reject the submission that "Mr Ireland was placing one, and only occasionally more than one, trade on any of the days he traded."
There is no evidence to support Novus' submission at [124] concerning the amount of preparation time required for Mr Ireland's trade placement.
Having regard to Novus' onus and the lack of evidence to support Novus' submissions that Mr Ireland satisfied the 90-day exemption, I reject the submissions. I am not satisfied that the 90-day exemption applies to Mr Ireland in 2012.

[17]

Mifsud, Joe (90-day exemption)

There is no AR agreement in evidence between Mr Mifsud and Novus. However, the parties have proceeded on the basis that he was a Novus AR.
The extract from ASIC's database at page 282 of Exhibit NJH1 shows that Mr Mifsud was a Novus AR from 3 May 2010 until 1 March 2012 and was authorised to "Deal in a financial product/Apply for, acquire, vary or dispose of financial products on behalf of another" and "Provide general financial product advice."
The parties agreed in AAF: 2. From 1 July 2010 to 30 June 2011 Joe Mifsud placed trades for clients to purchase or sell shares on the execution and settlement services platform on 83 days, otherwise any other work undertaken by Joe Mifsud is not agreed and will be the subject of submissions as to whether the exception in s 32(2)(b)(iii) of the Payroll Tax Act 2007 applies.
Novus' claim is that the 90-day exemption applies. That is, Mr Mifsud did not provide services, during 2011, for periods which in the aggregate exceeded 90 days.
I find for the purpose of the proceedings that Mr Mifsud was a Novus AR during 2011 and that he was a party to one or more AR agreements with Novus and that that agreement or those agreements formed a relevant contract for the purpose of Division 7.
Novus submitted: 119. Mr Mifsud ... is a mortgage broker. He received payments through his company, Eagle Range Pty Ltd. He says he worked fewer than 90 days during the Relevant Years… 120. In 2011, Mr Mifsud received $59,853.239 … The objective evidence is consistent with the statement in Mr Mifsud's affidavit to the effect that he worked fewer than 90 days during each financial year. Further, like Mr Swarbick, Mr Mifsud provided "execution only" services, which did not involve time consuming advisory work. Even allowing for a reasonable amount of time for Mr Swarbick to complete any paperwork or research for clients - and remembering that just because he did a trade on a particular date, it does not mean that he did nothing for the rest of the day - the Tribunal would find that, on balance, Novus has demonstrated that Mr Mifsud satisfied the 90-day Exemption.
Novus provided no evidence in support of its submission that Mr Mifsud "provided execution only services". This submission contrasts with the excerpt from ASIC's database referred to above that Mr Mifsud was authorised to "Provide general financial product advice." In the circumstances I am not satisfied that Novus submission which implied that Mr Mifsud provided no advice services is accurate. I reject the submission.
Novus submitted at footnote 242 "For the same reasons as expounded in relation to Mr Swarbick's evidence, Mr Mifsud's evidence should be given its full weight notwithstanding the fact that he could not be made available for cross-examination."
The mere fact that Novus agreed that trades were placed by Mr Mifsud on 83 separate days is not in my opinion evidence that no services were provided by Mr Mifsud to clients, and therefore to Novus, on any other days. Mr Afshar conceded during the hearing that Mr Mifsud resided in New South Wales. Shortly before Mr Mifsud was expected to appear to give evidence, Mr Afshar informed the Tribunal that Mr Mifsud was not contactable. Mr Afshar also conceded that no effort had been made to issue a summons to Mr Mifsud in order to ensure his attendance.
Novus was on notice at all relevant times that Mr Mifsud was required for cross-examination. Having regard to Mr Afshar's express concession during the hearing that Novus would not rely on Mr Mifsud's affidavit, and Novus' failure, without adequate explanation to ensure that Mr Mifsud was available for cross-examination, I am not prepared to accept Novus' submissions based on contents of Mr Mifsud's affidavit to the extent that those contents support Novus' claims.
At [23] Novus submitted "the Objection Decision applied a threshold of $40,000 to exclude certain ARs on the basis that "it is likely the ARs worked for less than 90 days".
At Schedule 2, Novus submitted that it paid $59,853.77 on Mr Mifsud's account. The result of the Commissioner's calculations is the lesser amount of $53,992.97.
Even if it was legally appropriate to apply a $40,000 threshold in relation to the 90-day exemption, and I make no finding in that regard, and using the Commissioner's lower amount of $53,992.97, the amount paid during 2011 is nearly 35% above the Commissioner's artificial threshold.
Having regard to the above evidence, I find that Novus has not satisfied its onus to prove that Mr Mifsud did not provide services to Novus, during 2011, for periods which in the aggregate exceeded 90 days.

[18]

Mudd, William (90-day exemption)

The extract from ASIC's database dated 9 September 2016 at page 283 of Exhibit NJH1 shows that Mr Mudd was a Novus AR from 1 December 2003 and has no cessation date. The extract does not refer to any relevant class of representation.
Novus submitted that the years in dispute were 2011 to 2013 and states that Mr Mudd's affidavit made 20 July 2016 deposes that he provided corporate advisory services. There is no AR agreement in evidence between Mr Mudd and Novus. However, the parties have proceeded on the basis that he was a Novus AR and agreed at AAF [13]: The Agreement headed "Corporate Advisory Services Authorised Representative Agreement" at Tab 10 of Exhibit R2 "Key Documents" is to be a representative document between the applicant and the following Authorised Representative: … (iii) AR06 William Mudd
I find on the balance of probability that there was an AR agreement between Mr Mudd and Novus in respect of at least the years in dispute. Accordingly, I find that there was a relevant contract in existence in respect of those years.
On 5 December 2017 the Tribunal received a letter from Novus' solicitors attached to which was, amongst other documents a copy of an affidavit by Mr Mudd dated 20 July 2016. There is no evidence that the original affidavit was ever provided to the Tribunal.
Novus had been requested by the Chief Commissioner to ensure that Mr Mudd would be available to attend the hearing for cross-examination. He did not do so. Mr Afshar gave evidence from the bar table on 13 and 14 December 2017 that Mr Mudd was "in the UK" and that Novus was trying to make contact with him. Mr Kimber informed the Tribunal that prior to the receipt of the affidavit from Mr Mudd, an affidavit and been sworn by Mr Krause that purported to deal with Mr Mudd's case. That affidavit was withdrawn from the material before the Tribunal and not read.
There is a dearth of documents in evidence in relation to Mr Mudd. On 7 December Mr Afshar requested that all documents between Tab 2 and Tab 3 of volume 4 in Exhibit A3, be removed from the folder. Those documents, whatever they were, were so removed and were uplifted by Novus. Accordingly, they do not comprise material before the Tribunal for the purpose of the proceedings. The index to Tab 2 is styled "William Mudd". That Tab contains no documents. Tab 6 of volume 1 of Exhibit A3 is also styled "William Mudd." There are no documents behind that Tab.
Despite this, Novus made submissions at [121] and [122] to the effect that Mr Mudd deposed in his affidavit dated 20 July 2016 that he traded as a sole trader who provided corporate advisory services for less than 90 days during each of the 2011 to 2013 years. Novus also made submissions as to amounts allegedly paid by it to Mr Mudd in respect of each of those years.
The footnote supporting a submission in [122] that the 90-day exemption ought to be applied because of a schedule that lists the trades and work that Mr Mudd performed states: 250 This document appears not to have been tendered, but was produced to the respondent prior to the hearing. It details the work that Mr Mudd did in relation to the 2011 to 2013 financial years. The respondent has been on notice of this document and there is no prejudice in it being included in the evidence. This document is headed "William Mudd Worked Documents" and was produced in response to paragraph 17 of the respondent's categories of discovery.
It may well be that certain documents were provided by Novus to the Chief Commissioner prior to the hearing. However, as counsel for Novus is well aware, unless those documents are part of the material before the Tribunal, it is not appropriate for the Tribunal to take such documents into account for the purpose of the hearing, s 63 ADR Act.
In the last sentence of [122] Novus submitted that the substantially higher amount which it claimed that Mr Mudd received for 2013, in comparison to the amounts received for 2011 and 2012, did "not overturn Mr Mudd's evidence that he worked fewer than 90 days". Footnote number 251 on which Novus sought to rely for this submission stated: 251 The fact that Mr Mudd's attendance could not be procured for cross-examination ought not undermine his affidavit evidence. There cannot possibly be any attack on his credit; accordingly, on the central question of the number of days, on which he worked, his evidence should be accepted.
The Chief Commissioner submitted that substantial earnings of Mr Mudd in 2011, 2012 and 2013 as shown at [98], varied, according to Novus, from over $69,000 to nearly $150,000. Accordingly, "probative evidence would be needed to show that such sums were earned on the basis of work on less than 90 days in each of those years. Yet this was not even attempted by Novus", [99]. 100. No affidavit from Mr Mudd was read to the Tribunal as Novus did not make him available for cross-examination (despite being on notice that he was required) and there are no Section 58 documents that provide any support for Novus' contention with respect to Mr Mudd (Ex R1, Section 58 documents, vol 5 at pp.1875-1883). … 105. The Chief Commissioner submits that Novus has failed to discharge its onus of proof with respect to the less than 90 day exception contention with respect to Mr Mudd.
It is somewhat surprising to me that Novus should repeatedly seek to rely on affidavit evidence of ARs who were not made available for cross-examination, after repeated statements were made to the Tribunal by Mr Afshar that the affidavits of five ARs who did not attend for cross-examination were not read and would not be relied on.
As Mr Mudd's affidavit was not read and Mr Afshar stated that it would not be relied on, I do not have regard to its contents in these reasons. Similarly, as the documents which apparently related to Mr Mudd were uplifted by Novus during the proceedings, they were not read, they have not been considered and are no longer in the possession of the Tribunal. Those documents do not constitute material before the Tribunal, and it is not appropriate that they be taken into consideration.
In the circumstances I find that Novus has not satisfied its onus of showing on the basis of probative evidence that Mr Mudd did not provide services, during any of the 2011, 2012 and 2013 years, for periods which in the aggregate exceeded 90 days.

[19]

Streeter, Stephen (90-day exemption)

The parties agreed at AF [5] that Mr Streeter and Novus entered into an Authorised Representative Agreement for corporate advisory services (CAS).
I find that the AR agreement entered into between Mr Streeter and Novus was a relevant contract for the purpose of Division 7.
The years in dispute in respect of Mr Streeter are 2009, 2010, 2011, 2013 and 2014. Although Novus submitted that Mr Streeter did not provide share trading services the parties agreed at AAF [6] to [10] that the number of days each year in dispute on which Mr Streeter placed trades for clients to purchase or sell shares on the execution and settlement services platform was 51 days in 2009, 28 days in 2010, 16 days in 2011, 13 days 2013 and six days in 2014.
Novus and the Chief Commissioner respectively submitted that Novus made payments for or on behalf of Mr Streeter in the sums of $71,000 / $88,000 in 2009, $277,000 / $380,000 in 2010, $54,000 / $61,000 in 2011, $166,000 / $186,000 in 2013 and $334,000 / $304,000 in 2014.
Novus submitted at [161]: 1. Mr Streeter had given evidence in his affidavit that he had considered his records and confirmed that he worked fewer than 90 days in each year; and 2. while Mr Streeter said he had looked at the days he was in the office he also said he considered other out of office activities, such as work trips, fell within the scope of his work.
Mr Streeter's evidence at TS 384 and 385 that he performed "90 days or less" work in each year was calculated by reference to the number of days he went into the Novus office. Separately from that, Mr Streeter confirmed that a lot of his work to provide services for his clients did not involve being in that office and he travelled quite a lot including interstate and overseas. He regarded that travelling as part and parcel of the work he had to do as a corporate advisor.
In the context of Mr Streeter having informed the Tribunal that the number of days worked, referred to in his affidavit, only comprised days he went into Novus' office, and that a lot of his relevant work did not involve being in the office I find the post-hearing submission in [161] that he "confirmed that he worked fewer than 90 days" to be materially inaccurate and potentially misleading.
Having regard to Mr Streeter's oral evidence, I find that Novus has not satisfied its onus of showing on the basis of probative evidence that Mr Streeter provided relevant services for a period that in the aggregate did not exceed 90 days in any relevant financial year.

[20]

Swarbrick, Robert (90-day exemption)

The extract from ASIC's database dated 9 September 2016 at page 281 of Exhibit NJH1 shows Mr Swarbrick (on some documents spelled Swarbrick) was a Novus AR from 1 December 2003 until 3 May 2013. The extract does not refer to any relevant class of representation. There is no AR agreement in evidence between Mr Swarbrick and Novus. However, the parties have proceeded on the basis that he was an interstate AR of Novus.
Novus submitted that the years in dispute are 2009, 2010, 2011 and 2012 and that Mr Swarbrick provided "execution-only services to his clients under a 'no-advice' business model.
I find on the balance of probability that there was an AR agreement between Mr Swarbrick and Novus in respect of at least the years in dispute. Accordingly, I find that there was a relevant contract in existence in respect of those years.
The parties agreed at AAF [3] to [5] that that the number of days on which Mr Swarbrick placed trades for clients to purchase or sell shares on an execution and settlement services platform was 40 days in 2009, 71 days in 2010 and 16 days in 2011, and that any other work undertaken by Mr Swarbrick is not agreed and will be the subject of submissions as to whether the 90-day exemption applies.
An affidavit by Mr Swarbrick was tendered to the Tribunal. However, Mr Swarbrick did not attend for cross-examination. During the hearing Mr Afshar informed Mr Kimber and the Tribunal that Mr Swarbrick's affidavit was not read and would not be relied on by Novus. The transcript shows at T396 that Mr Afshar sought to provide evidence from the bar table by stating that "Mr Swarbrick is in Indonesia and he has not been contactable". However, Mr Afshar conceded that Mr Swarbrick had provided an affidavit and was aware of the proceedings. Mr Afshar also said he had been instructed that Mr Swarbrick was informed that he was required and given the dates of the hearing.
After the hearing Novus sought at [115] to rely on Mr Swarbrick's affidavit. At footnote 220 Novus sought to introduce evidence not provided during the hearing stating Mr Swarbrick "could not attend" the hearing. The evidence shows that despite Mr Swarbrick being aware of the hearing and that he was required to give evidence he "did not" attend the hearing, whether in person or by telephone or by the use of audio-visual means. There is no evidence before the Tribunal that Mr Swarbrick was actually in Indonesia or in any other particular location outside Sydney at the time of the hearing nor that he "could not" attend to give evidence.
Novus submitted that "full weight" should be given to Mr Swarbrick's evidence. For the reasons set out above I do not propose to have regard to the contents of Mr Swarbrick's affidavit.
The documents "behind" Mr Swarbrick's affidavit, at tabs 4B to 4F of Exhibit A3, consisted of a periodic compliance declaration dated 15 August 2009, a template for business cards for Mr Swarbick as Senior Client Adviser and authorised representative of Novus; an ASIC document described as an "AFS authorised representatives register" extracted from ASIC's database in August 2011 stating that Mr Swarbick was a representative of Novus in the classes of "Provide financial product advice, Deal in a Financial Product, and Apply for, acquire, vary or dispose of financial products on behalf of another"; a Novus Financial Services Guide dated 11 August 2008; and an undated Novus schedule headed "INTERSTATE ENTITIES Residence Support Material" which included Mr Swarbick's name and the authorisation period 31 July 2006 to 3 May 2013.
I find that the documents referred to in the immediately preceding paragraph are not relevant for the purpose of determining whether Mr Swarbick satisfies the 90-day exemption for any year in dispute. However, I observe that the ASIC document at Tab 4D provides that one of the classes in which Mr Swarbrick is registered as an AR of Novus is "Provide financial product advice". This appears to conflict with Novus' unsubstantiated submission at [115] that Mr Swarbrick provided "services to clients under a "No Advice" business model". As Mr Swarbrick was not made available for cross-examination, this is one of the matters which could not be tested.
The Chief Commissioner submitted: 110. Given that the number of days upon which trades actually took place in each of those years, when due allowance is made for the necessary preparation work associated with all trades, there is no basis for being satisfied that when all the likely necessary work is taken into account, that Mr Swarbrick worked for less than 90 days in any of the years in issue - let alone in each and every one of those years. 111. It is submitted that Novus has not discharged its onus of proof with respect to the less than 90 day exception with respect to Mr Swarbrick.
There is insufficient evidence before me to enable me to determine on the balance of probability that Mr Swarbrick provided services for periods that in aggregate in each year in dispute did not exceed 90 days. Accordingly, I find that Novus has not satisfied its onus in respect of Mr Swarbrick for the purpose of the 90-day exemption in any of the years in dispute.

[23]

Services supplied by execution clearing and service providers

Novus submitted at [208] that the two-person exemption "is satisfied in relation to all of the ARs, even the ones in relation to which the application of the 90-day Exemption has been claimed." The footnote relied on by Novus to support this submission stated "Each of those use ECPs in the course of providing services to their clients."
The first reference to "ECPs" in AS is in a footnote (to [9]) which states "It should be noted that all of these ARs received services from ECPs. If the Tribunal finds, as it ought to, that ECPs provided services for ARs, then these ARs are, accordingly, exempt pursuant to the Contractor Exemption."
"ECP" is not defined in AS as provided to the Tribunal on 14 June 2017. However, at [17] in the submissions titled "Outline of the Applicant's Submissions in Response" dated 5 December 2016, part of which was incorporated into AS by reference on 21 August 2017, "ECP" appears as an abbreviation for "Execution Service Provider".
In his opening remarks, Mr Afshar, when referring to an affidavit by Mr Moloney, said at TS14, Mr Moloney gave evidence about entering into contractual arrangements with third party service providers. Mr Afshar said: These are execution, clearing and settlement providers. In my submissions I think I called them ECPs; they have been referred to as ECSS; but basically what they are are service providers, we say, that obtain orders for the trading of securities from authorised representatives on behalf of their clients and provide services to get that to the relevant market, so the ASX, and then tend to all of the other matters that are associated with share trading or warrant trading or options trading, et cetera. Whatever trades are taking place, these services are the services through which these trades take place.
Mr Afshar informed the Tribunal that ECSS: … provide the mechanism, the checking, the actual putting of the orders, subject to various different things that they do. The dispute in relation to this is whether it's a tool, as the Chief Commissioner says, or is it a service, as I say the position should be accepted … [TS 15]
Many of the ARs claimed in their affidavits, in identical or similar wording, that Novus did not provide any back office, clearing, execution and settlement services or platforms and each relevant AR claimed, using the following wording or words to similar effect "I am required to engage the services of third-party Execution, Clearing and Settlement Service Providers (ECSS)". These ARs, and the relevant paragraphs in their affidavits, included Mr Moloney at [7], Ms Lu at [12], Mr Gerrish at [10], Mr Walsh at [8], Mr Glover at [8], Mr Gable at [8] and Mr Hogan at [11].
Novus claimed in its objection that the ECSS identified by each AR, supplied that AR in the course of a business carried on by the AR, with services for or in relation to the performance of work under a contract between the AR and Novus in the course of a business carried on by Novus during each year in dispute.
The claim was rejected by the Chief Commissioner. The Objection Determination states at [28] where third party service providers are engaged … the provision of services by these third-party services providers are tools which the ARs use in the course of carrying on their businesses. They are not the performance of work or Services which is the subject of the contract between the AR and Novus.
The Chief Commissioner made several specific submissions concerning the relationship between ECSS providers and various ARs. These included submissions at [203] in relation to Mr Moloney, at [268] in relation to Mr Glover and at [279] in relation to Mr Gable. The submissions used the following identical wording: … execution services provided by the ECSS providers listed, did so under a contract between those providers and Novus directly and not with [the AR]. The services were provided by those parties for Novus and not to [the AR] … so whilst [the AR] used those services, he did not personally engage the ECSS providers and so the two-person exception is not available in respect of them.
Mr Russell Krause was at relevant times a director of Novus. He made an affidavit dated 5 August 2016 which was withdrawn, and an affidavit dated 7 December 2016 (Exhibit A5) on which he was cross-examined.
Mr Krause deposed that he had 30 years' experience working in the financial services industry. This experience included back-office settlement systems, "execution, clearing and settlement services (ECSS), such as Etrade", and he "continue to use, the Etrade system since 2003. I have used other systems as well. Their operations are broadly similar in my experience.
At [4] to [7] in his affidavit Mr Krause detailed the work involved by an AR in setting up an account for a client with ETrade and at [8] to [16] the work of both an AR and ETrade in effecting a trade. Paragraph [17] related to clearing trades and [18], the last paragraph, referred to "off-market" trades.
Mr Krause did not refer to Novus anywhere in [4] to [18] of his affidavit. In cross-examination it was put to him that he had indicated how the AR and the clients interrelated with the ECSS but that he hadn't "put Novus in the frame at all. On reading this affidavit, you would, I must say, have the impression that Novus is really not part of the exercise and all".
Mr Krause acknowledged that "Novus does have to sign the execution and clearing agreement with the third-party provider" and that the ARs "utilise that agreement".
Mr Krause was referred to an ETRADE execution clearing and settlement agreement. He identified it as "the agreement between ETRADE and Novus Capital".
Mr Krause confirmed that: 1. the agreement was the overarching agreement that facilitates Novus clients being able to use or set up accounts within ETRADE; 2. Novus, described as "the intermediary", provided a range of financial services to its clients through the ARs; 3. ETRADE agreed to provide execution clearing and settlement services to Novus and its clients on the terms set out in the agreement; 4. Novus entered into the agreement with ETRADE and then authorised certain ARs to have access to the ETRADE platform; 5. Novus is the client's agent for the purpose of facilitating access to and use of the ETRADE platform; and 6. the contract between Novus and ETRADE is fairly representative of the agreements with other organisations that provide similar services.
Mr Krause confirmed that an Advisor Access Form annexed to the agreement provides that Novus is required to specify to ETRADE the nature of the person that it is asking be given access, who the person is, the person's details, that Novus must consent to the relevant "advisor" having access to use the ETRADE system and Novus must accept responsibility for the conduct of the adviser in relation to Novus' agreement with E*TRADE.
The parties agreed at [1] in AF: The Execution, Clearing and Settlement Agreement between the Applicant and ETrade Australia Securities Limited dated 30 March 2010 is representative of the following Agreements entered into by the Applicant and the following entities: a. Commsec Securities Limited; b. Weblress; c. UBS Securities; d. D2MX Pty Ltd; e. Pensions Australia; f. Pershing Securities Australia
I have referred above to affidavits by Mr Moloney, Ms Lu, Mr Gerrish, Mr Walsh, Mr Glover, Mr Gable and Mr Hogan stating that they were each "required" to engage the services of ECSS.
The transcript shows that in cross-examination of Mr Moloney at TS375, MS Lu at TS317, Mr Gerrish at TS346 and Mr Gable at TS238, rather than confirming that they engaged ECSS, they each confirmed that Novus entered into agreement(s) engaging the relevant ECSS to authorise him/her to have access to the relevant platform(s).
Mr Walsh thought but was not sure that Novus signed off with E*Trade but said he had his own contracts with IG Markets and Leveraged Equities. He also said he was not sure about who signed off with the ECSS, TS280-281. Mr Kimber called for any contracts between Mr Walsh and an ECSS which were before the Tribunal and Mr Afshar undertook to endeavour to answer the call that day, 12 December 2016. My recollection is that no contracts made between Mr Walsh and any ECSS were provided to the Tribunal and I am not satisfied that Mr Walsh was sufficiently certain of his oral evidence as to enable me to rely on it.
Mr Hogan was not cross-examined concerning agreements with ECSS.
The wording deposed by ARs in their affidavits is that that they are required to "engage the services of third-party Execution, Clearing and Settlement Service Providers (ECSS)". However, having regard to the oral evidence of the ARs referred to immediately above, the content of the agreement between ETRADE and Novus, the content of the application form for use of the ETRADE platform and services by ARs (that it needed prior approval by Novus as the other party to the ECSS Agreement with E*Trade), Mr Krause's oral evidence, the wording of the AR agreements between Novus and each AR (to the extent that they were brought to the attention of the Tribunal), I am not satisfied that any of the ARs, in their capacity as Novus ARs, entered into stand-alone agreements with any ECSS to obtain services which would activate the two-person exemption in any year in dispute between Novus and the Chief Commissioner.
Instead, I am satisfied that any services provided by any ECSS to any AR in the course of that AR supplying services to any client of Novus, were provided by the ECSS pursuant to an agreement between that ECSS and Novus.
The parties agreed that the Parliamentary intention in respect of the exemption provisions in Division 7 is that bona fide independent contractors would not be caught by the legislation.
The two-person exemption relates to the supply of services to "the contractor" (the ARs) by persons (third parties) either employed by or who provide services for the contractor.
In my opinion Parliament did not intend that the exemption would apply to third-party service providers who were engaged by the designated person (Novus) as this would negate the intention of the legislation to ensure the independence of the business of contractors who enjoyed the statutory exemption.
Accordingly, to the extent that Novus relies for the two-person exemption, on services provided by service providers to ARs, where those service providers had been engaged by Novus, I find that Novus has not satisfied its onus.

[24]

The Chief Commissioner submitted that for the purpose of s 32(2)(c)(iii) a Novus AR could not be supplied with relevant services by a second Novus AR, could not engage in fee splitting and could not work for no consideration

Novus claimed, in respect of several ARs who supplied services under a contract to Novus in the course of Novus' business (principal ARs), that a person who was also a Novus AR (the second AR) who was employed by or provided services to the first AR in the course of the first AR's business, and who carried out work in relation to which the services of the principal AR to Novus related, activated the two-person exemption.
The Chief Commissioner submitted that a principal AR could not be supplied with services by a second AR. His detailed submissions are at [154] and [155].
The Chief Commissioner stated at [154]: The construction to be placed on s. 32(2)(c) of the PRTA, having regard to context and purpose of the provision and the language used, is that for the exception to be engaged, the second "person" must not have worked for, been engaged by or 'provided services to', the 'designated person' in the relevant year. So, for instance, the utilisation of one AR by another AR on a fee splitting basis will not attract the exception.
Novus' response at ASR [20.1] was: The submission at RFS[154] is unsustainable. No authority has been cited for that proposition. No reference is made to any part of the legislation that prohibits such relationships. Finally, it is totally inconsistent with the approach in Bridges.
I observe that s 32(2)(b)(iii) (A) and (B) each expressly provide that the 90-day exemption will not be activated by work performed by a person who otherwise performs work for the designated person (Novus). However, I agree with Novus that there is no equivalent legislative basis in relation to the s 32(2)(c)(iii), two-person exemption and I reject the Chief Commissioner's implied submission.
I also observe that, in relation to Novus reliance on Bridges Financial Services, the references to fees being shared in Bridges Financial Services relate to sharing between Bridges and the relevant representative and/or agent controlled by the representative, rather than fee splitting between a principal representative and a second representative employed or engaged by the principal representative.
In respect of [155] the Chief Commissioner's broad reasons include: (a) the language of s 32(2)(c)(iii) (in the case where the AR is a natural person) and s. 32(2)(c)(i) (in the case where the AR is a corporation) would not be engaged as the second person would not be employed by or providing services for the contractor in the course of a business carried on by the contractor; (b) it would not be lawful for the second AR to supply those services to the contractor in the course of the contractor's business under the Corporations Act Part 7.6; (c) should it be lawful for the second AR to supply such services, the evidence does not establish contractual relationships between the contractors and the second ARs; (d) further, the evidence does not establish that any of the second ARs are supplying services to the contractor for the performance of work by the contractor under his or her contract with Novus. This is properly characterised as an assignment of the work of one AR that he or she is unable to perform, to a second AR; and hence not surprisingly that second AR is paid by Novus; (e) further, the splitting of fees by one AR with a second AR does not mean that the second AR has worked for or has been engaged by or has provided services to the first AR in the course of the AR's business; and (f) further, in the case of certain ARs there is no probative evidence of consideration for the services supplied being paid by the contractors themselves - other than nebulous suggestions of reciprocity (and reciprocity is not sufficient to meet the exception requirements). 156. Therefore, the exception does not apply to the use by the ARs of other ARs of Novus. The Chief Commissioner submitted on each such occasion that work or services performed by a second AR in the circumstances set out in the immediately preceding paragraph,
Novus' submissions in reply at ASR [20.2] to [20.5] were that the Chief Commissioner's [155] submission should be rejected because: 1. [155(a)] is an assertion lacking in any analysis. 2. [155(b)] is, again, a wide assertion without any detail as to why it is correct or should be accepted. 3. RFS[155(c)] ignores copious evidence both in writing and orally as to relationships between ARs to provide services to and receive services from other ARs. Given the breadth of relationships that can exist between parties (many of which have been explored in the NSC, for example, voluntary services as recognised in B&L Linings), the respondent's narrow approach ought to be rejected. He cannot on the one hand contend that a "relevant contract" should be found in "arrangements" that go well beyond the language of the contract but on the other hand insist on the existence of "contractual relationships" for the purposes of the exemption, especially given that no such restriction is imposed by the language of the provision. 4. [155(d)] again ignores the evidence, to which reference is made in the NSC, about the ARs' arrangements. The reference to "the second AR is paid by Novus" ignores substance in favour of form. It is beyond doubt that the money that was paid from Novus to any AR was beneficially owned by the AR. Accordingly, if an AR directed Novus to pay an amount to another AR, that is as usual as a sub-contractor directing monies payable to it by a head contractor to pay those monies to another sub-contractor. In substance, the payments directed to be paid by one AR to another are payments from one AR to the other. 5. [155(d)] (sic) is yet another assertion lacking any analysis. Quite why one AR would split fees with another AR were it not in consideration for services by the latter AR is unexplained. The evidence weighs decisively against the respondent's submissions in this regard. 6. [155(e)] (sic) contains the curious submission that services provided could not be consideration for services received. Again, no analysis follows that submission. It ought to be rejected. There is nothing in the language of the legislative provisions or the authorities that support the respondent's submissions in this regard.
I deal with the Chief Commissioner's submissions, and Novus' response, as follows. Firstly, counsel for the parties were informed by the Tribunal prior to providing submissions that in order for any submission to be considered, it should be supported by identified evidence brought to the attention of the Tribunal or identified legislative or case-law authority. The Chief Commissioner has supported his submissions in [155] with no evidence or case-law authority. His references to legislation at (a) and (b) are, at best, vague and uninformative.
My analysis and findings in relation to the Chief Commissioner's submissions at [155(a) to (f)] are as follows.
First, in respect of [155(a)] the language of s 32(2)(c)(iii) may not be easy to read or understand. However, whether certain work has been performed by a person (second AR) who provides services for a contractor (the principal AR) in the course of a business carried on by the contractor is a question of fact to be determined on the evidence before the Tribunal. It is not a matter for a general statement unsupported by reference to any evidence or authority. I reject the submission.
Secondly, in respect of [155(b)], the Chief Commissioner's allegation of unlawfulness is based on an unsupported reference to Part 7.6 of the Corporations Act. Part 7.6 comprises 12 divisions of the Corporations Act containing over 100 sections from 910A to 926B. No specific section or sub-section has been referred to. There is no dispute that the overall onus lies on Novus to prove its case on the balance of probabilities, that overall onus does not lie on the Chief Commissioner. However, that does not mean that the Tribunal should accept unsupported wide-ranging submissions from the Chief Commissioner, especially where the Tribunal's express directions were that submissions should be supported. I reject the submission.
Thirdly, in respect of [155(c)], the Chief Commissioner makes a wide-ranging submission that "the evidence" does not establish certain contractual relationships in contrast to Novus which alleges that there is "copious evidence" of relevant relationships. This matter requires consideration of the evidence before the Tribunal in relation to each AR.
Fourthly, in respect of [155(d)], the Chief Commissioner's submission is that there is no relevant evidence that any second AR supplies services to a principal AR in relation to the performance of work by the principal AR for Novus, and, without relying on any authority, seeks to characterise any such working relationship between two ARs as an assignment of work.
Novus submitted at [173]: … in Zuccala Homes v Commissioner of State Revenue (Victoria) (1994) 94 ATC 2084, it was noted at [15]: The second ground of contention was that the services provided by the stump hole digger were provided [not] for the Debelecks but for Zuccala. There is my view no necessary disjunction. In truth the contractor employed by the Debeleks does the work for the benefit of a number of people: not necessarily in order, they would be for himself so he could get paid, for the Debeleks so that they would be moved to pay him, and for Zuccala Homes, and others down the chain, so that the house might have a decent chance of [staying aloft and they might have a decent chance of] getting other jobs ...
I observe that the Chief Commissioner said at [34]: In Bridges Financial Services, Justice Gzell also quoted approvingly from the decision of the Victorian Administrative Appeals Tribunal in Re D & D Tolhurst Pty Ltd and Cmr of State Revenue (Vic) 1997 ATC 2179 ("D & D Tolhurst"). D & D Tolhurst was a case involving a stockbroker and licensed dealer who engaged investment advisors who wrote business in the name of the stockbroker who retained 60% of the brokerage fees earned by the advisors. The Tribunal (constituted by Mr Nettle) concluded that the advisors supplied Tolhurst with services under a contract. He said (quoted approvingly by Gzell J in Bridges Financial Services): "There can be no doubt that there was an agreement or arrangement or understanding between Tolhurst and each of the advisors that the advisors would render services to the clients as the agent of Tolhurst, at the client's request. In my view it follows, as a matter of plain language, that the advisors supplied services to Tolhurst by servicing the needs of the clients. By doing so they supplied services to Tolhurst for the purpose of its business, notwithstanding that they also at the same time supplied services to the clients." (emphasis added).
The Chief Commissioner also said at [79]: The comments of Mr Nettle in D & D Tolhurst in relation to the investment advisors in that case are apposite to the present: "By doing so they supplied services to Tolhurst for the purpose of its business, notwithstanding that they also at the same time supplied services to the clients."
Using the reasoning in Zuccala Homes and the Chief Commissioner's own references to authority in Bridges Financial Services and D & D Tolhurst I am satisfied that, subject to the evidence before the Tribunal in each case, there appears no logical reason why an AR (the working AR) in the course of carrying out work for the benefit of a Novus client was also not supplying services to Novus and another AR (the contractor) who had originally been engaged to carry out the work and who had requested the working AR to perform the work so as to assist the contractor. Subject to that qualification, I reject the Chief Commissioner's general submission.
I address below the issue of whether there is relevant evidence before the Tribunal in respect of appropriate ARs.
At [155(e)] the Chief Commissioner merely asserts a truism. On several occasions in RS when the Chief Commissioner expressly considered the relationship between a principal AR and a second AR he referred to a "fee splitting arrangement" and in footnotes rejected the arrangement stating "Not exempt. Fee splitting arrangements are not considered as qualifying for this contractor exemption."
Novus' submissions in respect of several of the ARs is that a principal AR engaged one or more second ARs to provide services to the principal AR on the basis that the fees paid by Novus to the principal AR in respect of services provided by the second AR would be split between the two ARs.
The Chief Commissioner submitted that where this arrangement was in evidence, it had been rejected at Clause 30 of the Objection Determination which includes: …. we consider that arrangements between the ARs where they may engage each other but have a fee splitting arrangement and accordingly each AR is paid by Novus do not qualify for the section 32(2)(c) exemption. In such situations it is not accepted that the ARs are employed by, or provide services for, the principal AR in the course of a business carried on by the principal AR. The ARs are each authorised by Novus and perform services for Novus in the course of carrying on their own businesses.
It may well be that the Chief Commissioner does not consider that fee splitting arrangements qualify for the two-person exemption. However, he has provided no reasoning to support his position and I am aware of no valid reason why ARs should not share rewards in such manner as they see fit. I reject the submission.
In respect of [155(f)], the Chief Commissioner effectively rejects Novus' submission that services may be consideration for other services without referring to the authority, if any, on which he relies. I agree with Novus' submission that there is no legislative support for this aspect of the Chief Commissioner's submission and I am aware of no case-law authority.
The Chief Commissioner also submits, that in respect of certain ARs "reciprocity is not sufficient to meet the exemption requirements". The Chief Commissioner has provided no legislative basis or authority for this submission, nor am I aware of any such basis or authority. I reject the submissions at [155(f)].

[27]

Gable, Michael

There is no dispute that during 2013, the only year for which the Chief Commissioner assessed Novus to payroll tax in respect of payments to Mr Gable, Mr Gable was a Novus AR for share trading services. Novus submits that in respect of 2013, the two-person exemption applies.
Novus submissions at [152] to [155] are to the effect that Mr Gable, who both advised clients and traded: 1. was provided research services, and, at footnote 360, "there are invoices in evidence pertaining to these services during the 2014 financial year that support Mr Gable's evidence that he had received these research services also in previous financial years: see Exhibit A3, V3, 734 ff". 2. he received services from ECPs to effect trades; and 3. he "expended monies independently to build and conduct his own business".
The Chief Commissioner's submissions in response at [271] to [281] included: 1. work contracts and invoices relied on by Novus are all dated after 1 July 2013 and relate to 2014. 2. execution services provided by the ECSS providers listed did so under a contract between those providers and Novus directly and not with Mr Gable. 3. Mr Gable had engaged a firm to provide business, tax and accounting advice as well as client referrals during 2013 and a variety of firms provided media marketing, website development and research services during 2013. The provision of tax, accounting and business advisory services, whilst undoubtedly useful and necessary to Mr Gable in running his own business, were not work services which Mr Gable was required to perform under his contract with Novus. Consequently, these service providers to Mr Gable do not enliven the two-person exception for Novus.
My comments and findings in respect of the above submissions and the evidence referred to are: 1. it is not disputed that Mr Gable was an AR of Novus. I have found above that the AR agreement between Mr Gable and Novus is a relevant contract for the purpose of Division 7. 2. my consideration of the invoices at Exhibit A3 page 734 ff shows that it provides for events after 30 June 2013. None are relevant to the year in dispute.. 3. I have previously found that the supply of services to ARs from ECPs, pursuant to agreements between those entities and Novus, does not, constitute the provision to any relevant AR of services for the purpose of the two-person exemption. 4. I observe that in addition to submissions from Novus, Mr Gable deposed at [7(f)] that he conducted separate business ventures required for his general business development and growth, unrelated and independent to his authorisation Novus. I have found above that evidence of general business development matters which do not deal with the specific issues in s 32(2)(c)(iii) are not relevant for the purposes of that provision.
An evidence schedule at pages 747 to 749 of Exhibit A3 states that services, which may have been relevant were provided to Mr Gable by equities analysts and a researcher. However, the first such service commenced 29 July 2013, after the 2013 year ended. No such services are relevant to the year in dispute.
The Chief Commissioner acknowledged that Mr Gable gave oral evidence that his spouse, Mrs Gable, provided administrative support for his business, and, relying on Bridges Financial Services at [235], submitted that such support, in the order of one hour per week (T/S 303.08-303.16) was de minimis and did not qualify for the two-person exemption. Novus did not dispute this submission in ASR.
Having regard to the above circumstances, evidence and submissions, I find that Novus has not satisfied its onus in respect of payments by Novus to Mr Gable for 2013.

[32]

Services from Mr Streeter to Mr Gerrish

Novus submitted at [133] and [134] that Mr Streeter provided services to Mr Gerrish. Novus relied on the transcript at TS358:11 ff. The transcript at TS358:28 refers to a letter from Mr Gerrish to the OSR dated 5 May 2014. At page 299 of Exhibit A3 is a reference to Mr Streeter. The letter relevantly states: I established relationships with Steve Streeter … I have no written agreement with Steve Streeter however we operated closely together for a number of years, and payments were made between us both …
The Chief Commissioner submitted at [249] the arrangement with Mr Streeter was a fee-splitting one whereby Mr Gerrish would bill Mr Streeter for executing trades that Mr Streeter was not authorised to execute himself. I have found above that if relevant services were provided to a principal AR by a second AR, then the use of a fee splitting arrangement does not detract from the activation of the two-person exemption.
The Chief Commissioner also submitted that as both Mr Streeter and Mr Walsh were ARs of Novus, any work performed by either of them for Mr Gerrish did not qualify for the two-person exemption. I rejected this submission above and there is no need to repeat my reasons.
However, I observe that Mr Gerrish's oral evidence was that his arrangement with Mr Streeter, which he conceded was not evidenced in writing, related to Mr Gerrish carrying out execution services for "Ausbil" which was described as a client of Mr Streeter. The arrangement between Mr Gerrish and Mr Streeter was that the transaction was carried out in Mr Gerrish's name, he would invoice Novus "for the full sum", and then pass 80% of the payment received from Novus to Mr Streeter and retain 20% for his execution services. At TS354, Mr Gerrish conceded that Mr Streeter was not providing services to clients for him, rather that Mr Streeter referred clients to him.
I am not satisfied that the referral of potential clients to an AR (the contractor) evidences the provision of services to those clients pursuant to an agreement between the contractor and Novus and an agreement between the client and Novus. It may well form part of the development of the contractor's business and a preliminary step in creating a relevant agreement. However, I am not satisfied that it is the provision of a relevant service to the client. Novus has provided no authority to me to dissuade me from that view.
In the circumstances I find that Mr Streeter was not employed by Mr Gerrish nor did he provide relevant services to Mr Gerrish.

[34]

Services from Mr Coates to Mr Gerrish

Novus relied for its submission that Mr Coates provided services to Mr Gerrish on Exhibit R1 at page 1940 [8] and the transcript at T358.11 ff. Novus also submitted at [138] "Mr Coates provided services that Mr Gerrish described as "execution assistance" in September 2013". Novus relied, in making the second submission, on page 303 in Exhibit A3.
The Chief Commissioner made no reference to Mr Coates in his submissions.
At page 1942 of Exhibit R1, at [8] in a statement apparently made for the purpose of the payroll tax audit, Mr Gerrish said he had delegated or engaged the services of fellow Novus ARs, namely Messrs Streeter, Walsh and Coates, "from time to time for the provision of services to [his] clients". I have already found that there was no relevant engagement of the services of either Mr Streeter or Mr Walsh. The statement continues by referring to attached samples of invoices received by Mr Gerrish for delegating or sub-contracting services. My consideration of the contents of pages from 1942 discloses, commencing at page 1956, a statutory declaration by Mr Gerrish. That statutory declaration includes answers to questions concerning Mr Streeter, Mr Walsh and Mr Coates and relates to services to Mr Gerrish and his company. Questions to and answers by Mr Gerrish, in respect of Mr Coates at pages 1960 and 1961 include: Question 35 - When do you use his services - for example when you're on leave? Answer - I don't. Question 36 - please list exactly what type of services/duties/tasks he performs. Answer - He has referred some clients to me. Question 38 - As well as the services in question 7, what extra services would Tom Coates provide to you? Answer - None. [Question 7 related to the performance of services by Mr Streeter] Question 39 - How many days within each financial year (2010-2013) did you use his services? Answer - 2010 - 2012 none. 2013 - 1 day. Question 40 - How long is spent on performing the services? Answer - Half a day
The only tax invoice I located from Mr Coates is on page 1979. It is dated 10 September 2013, addressed to City Securities Pty Ltd and is for the sum, including GST, of $154.73. The description of the relevant work is "services in relation to one off sales".
I find that other than in 2014 no relevant services were provided by Mr Coates to Mr Gerrish (rather than to City Securities Pty Ltd). To the extent any relevant services were provided to Mr Gerrish or his company in any year, I find that the de minimis principle applies.

[35]

Services from Mrs Gerrish to Mr Gerrish

Novus submitted at [135]: Mr Gerrish … received services from his wife, Alice Gerrish.298 These were described as "administrative support"299 and acted as Mr Gerrish's office manager.300 Her responsibilities, which remained the same over the Relevant Years,301 included "typing and issuing of correspondence, arranging files, files keeping and record keeping", setting up new accounts, liaising with web developers, writing of content, invoicing and general marketing.302 All of this work is clearly related to the services that Mr Gerrish was providing under his AR Agreement; this conclusion accords with the findings in Bridges about the relevance of administrative support (and the findings by the appeal panel in B&L Linings). Mrs Gerrish provided these services regularly for around 6 hours to a day per week.303 She was paid monies by way of distributions from a family trust for her services.304
For convenience I have retained the references in the above extract and reproduced them below: 298 Exhibit R1, V5, 1944, [13]. 299 Exhibit R1, V5, 1944, [13]. 300 T341:1; T342:28. 301 T341:13. 302 Exhibit R1, V5, 1944, [13]; see also T343:6. 303 T341:19 304 T342:39.
My consideration of the sources of the references indicates the following: 1. references 298 and 299 - Mr Gerrish referred in a statement to what he called administrative support services from his wife and stated "The services are provided gratuitously on a regular basis and relate typing and issuing of correspondence, arranging files, files keeping and record-keeping." 2. reference 300 - Mr Gerrish is taken to a document in which he referred to professional services he received. He stated that his wife worked as office manager in 2012, 2013 and 2014. He did not refer to any professional services in 2011. The transcript at TS342.28 shows that Mr Gerrish said his wife carried out "a lot of the admin in our - my office at home" 3. reference 301 - At this reference Mr Gerrish said that his wife "was doing the same thing now". This does not explain the lack of evidence as to any services provided in 2011. 4. reference 302 - the referral to Exhibit R1 page 1944 [13] was dealt with in relation to references 298 and 299 immediately above. The transcript at TS343.6 supports the submission generally. However, it does not support any submission that Mrs Gerrish's work materially related to the relevant contract nor is there any evidence as to the proportion of Mrs Gerrish's work which related to that contract. 5. Novus provides no support for its submission in [135] that all of the work carried out by Mrs Gerrish was "clearly related to the services that Mr Gerrish was providing under his AR Agreement." Mr Gerrish's evidence is that his wife's "office manager" role was for City Securities Pty Ltd. His evidence is also that that company is a trading company, it receives any revenue he earned from clients, all of his share trading and "some of [his] external investments, et cetera, were in that company as well as payments from Novus". Mr Gerrish said that his sources of income included share trading in his own name as well as in his company's name. He then changed his evidence to say that share trading was done within the company. 6. I am satisfied that some of the work carried out by Mrs Gerrish in 2012 2013 and 2014 may well have been in support of the work Mr Gerrish carried out pursuant to the relevant contract. However, I am not satisfied that there is evidence that Mrs Gerrish's contribution went beyond the de minimis level. 7. reference 303 - There is no dispute that Mrs Gerrish may have worked for Mr Gerrish's company for some six hours each week. This does not change my findings in the immediately preceding paragraph as to the lack of evidence as to the extent of her relevant work having regard to Novus' evidentiary onus. 8. reference 304 - This submission is supported on the evidence. However, it is not evidence of the provision of any relevant services either at all or in any particular year.
Having regard to my above analysis I am not satisfied on the material before me that Mrs Gerrish provided relevant services in relation to s 32(2)(c)(iii) beyond the de minimis level in any relevant year.

[36]

He used research he purchased to service his own clients. Novus submitted at [138] that Mr Gerrish was provided research services by third parties

In respect of the first reference Mr Gerrish said TS344:1: I do research to service my clients and Andrew needed a hand with what he was doing so I offered what I was doing to him. Q. You don't sell your research more generally A. No. Q. It is something you do for your own clients? A. Something I do for my own clients, I sat next to Andrew Walsh who needed assistance in dealing with his own clients from a research side, so I provided those that to him for a fee.
This evidences that Mr Gerrish was providing services, not that he received services. I reject the submission.
In respect of the provision of research services by third parties, for which Novus relied on Exhibit A3 at pages 309 ff I observe that: 1. page 309 is a credit memo dated 22 August 2013 from Sleek InfoSolutions Pvt. Ltd of West Bengal, India to Global Income Strategies for miscellaneous extra work in relation to 'New Website'. 2. pages 310 and 311 are invoices dated 26 April 2013 and 15 March 2013 from Sleek InfoSolutions Pvt. Ltd to Global Income Strategies in respect of payments for 'New Website'. 3. pages 312 and 311 are emails respectively dated 19 August 2013 and 19 November 2013 being tax invoices on behalf of Eureka Report Pty Ltd in respect of 'Eureka Report Monthly - Lotus Notes Subscriber subscription' for periods from 19 February 2013 to 19 February 2014. No details are provided as to the content of the subscription.
There is no evidence that the transactions involving Sleek InfoSolutions Pvt. Ltd concern research for the provision of services to Novus or Novus' clients. The Eureka monthly report may involve relevant research. However, there is no evidence as to the contents of the report nor as to whether, if the contents did relate to research involving possible share investment or financial advice, that investment or advice was for the purpose of Novus' clients or for Mr Gerrish's private trading through his company or if for both purposes, the proportionate use of the research.
In cross-examination at TS358-359 Mr Gerrish referred to the Eureka Report. He said his company pays Eureka to help with "general market knowledge and ideas" and when asked whether it was principally directed at informing him so that he could perform well on TV he said "yeah, it is one of the reasons, I guess, the TV. But the end goal is to make the decisions, I guess".
I am not satisfied that the extent to which the Eureka Report involves the provision of a service to Mr Gerrish goes beyond the de minimis level in respect of work under Mr Gerrish's contract with Novus.

[41]

Services from Mr Hogan to Mr Glover

Novus submitted at [146], [147] and [150] that from 2009 Mr Hogan provided research capabilities to Mr Glover and assisted him generally with his business: 147. … in return for which Mr Glover provided him services by way of assistance with sales together with administration services, organising client meetings, collating research, marketing and business development. At the time he began providing services to Mr Glover, Mr Hogan was not an AR. Mr Glover said his arrangements with Mr Hogan … involved him conducting the core authorised representative work and Mr Hogan conducting work related to (or associated with) Mr Glover's work. They split the receipts from the clients 50-50. This arrangement was altered in … 2012 … and Messrs Hogan and Glover operated a loose partnership to help each other on a reciprocal services and gratuitous basis. However, the payment arrangements between them did not cease on 30 June 2011; it continued well into the 2012 financial year. Even after the arrangement changed, Mr Hogan continued to provide services in the manner which he had provided them prior to 2012, which services included managing and placing trades for clients. These services were provided regularly and consistently. … 150. … Mr Hogan continued to provide, for a split of fees, services to Mr Glover during the 2012 financial year. … the respondent does not dispute that services were provided … At all times, the services were provided for Mr Glover, who paid Mr Hogan out of the commissions he was receiving from Novus. …
The OSR requested that Mr Glover provide all invoices from Mr Hogan for the 2010-2013 years. Mr Glover's response, at page 2164 of the s 58 documents is "all invoices from Stephen Hogan attached". Monthly invoices from December 2009 to June 2011 appear from page 2176. At page 2195 is an invoice dated 10 November 2011. No other invoices from Mr Hogan to Mr Glover were brought to the Tribunal's notice. The November 2011 invoice bears a direction that it be paid to an account in the name of "Hogan Lampert Broking". All other invoices are marked payable to an account in the name of "Stephen Hogan".
Mr Glover said at page 2167 that he did not use Mr Hogan's services every day. Mr Glover's evidence was that Mr Hogan was available every day in case of need, trading ideas were discussed almost every day, Mr Hogan answered Mr Glover's phone every second day, took an order at least weekly and assisted "totally when I am out of office. 50% of the financial year would be a fair assessment since commencement" Mr Hogan would spend a couple of hours each day performing the services requested by Mr Glover "discussing ideas and strategies, talking to my clients and assisting with other administrative functions."
Mr Glover's evidence (at page 2167) is: 11. When we started in 2009 we had an agreement which was a completely shared calculation, 50% each. I [invoiced] Novus and Stephen invoiced me. Later in 2012 we lodged separate invoices, deciding not to split the revenue and just provide each other reciprocal intuitiveness services. We help each other and trust each other in a business capacity to look after when we are away of to [sic] busy to take calls.
The Chief Commissioner refers to Mr Hogan at [263] [266(a)] and [269]. His submissions include: 1. Mr Glover and Mr Hogan invoiced Novus directly during 2012 and 2014 at which stage Mr Hogan was an AR of Novus. In the Objection Determination the Chief Commissioner said "Fee splitting arrangements are not considered as qualifying for this contractor exemption." 2. Novus claims that Mr Hogan provided services variously as a "dealer's assistant, research assistant or administrative assistant in 2012 and 2014"; and 3. the arrangement between Mr Glover and Mr Hogan from 2012 does not attract the exception because it was voluntary and gratuitous. Mr Hogan was an AR of Novus, accordingly any work performed alongside Mr Glover does not qualify for the Two-Person Exemption.
I have previously rejected the Chief Commissioner's submissions in the nature of (1) and (3) above. I reject these specific submissions for the reasons previously given.
Mr Hogan gave oral evidence to the Tribunal. To a large extent, Mr Hogan's evidence corroborated Mr Glover's evidence in respect of both the working relationship between them during the Relevant Period, the initial payment arrangement and the change to the payment arrangement whereby they each provided services to the other on a reciprocal basis without any payment.
During Mr Glover's cross-examination I found that several of his answers were unreliable. These answers included his evidence: 1. that he drafted the whole of the content of his affidavit "by himself" when much of the wording of Mr Glover's affidavit was common to that of affidavits by several other ARs tendered in these proceedings; 2. that he did not have a company or an associated entity, then he did have a company which he said was inactive, then he had probably not used that company for the last six or seven years, then some of his trading may have gone through the company "which is really part of who I am", then the company had not traded for 8 to 10 years, then it could have been 12 years since it traded, then "I haven't really used that company" it is sitting dormant and has been dormant for 10 years, which contrasts with his affidavit in which he deposed that "all intellectual property, belong to myself and/or my associated company"; 3. concerning the letters "CA" in the following excerpt from the transcript of his cross-examination: Q. I notice in paragraph 16 of this affidavit there is reference to section 200 and 912B of the CA, what is the CA? A. The client agreement I imagine. Q. Section 912B of the client agreement, what is the client agreement, if that be so? A. Yeah, so depending on each client whoever they want to use, so like I use quite a few different third party providers, so they would have a client agreement with Pershing, they might have a client agreement with eTrade, they might have a client agreement potentially with IG historically, they might have a client agreement with whichever clearer they want to use. … Q. I am asked you what in your affidavit what CA is and you had a crack at it and you said a client agreement and you referred to a client agreement in a completely different context, namely, an ECSS agreement? A. It's two letters. Q. If I suggested to you it means the Corporations Act does that provide you with any assistance at all? A. Not that much, no, probably not. No. Q. But this is your affidavit that you drafted only a few months ago on your sworn testimony and yet you don't even know what CA means? A. Yes, I think was drawn actually a lot longer than that actually so, yeah. I can't remember what I, you know. 1. concerning "ownership" of his clients in contrast with the clear terms of his AR Agreement, of which he said he was aware.
In the course of Mr Glover's oral evidence I formed the preliminary opinion that he was an unreliable witness and made a written note to that effect. My consideration of the transcript for the purpose of writing these reasons has confirmed that opinion. Accordingly, I am not prepared to accept Mr Glover's uncorroborated evidence.
However, to the extent that Mr Glover's affidavit or oral evidence is corroborated, I accept his evidence. In particular I am satisfied that Mr Hogan's oral evidence in cross-examination materially corroborated Mr Glover's evidence in respect of the provision of services by Mr Hogan to Mr Glover.
I find that Mr Hogan provided relevant services to Mr Glover during 2012 and 2014 so as to activate the s 32(2)(c)(iii) two-person exemption in respect of payments by Novus to Mr Glover during those years.

[42]

Services by Mr Wilson to Mr Glover

In a letter to the OSR dated 4 June 2014 (at page 2163 in the s 58 documents) Mr Glover stated he engaged an adviser Tim Wilson who was involved in assisting him in all aspects of his business on a one day per week basis and was a shared expense with Mr Hogan.
Pages 612 to 622 in Exhibit A3 comprise tax invoices from Mr Wilson to Mr Glover for work carried out during 2013 and 2014. The invoices do not indicate the nature of Mr Wilson's work.
Mr Hogan informed the Tribunal that he sat next to Mr Glover at the Novus office for at least the 2012 to 2014 period. His evidence is that he and Mr Glover both engaged Mr Wilson to assist in their respective business activities. Mr Hogan described Mr Wilson as a "dealer's assistant" and said that the work Mr Wilson did for him included business development and sales, email marketing, engaging third party financial accommodators, drafting newsletters, carrying out research as to how Australian and overseas markets were performing and contacting potential clients to arrange the opening of accounts.
At [18(b)] the Chief Commissioner accepted that the s 32(2)(c)(iii) exception was "engaged for the 2013 year for Mr Hogan (AR15) only, given the invoices from Mr Wilson for 2013 and the evidence from Mr Hogan that during the 2013 income year that he engaged the services of Mr Wilson as a full time "dealer's assistant …"
Mr Glover's written evidence was that he engaged an adviser Tim Wilson who assisted him in "all aspects" of his business on a one day per week basis. Mr Hogan confirmed Mr Wilson's engagement by Mr Glover and that they shared his services. "All aspects" of Mr Glover's business includes Mr Glover's work for Novus's clients.
Mr Glover was not asked any questions in cross-examination concerning the nature of the work Mr Wilson carried out for him, accordingly his evidence is unchallenged in that respect. Having regard to the nature of the work Mr Hogan and Mr Glover were performing for Novus I am of the view that it is reasonable to assume that the work carried out by Mr Wilson for Mr Hogan, which was accepted by the Chief Commissioner for the two-person exemption, was materially similar to the work Mr Wilson carried out for Mr Glover.
Mr Glover did not state when Mr Wilson commenced working for him. I deduce from the invoice numbering and the dates which appear on some invoices, that invoice 001 related to work during March-April 2013 and that this was the first work carried out by Mr Wilson for Mr Glover. Accordingly, I am not satisfied that Mr Wilson provided any services to Mr Glover during the 2012 year.
Having regard to the invoices from Mr Wilson to Mr Glover, Mr Hogan's evidence and the Chief Commissioner's concession in [18(b)] I am satisfied that Mr Wilson provided services for Mr Glover in 2013 and 2014 which satisfied the requirements of s 32(2)(c)(iii).

[47]

Services from Mr Glover to Mr Hogan

Both Mr Glover and Mr Hogan gave evidence that they entered into a document named "Joint Venture Agreement" (the Glover Hogan Agreement) dated 2 November 2009, which is in evidence, pursuant to which each provided various services to the other including services listed in their agreement.
The Glover Hogan Agreement states that the services to be provided by Mr Glover to Mr Hogan included research, a weekly report for clients, trade execution for clients, trading strategies and undertaking client meetings.
The evidence of both Mr Glover and Mr Hogan is that the arrangement constituted by the Glover Hogan Agreement which included a 50:50 fee splitting arrangement continued after Mr Hogan became an AR. At some date in calendar 2012 the arrangement changed. There is no dispute that the evidence of both Mr Glover and Mr Hogan is that from the time of the change, and until Mr Hogan ceased being a Novus AR, Mr Glover and Mr Hogan operated what they described as a loose partnership to provide a range of services to help each other's business on a reciprocal and gratuitous basis.
In cross-examination Mr Hogan said at some time, possibly in 2013, the amount of work he and Mr Glover were doing together reduced and services from Mr Wilson to Mr Hogan increased, then in 2014 he and Mr Glover recommenced working together. They provided each other with research and would assist looking after each other's clients when the other was on holidays and would be available to assist the other's clients and their business. They sat next to each other in the Novus offices for the three years from 2012 to 2014. From some time in 2012 neither Mr Glover nor Mr Hogan billed each other for the work they carried out.
As I understand the Chief Commissioner's argument, he does not dispute that Mr Glover provided relevant services for Mr Hogan's business activities with Novus during 2012 and 2014.
In 2014 Mr Glover and Mr Hogan each supplied services to the other to assist their respective business activities as Novus ARs. In that year Mr Glover and Mr Hogan did not render bills to each other, they carried out work for each other's business on a reciprocal and gratuitous basis.
I am satisfied that Mr Glover carried out relevant work for Mr Hogan in the course of Mr Hogan's agreement with Novus and in the course of Mr Hogan's business.
The Chief Commissioner referred to the agreement between Mr Glover and Mr Hogan at [295] and submitted "such voluntary arrangements do not attract the exception. In any event, because Mr Glover was also an AR of Novus, any work performed alongside Mr Hogan did not qualify for the" two-person exemption.
For the reasons set out above I have, in the context of the two-person exemption rejected the Chief Commissioner's "voluntary work" submission, his "no assistance from another AR" submission, and his "no split-fees" submission,

[50]

Kapes, Nicholas

Novus claims the two-person exemption applies to Mr Kapes for each of the 2011 to 2014 years.
Evidence relied on by Novus includes an affidavit made by Mr Kapes on 25 July 2016 (at page 124 of Exhibit A3), a statement he made on 31 December 2013 (at page 1614 of Exhibit R1) and his oral evidence.
The parties agreed that Mr Kapes was an individual interstate AR of Novus and agreed at AAF [13]: The Agreement headed "Corporate Advisory Services Authorised Representative Agreement" at Tab 10 of Exhibit R2 "Key Documents" [Agreed CRA] is to be a representative document between the applicant and … … (ii) … Nicholas Kapes
A copy of a Corporate Representative Agreement signed by Mr Kapes is at page 178 of Exhibit A1 (2013 CRA). It is dated and stated to commence on 18 August 2013. There are no earlier versions of the agreement in evidence.
The Agreed CRA appears to be a template while the 2013 CRA has been completed in relation to Mr Kapes. Schedule 1 in the 2013 CRA contains provisions in relation to Mr Kapes being at liberty to retain persons' services to provide "administration, marketing, advisory and general support services" to him and states that he has nominated Mr Yeo "as a corporate advisor and to contribute to this corporate advisor the payment of a monthly fee of $3000 + GST or such other amount as agreed between" Novus and Mr Kapes.
There is no dispute that Mr Kapes was a Novus AR during at least the disputed years. I am satisfied that there is a relevant contract between Novus as "designated person" and Mr Kapes as "contractor" for the purpose of s 32 during those years.
Novus submitted: 114. …. During each of the Relevant Years, Mr Kapes was provided services by Mr Yeo. … There is evidence that Mr Xu provided services to Mr Kapes from 2010 to 2013. There is evidence that Mrs Kapes provided administration services to Mr Kapes during all of the Relevant Years …. [and] several other third parties provided services to Mr Kapes during all of the Relevant Years. ….

[51]

Mr Kapes' evidence generally

In cross-examination Mr Kimber challenged the accuracy of parts of Mr Kapes' affidavit, the accuracy of some of his oral evidence, and his credit as a witness.
Mr Kapes' repeatedly said he drafted his affidavit himself after having "trawled the internet" with Mr Yeo and he dictated the words of the affidavit to Mr Yeo to type. Mr Kapes agreed that no one suggested wording to him and no one made any suggestions about the contents of the affidavit.
I make the following observations in respect of specific paragraphs of Mr Kapes' affidavit which I have compared with affidavits made by Mr Walsh, Mr Glover and Ms Lu which are in evidence. On the face of the affidavits they were all made before Mr Gooley. Mr Glover's affidavit is dated 26 July 2016 and the other three affidavits are each dated 25 July 2016.
Paragraph 2 of Mr Kapes' affidavit is identical to paragraph 2 of Mr Walsh's affidavit and substantially similar to paragraph 2 of Mr Glover and Ms Lu's affidavits. All four affidavits contain the same typographical error in the second last line of paragraph 2.
Paragraph 3 of Mr Kapes' affidavit is substantially similar to paragraph 3 of the other three affidavits and the second sentence of Mr Kapes affidavit contains the same typographical error as appears in the second sentence of Ms Lu's paragraph 3.
Paragraph 6 of Mr Kapes affidavit is substantially similar to paragraphs 5 and 6 of Mr Walsh's affidavit.
Paragraph 15 of Mr Kapes' affidavit is substantially similar to paragraph 16 of Mr Glover's affidavit and paragraph 15 of Ms Lu's affidavit.
Mr Walsh's oral evidence was to the effect that the Novus legal and compliance team substantially drafted his affidavit. Mr Glover's oral evidence was that he drafted his affidavit himself. Ms Lu's oral evidence was that Novus prepared her affidavit.
Having regard to my above observations I find it implausible that Mr Kapes gave accurate evidence when he repeatedly said he drafted his affidavit himself and dictated it to Mr Yeo for typing. Accordingly, to the extent that it is not corroborated, I am not prepared to accept Mr Kapes evidence at face value.

[52]

Services from Mr Yeo to Mr Kapes

In his affidavit Mr Kapes said: 11. To assist in the providing Corporate Advisory Services, since 2 November 2009, I have engaged the services of Mr Benjamin Yeo, a Senior Corporate Advisor. 12. Due to the provisions and operations of the CA, while Mr Yeo is authorised under the Novus AFS License, Mr Yeo provides the services to my entity and is remunerated for his services by my business.
In his statement, Mr Kapes said: 7. … I have the flexibility on how I conduct my business operations …. I am free to delegate tasks so that I may provide the services to my clients…. 8. During the period [there is a prior reference to the review period being undertaken by the payroll tax audit] I had delegated or engaged the services of fellow Novus Authorised Representatives from time to time for the provision of services to my clients. The Authorised Representative referred to is as follows: Mr Benjamin Yeo; and Mr JingShen (Jack) Xu.
There are three letter agreements signed by each of Mr Kapes and Mr Yeo in material before the Tribunal. The agreements are virtually identical other than for changes of address by Mr Yeo (who is described as "Bay" in the agreements and whose personal ABN is provided), the dates of the agreements and the payment schedules.
The agreements, dated 3 November 2009, 1 July 2011 and 1 February 2014 respectively provide for no payment of Mr Yeo by Mr Kapes, monthly payments of $1875 (plus GST) and $4000 (plus GST). As noted above, the 2013 CRA provides for monthly payments of $3000 (plus GST).
The details of the services to be provided by Mr Yeo to Mr Kapes under the letter agreements are set out in item 1 of schedule 1 to each agreement. They are described as "Corporate Advisory Services" and are identical to the wording of the services to be provided by Mr Kapes to Novus at Item 4 in Schedule 1 of the 2013 CRA.
Mr Kapes agreed in cross-examination that he engaged Mr Yeo to promote his business, assist in developing business operations including corporate service activities and a general undertaking of the services referred to in schedule 1 of their agreement. He also agreed that these were matters that he thought were helpful to maximise the value of his business.
Mr Kapes said he paid Mr Yeo based on invoices from Mr Yeo. Mr Kapes acknowledged that for several months after he first engaged Mr Yeo as an "intern" he did not pay him for his services. Mr Yeo subsequently became a Novus AR.
A questionnaire Mr Kapes had completed, which was in evidence, referred to invoices which Mr Kapes understood were directed by Mr Yeo to Novus. He said he did not have details of invoices from Mr Yeo to Novus or payments by Novus to Mr Yeo.
The material before the Tribunal included tax invoices from "BAY" (using Mr Yeo's ABN) to Mr Kapes. Invoices were dated: 1. 1 July 2010 in respect of "management services"; 2. January 2012 in respect of "2011 bonus" 3. 23 December 2013 in respect of a bonus; and 4. each month from December 2013 to July 2014 in respect of "consulting fees".
I accept that these invoices are claims for payment. I do not accept Novus' submission at [110] that they evidenced payments.
Mr Kapes said his engagement of Mr Yeo's services ceased about three weeks before he gave evidence (on 7 December 2016).

[57]

Lu, Robert and Yvonne / Chatswood Wealth Management

Rather than dealing with an individual AR of Novus, in this instance the Chief Commissioner combined Robert Lu, Yvonne Lu and Chatswood Wealth Management Family Trust (Chatswood Wealth) at item 27 of Annexure "A" of his Objection Determination Contractor Analysis, page 825 of Exhibit R1. Category 1 of Annexure "A" deals with interstate entities, Category 2 deals with third-party - related payments, Category 3 deals with "less than 90 days - greater than $40,000". Robert and Yvonne Lu and Chatswood Wealth are in Category 4 which is described as dealing with "Other Persons - s 32(2)(c)".
The Chief Commissioner allowed Novus' objection in respect of 2010 and disallowed its objection in respect of 2011 to 2014 on the basis, at page 825 in Exhibit R1, that: The evidence schedule [relied on by Novus] doesn't claim or provide evidence of the above persons were employed for those years. On the contrary, the evidence schedule states there were no research or dealers' assistants in these years.
Novus submits at [125] to [131] that the assessments for each of the 2011 to 2014 years are in dispute and the two-person exemption applies.
Page 832 of Exhibit R1, which is part of Annexure "B" to the Objection Determination Contractor Analysis, sets out payments by Novus to various entities pursuant to which the Assessments were calculated. The entities include Ms Lu, Mr Robert Lu and Chatswood Wealth.
No payments by Novus in respect of Mr Robert Lu were included by the Chief Commissioner in Annexure "B". However, payments are listed in respect of Ms Lu and Chatswood Wealth.
Ms Lu has been an AR of Novus from August 2009 until the date of the hearing and in her affidavit made 25 July 2016, which is in evidence, Ms Lu stated: 1. … [she is] the Director of Chatswood Wealth Management Family Trust (ABN …) (Chatswood Wealth) a private financial services firm that provides financial and share trading advisory services to Novus Capital Limited (Novus). …. 3. …. payments …. were made by Novus to me and/or my Service Company, Chatswood Wealth …. these payments we [sic] made under the provisions of an Authorised Representative Agreement (The Agreement) …. …. Appointment as an Authorised Representative of Novus 4. On 28 August 2009, Chatswood Wealth's officers and staff (Chatswood Office) became Authorised Representatives (AR) of Novus and …. the Chatswood Office continues to be an AR of Novus (Authorisation Period)
Ms Lu's affidavit also included: 6. The contractual arrangements between Novus and the Chatswood Office are set out in an Authorised Representative Agreements and I am advised that a copy of these Agreements have been previously provided to the OSR and the Tribunal. 7. Pursuant to the Agreement, the Chatswood Office's officers and staff are authorised to deal, arrange to deal and provided financial product advice to its clients and these are the financial services (the Services) referred to in the Agreement.
There is no dispute as to the facts asserted at [6] and [7] above in respect of the existence or the contents of the AR Agreements. The material before the Tribunal includes a signed Corporate Representative Agreement-Private Client Advising dated 27 August 2009 (CAR) between Novus as Licensee and Chatswood Wealth Management Pty Ltd as Corporate Representative. A schedule to the CAR nominates Ms Lu, Mr Robert Lu and Hui Zhang, each of whom are ARs of Novus, as persons who will provide advice to clients through Chatswood Wealth Management Pty Ltd.
The material also includes an Individual AR Agreement - Share Trading Services dated 2 September 2013 made between Novus as licensee and Ms Lu as AR.
The Chief Commissioner noted at [231] that Novus asserted that the two-person exemption applied in respect of Chatswood Wealth Management for 2011, 2012 and 2013 and in respect of Ms Lu for 2014. Novus made no express response to the Chief Commissioner's submissions in respect of Ms Lu, Chatswood Wealth and Chatswood Wealth Management other than to state generally in relation to 8 ARs that it repeated its submissions in AS. Accordingly, I accept that Novus did not dispute the Chief Commissioner's submissions at [231].
Novus submitted: 127. In the course of conducting her business, and the business of the "Chatswood Office", Ms Lu engaged ARs, "private employees" and third party service providers, who provided services to her such as creating and maintaining client relationships, providing "financial services" to her clients and engaging the services consultants in relation to the conduct of the business. In addition, she engaged third parties to provide services to her of a more general nature required to run her business as an independent contractor. She also used ECPs. … 129. From 2009 until 26 August 2010 (extending the Contractor Exemption to the 2011 financial year), Ms Lu was provided services by James Chung Tao Lu [Ms Lu's father]. From 2009 to 27 August 2013, Ms Lu was provided services by Robert Lu [Ms Lu's brother], who was an AR authorised by Novus. She also received services from one, Hui Zang, from 2006 to 2010. Ms Lu confirmed in cross-examination that she, Mr James Lu and Robert Lu conducted their business, loosely, as a partnership. 130. After James Lu and Ms Zang left, Robert Lu, an AR, provided financial services to Ms Lu's clients. She said he did "share trading" and some "corporate" work for which he was paid. A record of the invoices issued by Mr Robert Lu and payments made in relation to those invoices were tendered as exhibits A10 and A11. It is clear that Mr Robert Lu provided Ms Lu services that directly relate to the services she provided under her AR Agreements during each of the Relevant Years in dispute (2010 to 2014), especially given … that he ceased providing services on or about 27 August 2013. As stated above, there is no basis for the respondent's submission that services provided by one AR to another do not satisfy the Contractor Exemption. Ms Lu clearly falls within the exemption for all of the relevant years.
I observe that Ms Lu's evidence, when referring to matters such as the "independent" business in which she is involved at the Chatswood address she leases to Chatswood Wealth Management, staff, contractual relationship with Novus and "client book", fluctuates between using words in the first person singular such as "I" and "my" denoting herself and words in the first person plural such as "we" and "our" denoting one or more of Chatswood Wealth Management Pty Ltd, the Chatswood Wealth Management Family Trust, Chatswood Wealth and Chatswood Office.
It appears to me that Ms Lu either did not take care in her evidence to distinguish between herself and the relevant corporate entity or trust as the owner or operator of the business being carried on or was confused as to the legal distinctions.
However, I find that Novus submission in the last sentence of [129] "Ms Lu confirmed in cross-examination that she, Mr James Lu [her father] and Mr Robert Lu [her brother] conducted their business, loosely, as a partnership" does not accurately represent Ms Lu's evidence. Novus authority for the submission is T315:17. The transcript at page 315 from lines 1 to 30 shows the following: Q. The materials that you have produced, and I will come to some of them if need be, is it that you had Hui? A. Yeah. Q. She worked for Chatswood Wealth Management between 2006 and 2010 and for a slightly longer period, James Lu, that is your father, he worked in the same company between 2004 and 2010, is that right? A. In the same company. Q. Both under, presumably, both working for Chatswood Wealth Management or not? A. I think we established Chatswood Wealth Management in 2009. Q. Prior to that they were working for themselves, were they? A. Well, we used we all came from RBS Morgans. Q. Did you have a structure then or were you just working as individuals together in a loose partnership, before you had Chatswood Wealth Management Pty Ltd, was there a company? A. Yes. Q. What was the company then? A. Lu Management. Q. That is the name that I saw, Lu Management Pty Ltd? A. Yeah. Q. That was then replaced or was it a name change to Chatswood Wealth Management? A. Totally different company, new company, Chatswood is a new company.
I find that the evidence relied on by Novus does not show, that at any time during the 2011-2014 years Ms Lu was involved in a partnership with either or both of her father and brother.
I reject the repeated unsubstantiated submissions that prior to 2014, Ms Lu was with relevant services by any person, other than in her capacity as a director of Chatswood Wealth Management.

[58]

Provision of services generally to Chatswood Wealth Management for 2011 to 2014 and to Ms Lu during 2014

At Tab 8D, pages 254 and 256 of Exhibit A3, a document headed Corporate Authorised Representative - Chatswood Family Trust (Chatswood Wealth Management Trust) containing certain information, part of which in tabular form is stated to be an "evidence schedule" which purports to outline "Specialised Service Providers engaged by the Corporate Authorised Representative [CAR] pursuant to s 32(2)(c) of the Payroll Tax Act".
The evidence schedule in the document includes the following in respect of 2009: 1. under the heading "specialised services": Research and Dealers Assistant 1.Michele Zhang 2.Jamie Lu 1. under the heading Evidence Reference: General Ledger Extract: Wages for 1/07/1/07/2009 to 30/06/2010 Jamie Lu-ASIC Authorisation No
The matters referred to in the immediately preceding paragraph are not relevant for the 2011 to 2014 years. In respect of those years: 1. The columns headed "Specialised Services" and "Evidence Reference" are shaded-in but otherwise blank. 2. The column headed "Evidence Reference" which appears to relate to a third-party clearing, execution settlement service provider (ESCC Provider) namely E*Trade Australia, states "Novus Objection Paragraph [40.5] and [61]". Those paragraphs are submissions not evidence and refer to various agreements.
At Tab 8, page 245 of Exhibit A3 is a document headed "Evidence Schedule for the Chatswood Office" with the following definitions: Service Company: Chatswood Wealth Management (Family Trust); and Authorisations: the Authorised Representative is authorised to deal, arranged to deal, and provide financial product advice pursuant to an Authorised Representative Agreement.
The document states Appointment Date 28 August 2009 Division Share Trading - Private Client Adviser; Exemption Sought S32 2 (c) (i) of the PT Act
Under the heading Evidence to Be Relied Upon are references to various documents including Ms Lu's affidavit; General Ledger for 30 June 2010 confirming the payment of wages to staff; General Ledger Extract for Company Financials for year ended 30 June 2011 confirming the payment of wages to Staff; and "Profit and Loss for the Company Financial Year" for each of 2013 and 2014 "confirming expenses incurred for the ordinary course of operating a business, independent to Novus".
At Tab 8E, page 256 of Exhibit A3, is a document which is time dated 19 January 2015 2:16:11 PM headed Chatswood Wealth Management Pty Ltd General Ledger [Detail] for the 2010 financial year. The document contains a sub-heading "6-5130 Wages & Salaries". The document contains one entry for each of November and December 2009 and January, February and March 2010. In a column headed "Memo" adjacent to the November 2009 entry is "Zhang" and in the same column adjacent to the December 2009 entry is "Hui Zhang". No other names appear on the page.
At Tab 8E, page 257 of Exhibit A3, is a copy of page 256. No other wage and salary general ledgers of Chatswood Wealth Management were brought to the attention of the Tribunal.
At Tabs 8F and 8G pages 260 to 271 of Exhibit A3 are Financial Reports of CWM Family Trust ABN for the 2013 and 2014 years together with comparison for the immediately previous year. The 2012 and 2013 profit and loss statements contain no entries for wages. The 2014 statement contains a $42,000 wages expense. There is no indication as to whom wages were paid.
Accordingly, I find that there is no documentary evidence before the Tribunal that Chatswood Wealth Management employed any person in 2011, 2012 or 2013 nor is there any such evidence as to whom wages were paid in 2014 or the work carried out by any relevant employee(s).

[61]

Services from Mr Robert Lu to Ms Lu / Chatswood Wealth Management

Novus' relevant submissions were at [129] and [130] and appear above.
Ms Lu's, at times contradictory, oral evidence included: 1. Mr Robert Lu was not engaged by her business to help her in the 2011, 2012, 2013 or 2014 years. 2. Mr Robert Lu ceased being an AR of Novus on 27 August 2013 and moved to another business outside Chatswood Wealth Management. 3. after Mr Robert Lu ceased providing direct financial services to clients of the business Ms Lu was the only person performing that work. 4. Ms Lu was not certain of the date Mr Robert Lu stopped being in the business but thought it was during 2013. While he was in the business he did share trading and some corporate work and some newspaper commentaries and was paid for that work. 5. When asked for her best recollection as to when Mr Robert Lu left Chatswood Wealth Management, Ms Lu said: A. I have to check the exact date, but that is when, maybe when the authorised representative ceased, his licence ceased, that is when he left. …. Q. Let's just have a look at what the record reveals. It appears that Robert Lu was a Novus authorised representative until 27 June 2013? A. Yes …. Q. Is it your evidence that you think that is when he ceased being a Novus representative is when he left Chatswood Wealth Management? A. Well, he ceased to be authorised representative but I don't think then at the same time he quit the director of Chatswood Wealth Management. I think he is maybe after a while then I change him. Q. When he was at Chatswood Wealth Management, he worked as an authorised representative to Novus and he invoiced for the work he did directly to Novus, did he not, like you did? A. He was yes, he want invoice to Novus. Q. You didn't have a contract of employment with Robert Lu to work for Chatswood Wealth Management, do you understand what I mean? A. Right. Q. That is true, is it not? A. It is true, that we didn't have the employee contract.
During her cross-examination, Ms Lu was referred to the Tab D Lu Schedule. In relation to page 255 which deals with the 2011 to 2014 years, the transcript shows at T324:12 ff: Q. …. on the second page, for the years 11, 12, 13, 14, nobody is there recorded, do you see that? A. Right, yes. Q. That is true, because you didn't hire anybody to provide that assistance work in those years, correct? A. Yes. Q. Insofar as Mr Lu continued to provide work or do work as a Novus authorised representative, he billed Novus in his own right, correct? A. Yeah. Q. He sent them invoices in his own right? A. He sent, on behalf of Chatswood Wealth Management, yes. Because it is Chatswood Wealth Management who generates the business, so it is Chatswood Wealth Management just invoiced to Novus, and Robert is just helping to do the bills.
I observe that Ms Lu agreed that Mr Robert Lu ceased being a Novus AR on 27 August 2013 and that she was unsure as to when in 2013 he stopped providing services to clients and she took over that role. ASIC records in evidence show that Mr Robert Lu was a Novus AR from 26 August 2009 to 27 June 2013.
Ms Lu's oral evidence, shown in the transcript at T329:42 - 46, is that she took two years off work while she was having children then Mr Robert Lu decided to leave the industry and she came back to take his position.
Having regard to Ms Lu's expressed uncertainty as to relevant dates I find that on the balance of probability Mr Robert Lu ceased providing financial services to clients of the business no later than 27 June 2013 rather than 27 August 2013.
Novus relied in [130] on invoices, in evidence as Exhibits A10 and A11, "issued by Mr Robert Lu and payments made in relation to those invoices" as evidence that Mr Robert Lu was providing services relevant to the s 32(2)(c) two-person exemption.
However, as Novus is aware, when Ms Lu was recalled as a witness for further cross-examination and re-examination, her evidence was that notwithstanding the content of Exhibit A10 (which is a document on Chatswood Wealth Management letterhead dated 15 January 2014, stated to be an invoice in respect of "ETrade brokerage" in the sum of $2479.95, is addressed to "Robert Lu Authorised Representative" and describes the "CUSTOMER ID" as "Novus Capital"), that document actually evidences a payment from Chatswood Wealth Management to Mr Robert Lu as a courtesy because his clients, who had wanted to stay with him, could not stay with him because he was no longer in the industry.
Ms Lu agreed that the payment was made to Mr Robert Lu to reflect the fact that he had given his clients to her even though she did all the work, T328:3 - 8. Ms Lu also said that this payment arrangement started after Mr Robert Lu left the business and she had not changed the template from that used when he was providing services to the clients of the business.

[66]

Services from Mahoney Investments Pty Ltd to Mr Moloney

Novus relies on its submission at [102] to a reference to paragraph 13 of Mr Moloney's statement.
In his statement Mr Moloney claims that he receives a wide range of administrative, management and support services from his "company Mahoney, Mahoney Investments Pty Ltd, ATF Macca Discretionary Trust". Mr Moloney claims that the services include management services, provision of equipment, accounting and bookkeeping and taxation administration, provision of premises and rental accommodation, research services, external IT support, assist with client communications and relationships, portfolio monitoring, system as well as computer hardware to operate his business, technical and research support.
Mr Moloney did not specify when each or any of these services were provided nor the name of any individual who allegedly provided any services. Mr Moloney stated at [1] in his statement that he was the sole director of "Mahoney Investments" and at [1] in his affidavit that he was a director of Mahoney Investments Pty Ltd ABN … "that provides share trading advisory services to clients".
Mr Moloney's affidavit refers at [10] to "a detailed Evidence Schedule which outlines all of the Specialised Service Providers and or Person(s) that I have engaged for each financial year of the [Novus] Audit Period". The Evidence Schedule covers the 2009 to 2014 years and makes no mention of Mahoney Investments (Pty Ltd).
Pages 1248 to 1251 of Exhibit R1 comprise a survey questionnaire prepared by the OSR for Novus' ARs. The questionnaire answer which is undated was competed and signed by Mr Moloney. At page 1250 in response to the question "Have you or did you previously request that Novus pay any fees, brokerage or commission payable under the terms of your authorised Representative Agreement or appointment process to an associated company or trust?" Mr Moloney answered "Yes". The next question requested the name and ACN/ABN for such associated entity. Mr Moloney answered "Mahony Trading Pty Ltd; ACN … ; ABN …".
On page 1251 Mr Moloney's answers indicated that he utilised Mahoney Trading Pty Ltd as his trading and business entity, it traded or provided services which are not financial services for which an authorisation from an ASFL is required and he then or previously conducted share trading activities in that company. That company was also a service provider to him as an AR of Novus.
There is no evidence that any individual, other than possibly Mr Moloney, carried out any activity for or on behalf any company referred to above. I also observe that Tab 61 of Exhibit R1, titled "Simon Maloney" [sic] comprises a bundle of documents, from pages 1240 to 1610. Most of this unindexed bundle of some 370 pages was not brought to the attention of the Tribunal and in accordance with directions given to the parties, has not been considered for the purpose of these reasons.
I am not satisfied on the evidence brought to the attention of the Tribunal that Mahoney Investments Pty Ltd provided relevant services to Mr Moloney for the purpose of the two-person exemption in any relevant financial year. I reject Novus' submission to the contrary.

[69]

Services by John Costa to Mr Moloney

The evidence schedule at pages 45 and 46 states that Mr Costa provided dealers assistant services to Mr Moloney in 2009, 2010 and 2011. The evidence schedule at page 1015 states that Mr Costa provided unidentified services to Mr Moloney in 2009 and 2010, but not 2011.
Mr Moloney informed the Tribunal that Mr Costa was a Novus advisor who originally set up the office into which Mr Moloney moved. Mr Moloney reimbursed Mr Costa for part of the rent Mr Costa was paying.
Mr Moloney agreed that he entered into a reciprocal arrangement with Mr Costa to help each other out especially when one of them was away from the office for any period. Mr Kimber pointed out to Mr Moloney that the evidence schedule at page 46 indicated that the arrangement with Mr Costa continued into 2010 and asked Mr Moloney if that was correct. Mr Moloney said, at T370: I am not sure of the exact dates. John Costa was initially there at 2008. At one point he left the business. I don't know what date that was.
Mr Kimber then informed Mr Moloney that Mr Costa was also listed as providing dealer assistant services to Mr Moloney in 2011. The transcript shows at T371: Q … so does that mean for some of the time, it looks like 2009, presumably 2010 and 2011, you had relationships with both Mr Murphy and Mr Costa, is that right? A. Yes, but more so Chris Murphy, I was in a reciprocal arrangement with Chris Murphy more so than John Costa after the first one or two years.
The evidence schedule at page 1015 states that Mr Costa provided services in 2009 and 2010 but not thereafter, Mr Moloney's evidence was that the reciprocal arrangement was more with Mr Murphy that with Mr Costa "after the first one or two years", and at one point Mr Costa left the business and Mr Moloney was not sure when that occurred.
A statutory declaration by Mr Moloney dated 24 April 2014 and some attachments appear at page 1287 of Exhibit R1 and following. The declaration and attachments include questions from the OSR to Mr Moloney. In response to questions 18 and 21 to 25 Mr Moloney stated that the arrangement with Mr Costa started on 3 June 2008. Mr Costa's services: 1. were used on a regular basis (although the frequency was not stated); 2. included client liaison, placing share trading orders, sharing research and trading ideas and trading strategies, providing the same services to Mr Moloney's clients as Mr Moloney would, dealing with clients, providing market quotations on options and shares, executing sale orders for Mr Moloney's clients and answering questions and giving share quotations to clients.
Having regard to the evidence before the Tribunal, I am not satisfied that relevant services were provided by Mr Costa to Mr Moloney in 2011 other than possibly on a de minimis basis. However, I am satisfied that relevant services were provided by Mr Costa to Mr Moloney during 2009 and 2010.

[70]

Services by Christopher Murphy to Mr Moloney

The evidence schedule at pages 45 and 46 states that Mr Murphy provided dealers assistant services to Mr Moloney in 2009 and 2011 to 2014. The evidence schedule at page 1015 states that Mr Murphy provided unidentified services to Mr Moloney in 2009 and 2010 and "Deal assistant - assists AR in providing "financial services" services to clients" for 2011 to 2014.
Mr Moloney's statutory declaration includes: 1. details of the services provided by Mr Murphy for Mr Moloney's clients which are similar to the details of services provided by Mr Costa for Mr Moloney's clients. 2. the arrangement with Mr Murphy commenced on 3 June 2008, was a reciprocal arrangement relation to assisting each other's clients, continued while they were both in an office at Bundall, where they sat next to each other, and that thereafter they met in person most days of the week at lunchtime and at other times would talk throughout the day by phone. 3. Mr Moloney's estimate that the amount of time spent performing services for each other would average 1 to 2 hours a day, 3 to 4 days a week and on an 'as needed' basis. 4. the reciprocal work was carried out gratuitously between May 2008 and December 2012 with the understanding that at some point Mr Moloney would take over Mr Murphy's client base and Mr Murphy would be paid "an ongoing rebate". 5. after Mr Murphy left the office he and Mr Moloney shared, Mr Moloney took over the management of Mr Murphy's client base and from January 2013 Mr Moloney's company paid Mr Murphy a 30% commission on the net brokerage commission received for all share trades done with Mr Murphy's clients. The "30% payment incorporated a 'consultation fee' which allowed [Mr Moloney] to consult Chris Murphy on an ongoing regular basis regarding queries about his clients", page 1298 of Exhibit R1.
There is no evidence before the Tribunal which contradicts Mr Moloney's evidence that Mr Murphy provided relevant services to his business from 2009 to 2013. I accept Mr Moloney's evidence and am satisfied that Mr Murphy provided such services throughout that period.
Invoices from Mr Murphy to Mr Moloney's company for monthly payments from January 2013 to April 2014, which are consistent with Mr Moloney's evidence, are before the Tribunal.
In cross-examination Mr Moloney said the 30% commission was not an ongoing fee, it went for a certain period which he recalled as being 12 or 18 months. He also said that after Mr Murphy left, he contacted Mr Murphy on numerous occasions about the transferred clients.

[72]

Findings in relation to Mr Moloney in respect of Mr Costa and Mr Murphy

The Chief Commissioner submitted at [201] in relation to Mr Costa and Mr Murphy for the period prior to January 2013: 201 … services provided by Mr Costa or Mr Murphy as "dealer's assistants" to Mr Moloney or in respect of Novus's clients seen by them during periods of Mr Moloney's absence, cannot qualify for the exception as those persons provide services directly to Novus in its business and not as required by s 32(2)(c)(iii) to the business of the AR. In any event the agreement with Mr Murphy was both reciprocal and gratuitous and such voluntary arrangements do not attract the exception (refer [155(d)] above). and in relation to Mr Murphy from January 2013: 202. Commissions paid by Mr Moloney to Mr Murphy of 30% from January 2013 (refer invoices included at A3 Tab 2G pp 107-121) related to a rebate arrangement forming part of the terms of the purchase by Mr Moloney of the Novus client base serviced by Mr Murphy and not to services performed by Mr Murphy himself … these payments are evidence of a capital transaction between Mr Moloney and Mr Murphy: they do not evidence the provision of services by Mr Murphy to Mr Moloney … Consequently, the two-person exception is not engaged with respect to Mr Murphy.
The Chief Commissioner provided no authority to support the submission that a Novus AR could not provide services required by s 32(2)(c)(iii) to another AR. I rejected that submission for the reasons stated above and I reject the repeated submission in relation to services provided by Mr Costa and Mr Murphy.
I have previously rejected the Chief Commissioner's submission that reciprocal, gratuitous and voluntary arrangements do not attract the two-person exemption. I again reject that submission for the reasons provided above.
I accept that the 30% commission paid to Mr Murphy may well have, at least in part, represented consideration for a capital transaction. However, Mr Moloney's evidence, supported by the agreement signed by Mr Murphy and Mr Moloney dated 5 January 2013, is that Mr Murphy would make himself available for meetings or conversations with Mr Moloney concerning Mr Murphy's old clients. Mr Moloney's evidence was that he spoke with Mr Murphy on numerous occasions regarding those clients. There is no evidence to the contrary, nor did the Chief Commissioner submit that those conversations did not occur.
I find on the balance of probability that for each year in dispute one or more of Mr Costa and Mr Murphy provided relevant services for or in relation to Mr Moloney's business, and those services were for or in relation to the relevant contract between Mr Moloney and Novus.
Accordingly, I find that the two-person exemption applies in respect of payments by Novus to or for Mr Moloney for each year from 2009 to 2014.

[74]

Streeter, Stephen (two-person exemption)

Novus claimed that both the 90-day exemption and the two-person exemption applied to Mr Streeter. The 90-day exemption claim was dealt with above. The years in dispute are 2009, 2010, 2011, 2013 and 2014.
Novus submitted that Mr Streeter was an AR between 1 December 2003 and 18 November 2013. He used ECPs during the Relevant Years. In addition: 157 Mr Streeter … was provided execution-only services by Messrs Hing and Gerrish as "seat operators" or "seat traders"…. …. 160. There is no question that … Messrs Hing and Gerrish received monetary reward for their services, albeit as a fee split…. Messrs Hing and Gerrish "provided services for" Mr Streeter that related to his work under the AR Agreement. The connection between the work performed by the other two ARs and Mr Streeter's services could not be closer; he advised them about a trade and Messrs Hing and Gerrish executed the trades. As such, the Tribunal would find that the Contractor Exemption was engaged in relation to all of the Relevant Years.
The Chief Commissioner submitted: 125. Mr Streeter was not a full-time share trader …. (and … asserted at [5] of his affidavit that pursuant to his authorisation from Novus he provided assistance and/or advice in relation to initial public offerings and general advice to corporate clients), and during his time with Novus he was not authorised to provide share trading services - and hence engaged the services of other Novus ARs to execute the share trades that "his" clients required (at [9] of his affidavit). … 284. In Annexure A to the Objection Determination … the Chief Commissioner was not prepared to accept that any exception applied to Mr Streeter for any year, other than 2012. The Chief Commissioner said of the two-person ("contractor") exception: All other years [other than 2012] - Fee split arrangement with Stephen Hing and James Gerrish who are also ARs. Fee splitting arrangements are not considered as qualifying for this contractor exemption.
Notwithstanding the submissions by both parties that Mr Streeter was not authorised to and did not provide share trading services, the parties agreed at AAF [6] to [10] that from 1 July 2008 to 30 June 2014, Mr Streeter "placed trades for clients to purchase or sell shares on the execution and settlement services platform on" an agreed number of days in each of the years in dispute. The evidentiary basis for this agreement between the parties was not made known to the Tribunal.
In his affidavit, Mr Streeter stated that he was not authorised to provide share trading services. However, his clients required such services and he engaged the services of Mr Stephen Hing, a Novus AR, to provide such services throughout the disputed years until 22 March 2011. Thereafter, Mr Streeter engaged Mr James Gerrish, another Novus AR to provide the services. Mr Streeter entered into a "mutually beneficial" fee-splitting arrangement with each of Mr Hing and Mr Gerrish.
Mr Streeter orally confirmed to the Tribunal his engagement of Mr Hing and Mr Gerrish to provide execution only share trading services to his clients throughout the disputed years. He also said that Mr Hing and Mr Gerrish provided invoices to Novus for the work they carried out and they each directed Novus to pay his share of the net amounts directly to him. This evidence was not challenged during Mr Streeter's cross-examination.

[75]

Findings in respect of Mr Streeter

Having regard to the above evidence I find that, although Mr Streeter was not authorised by Novus in their CAS agreement, to provide share trading services, such services were provided by Mr Streeter to "clients" and therefore to Novus throughout the disputed years. These services were physically provided by Mr Hing and Mr Gerrish at the request of Mr Streeter in the course of Mr Streeter's business, and were accepted and paid for by Novus including payments to Mr Streeter.
Section 31 provides that in Division 7 "contract includes an agreement arrangement or undertaking, whether formal or informal and whether express or implied". Accordingly, although share trading services did not form part of the written agreement between Mr Streeter and Novus, the evidence is that throughout the years in dispute, Mr Streeter provided such services to clients and therefore to Novus and Novus accepted such services. I find therefore that the unwritten arrangement formed part of the relevant contract in the years in dispute.
For the purpose of the two-person exemption, I find that in each of the disputed years Mr Hing and/or Mr Gerrish provided services for Mr Streeter in the course of his business to perform services in the course of a business carried on by Novus.
The Chief Commissioner has not disputed the facts in evidence referred to above. The Chief Commissioner did however, submit at [287]: … because Mr Gerrish and Mr Hing were also ARs of Novus, any work performed alongside Mr Streeter did not qualify for the two person exception.
I have previously rejected this submission and I shall not repeat the reasons I gave above. I again reject the submission.
The Chief Commissioner also referred to the fee splitting arrangement between Mr Streeter and Mr Gerrish and between Mr Streeter and Mr Hing. For the reasons I gave above, I confirm that I reject the, on this occasion implied submission that a fee splitting arrangement between Novus ARs precludes the operation of the two-person exemption.
Novus' submission, based on a service schedule at pages 862 and 863 of Exhibit A3, that an ESCC provider, supplied services to Mr Streeter which activate the two-person exemption, is rejected for the reasons I gave above.
I find on the balance of probability that for each year in dispute one or more of Mr Hing and Mr Gerrish provided relevant services for or in relation to Mr Streeter's business, and those services were for or in relation to a relevant contract between Mr Streeter and Novus.
Accordingly, I find that the two-person exemption applies in respect of payments by Novus to Mr Streeter, at the request of each of Mr Hing and Mr Gerrish, for each of 2009, 2010, 2011, 2013 and 2014.

[76]

Swarbrick, Robert (two-person exemption)

Novus submitted that Mr Swarbrick is entitled to the two-person exemption for each year from 2009 to 2012.
Novus submitted in footnote 223 that Mr Swarbrick "… used ECPs such as ETrade" and "… in addition to the 90-Day Exemption, Novus claims that Mr Swarbick's use of ETrade (and other ECPs) as well as other services provided by third parties to Mr Swarbick (see Exhibit R1, V5, 1858, [Q3]) satisfies the Contractor Exemption".
I found above that the supply of services to ARs by ECPs does not activate the two-person exemption. I repeat that finding in relation to Mr Swarbrick. There is no need to repeat my reasons.
Exhibit R1, V5, 1858, [Q3], on which Novus relies, is a question and an answer in an undated five-page document apparently signed by Mr Swarbrick. The document states it is a survey questionnaire which Novus requests completion of by ARs in respect of their present or past activities as a Novus AR. Question three on page 1858 is part of a segment of the document headed "services provided to the AR" and requests an indication of the types of services the AR "regularly obtained" or his or her Associated Entity previously provided or currently provides in order to assist the AR in the provision of the AR's services as an AR of Novus. There is a list of 16 types of services some of which are marked "No" and others of which are marked "Yes". Some of the services marked "Yes" are provision of premises/rental and external IT support. There is no evidence that any such services were required to be provided by Mr Swarbick to Novus. Other services marked "Yes" are Desk/Dealers Assistant(s) and Research services which may have been required to be provided by Mr Swarbrick to Novus.
The extract from ASIC's database at page 281 of Exhibit NJH1 shows that Mr Swarbrick was an AR of Novus from 31 July 2006 until 3 May 2013.
There is no evidence as to whether any particular services referred to at question three on page 1858 were provided to Mr Swarbrick, whether regularly or otherwise, during any particular year in dispute. Nor is there any evidence as to whether the provision of particular services passed the de minimis threshold. There is also no evidence that Mr Swarbrick ever employed any person.

[78]

Walsh, Andrew

Novus submitted at [140] that Mr Walsh was an individual AR and in the corresponding footnote at 312, that his "AR agreement titled "Individual Representative Agreement - Private Client Advising" was dated 29 January 2008. "This document was produced Novus prior to the hearing. It appears that it was not tendered." The Chief Commissioner agreed at [253] that "Mr Walsh's relations with Novus were governed by an individual agreement for share trading services" and that the agreement was not in evidence." I am satisfied that Mr Walsh was a Novus AR and that there was a relevant contract for the purpose of s 32.
Novus submitted that the years in dispute in respect of Mr Walsh were 2009 to 2014. The Chief Commissioner submitted that Novus was not assessed to payroll tax in respect of Mr Walsh for 2013, and, the years in dispute are 2009 to 2012 and 2014. Novus did not respond to the Chief Commissioner's submission. Accordingly, I accept that the years in dispute are 2009 to 2012 and 2014.
Mr Walsh made an affidavit dated 25 July 2016 which is in evidence at Tab 10A in Exhibit A3. In the affidavit Mr Walsh states that he is a director of Gamma Investments Pty Ltd (Gamma Investments) which "provides share trading advisors services to private financial firms [and] and also engages in trading of securities".
At [4] Mr Walsh states that on 4 February 2008 he became an AR of Novus and was authorised to provide financial services to 3rd parties whom he described as "My Clients". Part of this evidence is corroborated by an extract from ASIC's database dated 2 September 2016, at page 288 of Exhibit NJH1 to the effect that Mr Walsh commenced as a Novus AR on 4 February 2008 and there is no cessation date. Mr Walsh states at [6] that pursuant to the agreement (which is not in evidence) he is authorised to deal, arrange to deal and provide financial product advice to his clients and these are the financial services …. referred to in the agreement.
I am satisfied that Mr Walsh was an AR of Novus for each of the years in dispute and that the IRA not in evidence is a relevant contract for the years in dispute.
Novus submitted that Mr Walsh used services of ECPs, Mr Gerrish, Mr Gable, Exceptional Business Solutions and other third parties.
At [10] Mr Walsh states that annexed to his affidavit "is a detailed Evidence Schedule which outlines all of the Specialised Service Providers and or Authorised Representatives that I have engaged for each financial year of the [Novus] Audit Period to assist in conducting my business."
There are two Evidence Schedules in evidence behind Tab 10 in Exhibit A3, neither of which is marked as an annexure to an affidavit. The first schedule, at Tab 10B, page 347, describes Mr Walsh as "AR" and Gamma Investments as "Service Company". The second schedule, at Tab 10D, pages 349 - 351 in Exhibit A3, describes the AR as "Andrew Walsh (Gamma Investments).

[80]

Services to Mr Walsh from Mr Gerrish / City Securities Pty Ltd

There is no dispute that City Securities Pty Ltd (City Securities) is a company associated with Mr Gerrish.
Novus submitted that Mr Gerrish provided research services to Mr Walsh for the years 2010 to 2014 for which Mr Walsh paid Mr Gerrish.
The Chief Commissioner submitted that none of the services provided by Mr Gerrish to Mr Walsh involved the performance of work required by the relevant contract between Mr Walsh and Novus. As Mr Gerrish was an AR of Novus, no work he performed qualified for the two-person exemption.
I have previously rejected the Chief Commissioner's submission that no work provided by one AR for another AR could qualify for the two-person exemption. I repeat that rejection in respect of Mr Gerrish (and Mr Gable) for the above reasons.
Both schedules stated that Mr Gerrish provided research material to Mr Walsh in 2011, 2012 and 2013. The consideration by Mr Walsh, according to the first schedule was that Mr Walsh allowed Mr Gerrish to transact Mr Walsh's business on the IG Markets platform. The first schedule stated that Mr Gerrish ceased being an AR with Novus on 11 February 2014. The second schedule stated that Mr Walsh agreed to allow "Mr Gerrish to transact Mr Walsh's private trading account on an IG Platform Market"
In cross-examination Mr Walsh said that the service he provided to his clients was to recommend and transact shares for them. He said he used research material from Mr Gerrish to talk to clients about the general mood of the markets, specific company research, specific economic research. Some of the research was used to assist his private trading business which did not involve his clients. He said "I use the research for numerous things but predominantly the end product is to help advise my clients". He also said the research was written by Mr Gerrish every morning for his (Mr Gerrish's) clients and was provided to Mr Walsh for his use.
A one-page agreement between City Securities and Gamma Investments dated 1 July 2011 is in evidence at page 348 of Exhibit A3. It relevantly provides: 1. City Securities agreed to transact business for Gamma Investments "on the IG MARKETS platform at a rate that will vary according to the markets that are being traded. The amount will be paid to City Securities by IG Markets on a monthly basis through Novus". 2. City securities will supply Gamma Investments with research to be used by Gamma Investments at its discretion. 3. the agreement will be in perpetuity and subject to each party's discretion to cancel.
The agreement was signed by Mr Walsh as sole director of Gamma Investments and by Mr Gerrish as sole director of City Securities.
Mr Walsh acknowledged the agreement was between companies not individuals. However, he said the person producing the report is an individual and the person using the report is another individual while the payment is by a company. Sole operators do their business through their companies and he acknowledged that he was intermingling the role of an individual with that of the company controlled by the individual.
I acknowledge that throughout these proceedings the evidence of several ARs who provided services to Novus and, its or their, clients did so personally and that by agreement with Novus the remuneration for the services was directed to companies controlled by those ARs.
As Mr Afshar conceded, the ARs were not always clear as to whether they were dealing personally or through companies. However, as he put it, the question is whether services were provided and in respect of Mr Walsh he said it is clear that services were provided to him as an AR doing work for his clients. There is also no doubt that the evidence of the ARs is that persons who may have been described in their written agreements with Novus as Novus' clients, were regarded by the ARs as their own clients.
I am satisfied that Mr Gerrish provided research material on what may possibly have been a daily basis for a period, which material may have been used both for Mr Walsh's personal trading and for the benefit of Mr Walsh's clients and Novus.
The next issue is to determine the period during which Mr Gerrish supplied that research material to Mr Walsh.
The agreement was dated 1 July 2011 and did not state that it had retrospective application.
Both schedules stated that Mr Walsh was supplied by Mr Gerrish with research in 2011, 2012 and 2013. Neither schedule includes 2009, 2010 or 2014 in relation to Mr Gerrish. Mr Walsh's affidavit stated the annexed schedule outlined all suppliers he engaged for each financial year during the audit period to assist in conducting his business.
The evidence Schedule at Tab 9C, page 286 of Exhibit A3 states that Mr Walsh was a service provider to Mr Gerrish in 2011 2012 2013 and 2014 and the evidence reference given is the commercial agreement made 1 July 2011. In cross-examination Mr Gerrish conceded that Mr Walsh provided no services to Mr Gerrish or City Securities. Mr Gerrish stated that the payment he received for the research carried out for Mr Walsh was in the order of $300-$500 a month.
Mr Gerrish said that the fee he received in respect of his research for Mr Walsh was that he "collected the revenue from his clients from that platform". In contrast, Mr Walsh's Evidence Schedule at page 350 states that "In return for the research being prepared by Mr Gerrish, Mr Walsh "agreed to pay for the research by allowing Mr Gerrish to transact Mr Walsh's private trading account on an IG Platform Market". Mr Walsh's relevant evidence in cross-examination was: Q. This is an agreement reached between two companies wherein on 1 July 2011 where Mr Gerrish's company, City Securities, has agreed to transact the business for Gamma Investments. To transact the business of Gamma Investments what business or that does City Securities transact for Gamma Investments? A. The trading of shares. Q. That is the other half of your business isn't it? A. That is part of, yes, the half of the Gamma Investments business which is, yes. …. Q. That he gets the brokerage for those particular transactions? A. Correct; and going back to 2009 2010 these are the type of situations that occur all the time as a sole operator in this business …. Q. I was really only asking why the word "private trading account" is referred to there? A. It's as in it's not my clients it is my personal account, my company's account. Q. Trades that you do in the operation of your own business; namely, Gamma Investments? A. Yes, Gamma Investments. Correct. Q. But not trades you place on behalf of clients? A. Not trades on behalf of clients. No
There are discrepancies in the evidence given by Mr Walsh and Mr Gerrish as to whether the trades carried out by Mr Gerrish with Mr Walsh's permission, which provided consideration for Mr Gerrish for the research material he provided to Mr Walsh, related only to private trading for Mr Walsh, or also related to trading for clients of Mr Walsh (and Novus).
There are also discrepancies as to the period through which the arrangement between Mr Gerrish and Mr Walsh occurred. Novus submitted that the research services were provided for the years 2010 to 2014. The oral evidence is inconclusive and at times stops in 2013 and on another occasion continues until Mr Gerrish ceased being an AR of Novus, 12 February 2014). The detailed Evidence Schedules of Mr Walsh cover the 2011, 2012 and 2013 years while Mr Gerrish's Evidence Schedule stated that the arrangement, based on the commercial agreement 1 July 2011, occurred during the 2011 to 2014 years.
I am satisfied that the arrangement between Mr Gerrish and Mr Walsh commenced no later than the date of the agreement, that is 1 July 2011. However, I am not satisfied that Mr Gerrish provided relevant services to Mr Walsh before 1 Jul 2011, that is, during the 2009, 2010 or 2011 financial years.
Being cross-examined can be a traumatic experience. The discrepancy in evidence as to relevant dates was not clarified in Mr Walsh's re-examination. On balance I prefer Mr Walsh's affidavit evidence at [10] that the schedule(s) "outline(s) all of the … service providers … [Mr Walsh] engaged for each financial year of the audit period to assist in conducting my business" and the fact that both schedules included 2011, 2012 and 2013 but did not include the provision of Mr Gerrish's services in 2014, over Mr Walsh's oral evidence in cross-examination that the services continued in 2014.
Accordingly, I find that Mr Gerrish provided relevant services to Mr Walsh during the disputed 2011 and 2012 years. I am satisfied that the two-person exemption applied in respect of Mr Walsh, during 2011 and 2012. Any services provided during 2013 are irrelevant as Novus was not assessed to payroll tax in respect of payments during 2013 concerning Mr Walsh.

[82]

Services to Mr Walsh by Sterling Wharton Taylor Pty Ltd

Mr Walsh made no express reference to Sterling Wharton Taylor Pty Ltd (SWT) in his affidavit, nor did Novus expressly refer to it in AS.
SWT appears in Mr Walsh's second evidence schedule under the heading "PROFESSIONAL SERVICES ACCOUNTANT" in respect of each financial year from 2009 to 2014. In respect of 2009 under SWT's name appears: Professional Services engaged by the AR [Mr Walsh] to assist the AR in the ordinary course of business including providing Accounting and Bookkeeping services, preparation and lodgement of ASIC company documents providing business advisory and taxation advice.
The EVIDENCE REFERENCE in the second Evidence Schedule states "Sample invoices provided for the period the services were performed beginning 17/09/2012 and ending on 10/04/2014." for each year from 2009 2014.
Pages 352 to 416 of Exhibit A3 largely comprise a bundle of tax and other invoices several of which are from SWT to Mr Walsh. The SWT invoices refer to fees for professional services rendered. The professional services are for matters such as the preparation and lodgement of income tax returns for Mr Walsh and Gamma Investments, maintaining Gamma Investments' registered office facilities, and the preparation and review of ASIC company statements and solvency declarations for Gamma Investments. For reasons which have not been made apparent to the Tribunal all of the SWT tax invoices appear twice in pages 352 to 416.
I accept that if the SWT invoices are accurate, SWT did, during the Relevant Period, provide services to Mr Walsh in the course of the businesses carried on by him and Gamma Investments.
The Chief Commissioner submitted: The provision of tax, accounting and bookkeeping services provided to Mr Walsh by service providers was not the work which Mr Walsh was required to perform under his contract with Novus.
I agree that there is no evidence that tax, accounting or bookkeeping services were services contracted by Mr Walsh to provide to Novus. Accordingly, such services do not activate the two-person exemption.

[86]

Yeo, Ben

At page 278 of Exhibit R3, an extract from ASIC's database dated 9 November 2016, states Mr Yeo commenced as a Novus AR on 3 November 2009, no cessation date is provided. I deduce that Mr Yeo remained a Novus AR as at 9 November 2016. No evidence has been brought to my attention that Mr Yeo was not such an AR at the date of the hearing. The ASIC extract states that the classes (presumably of Mr Yeo's representation of Novus) are "Deal in a financial product/Apply for, acquire, vary or dispose of financial products on behalf of another" and "Provide financial product advice."
The parties agreed that for the purpose of Division 7, Mr Yeo is an interstate contractor and agreed at AAF [13]: The Agreement headed "Corporate Advisory Services Authorised Representative Agreement" at Tab 10 of Exhibit R2 "Key Documents" is to be a representative document between the applicant and the following Authorised Representative: (i) Benjamin Yeo …
The agreement appearing at Tab 10 appears to be a template or precedent and makes no reference to any particular AR. A similar document, with items in Schedule 1 completed, signed by Mr Yeo as Corporate Advisor and by Mr Gooley on behalf of Novus as Principal, appears at Tab 1 of Exhibit R6. The term "Authorised Representative" is defined at clause 1.1(g) to mean "an Authorised natural person and/or a corporation, appointed by the Principal to provide financial services on behalf of the Principal and covered by the Principal's AFSL".
The services to be provided by Mr Yeo to Novus are defined both broadly and inclusively at clause 1.1(h) and Item 4 of Schedule 1 of the agreement which are: 1. those services referred to in Item 4 of Schedule 1: and 2. any corporate advisory services relating to business development, equity and debt securities, the marketing of corporate services, initial public offerings. rights issues placements, capital raisings, assistance in debt facilitation, mergers and acquisitions, restructurings, management consultancy, general corporate advisory activity; and 3. any other activity or financial service falling within the AFSL license of the Principal and the Authorised Representative's authority conferred by the Principal on the Corporate Advisor, to enable the Corporate Advisor to perform any of the said services.
Item 4 of Schedule 1 states: The services to be provided under this Agreement include preparation of Mandate Letters; drafting and preparation of Information Memorandums, Prospectuses, Bidders Statements, Assist Corporate Clients with Australian Stock Exchange Listing requirements and procuring consents. Liaising with third party service providers including legal advisers, accountants and taxation specialists for specific task and documents and advice. Preparation of marketing and investment presentation materials; attendance to meetings and facilitation of share trading services. Such services shall be provided in relation to:

business development;
equity and debt securities;
the marketing of corporate advisory services generally;
initial public offerings;
rights issues and placements;
capital raisings;
assisting in debt facilitation;
mergers and acquisitions;
restructurings;
business plans and management consulting;
share trading facilitation;
general corporate advisory work; and
any other activity which falls within the type of work undertaken by the Principal generally

Having regard to the above evidence I am satisfied that there was a relevant contract in existence in respect of the period from 2010 to 2014
Novus disputes the Assessments in respect of any amounts paid by Novus to or at the direction of Mr Yeo during the 2010 to 2014 years and asserts that the two-person exemption applies to him.
Novus submits that Mr Yeo was authorised by Novus as an interstate individual who conducted his own financial services business. The business was operated through all relevant years by Mr Yeo's company Bay Pty Ltd which received all commissions due and payable to him.
Mr Yeo's services included "providing corporate and financial advice [whether] personal advice or general advice and predominantly undertaking share trading and corporate advisory services to" his clients.
Novus submitted that a range of services were provided to Mr Yeo in the course of conducting his business by Bay Pty Ltd and certain named persons, provided a bundle of invoices in support of that submission and from [87] to [91] listed several invoices in each year in dispute.
Novus submitted (relying on a statement by Mr Yeo dated 7 January 2014): 86. In the course of conducting his business, My Yeo was provided the following services by third parties: . . . 86.3 Administrative, management, research, corporate advisory, and support services from Nicholas Kapes [a Novus AR], Ms Sara Harman, Mr Andrew Wheeler, Mr Rob Shaw, Mr Adrian Maskell, Ms Annelliese McQueen-Thompson and JingSheng (Jack) Xu [another Novus AR] who is contracted to me to provide services on a regular basis".
No written contract between Mr Yeo and Mr Xu was brought to the attention of the Tribunal.
Other than Mr Yeo's statement and the invoices, Novus did not provide any specific evidence in support of its submission at [86.3].
Novus submitted that the language used in the invoices to describe the work supported its submissions that the work relates to services provided by Mr Yeo to his clients, is self-explanatory, that the invoices evidence that Mr Yeo received services from the invoicer, that invoices are related to the services Mr Yeo provided under his agreement with Novus or that the invoices are evidence that Mr Yeo received the services referred to in the invoices. Novus also submitted that the relevant invoice date represents the date before which services were provided. Novus submitted that "this is an inference which is clearly available based on the normal experience in invoicing".
The documents filed with the Tribunal include Mr Yeo's affidavit and a statement he made on 7 January 2014 which appears at page 1216 of Exhibit R1.
One of the difficulties Novus faces in supporting its submissions is that during the hearing Mr Afshar conceded on several occasions that Novus did not rely on Mr Yeo's affidavit made 25 July 2016 as he was not made available for cross-examination. No explanation was provided for this failure. I also note that the evidence shows that the Chief Commissioner requested that Mr Yeo provide information by serving a notice on him. No relevant information was provided. Novus was aware for several months before the hearing that the Chief Commissioner wished to cross-examination Mr Yeo in respect of his business activities and documents in evidence.

[87]

Invoices 15 and 16 from Report Card Pty Ltd were both of the same date, for the same amount and have the same invoice number although some details differ. I assume they are different versions of the same invoice.
The only material evidence before me as to the actual work carried out in respect of which the invoices were created is the wording in the invoices. I have had regard to the agreements between Novus and Mr Yeo as to the services to be supplied by Mr Yeo. I have not had the opportunity to consider any testing of Mr Yeo's evidence as he was not available for cross-examination.
I am satisfied on the balance of probability that work invoiced above and addressed to "Bay" relates to the provision of services, including services in respect of which chattels were provided, for Mr Yeo in the course of the business carried on by him in conjunction with his company Bay Pty Ltd.
However, for Novus to succeed, it is also necessary for me to be satisfied that the services have been provided in relation to the performance of work under the contract between Mr Yeo and Novus.
I am satisfied that, having regard to the description of the work in the invoices, services relevant to invoices numbered 1, 6, 12, 13, 15 (and 16), 17, 18 and 20 were likely to have been provided in the course of the business carried on by Mr Yeo, However, I am not satisfied that the description of the services provided relates to the performance of work under a relevant contract.
Relatively generic wording such as management advisory fee, marketing, investor relations, business media/PR and communications services, advertising, educational training, and administration is too vague to satisfy me that they are more likely than not to have been services for specific clients rather than general services in relation to Mr Yeo's business.
The wording used by Report Card Pty Ltd of "Q.BAY.20130905 lll EDM 105,000 TBA lll 500,000 Premium Banners TBA" and "105,000 TBA lll 500,000 Premium Banners TBA" may well have a technical meaning which Mr Yeo may have been able to explain if he had given evidence. However, I am not satisfied that there was any evidence before the Tribunal to indicate the meaning of the terminology so as to identify what work or services were provided. Accordingly, Novus did not satisfy its evidentiary onus concerning invoices 15 and 16.
I am not satisfied on the balance of probability that, having regard to the description of the work in the invoices, services relevant to invoices numbered 11, 14, 19, 20 and 22 were provided in relation to the performance of work under a relevant contract beyond the de minimis level. I have had regard to the amount of annual payments to Mr Yeo by Novus in determining an applicable de minimis threshold of $500 excluding GST for an invoice. If a supplier has made multiple supplies which exceed $500 in aggregate in any relevant year then I have included that supplier's individual invoices below $500.
I am satisfied on the balance of probability that the services provided in relation to invoices numbered 2, 3, 4, 5, 7, 8, 9 and 10 were provided in relation to both the course of the business carried on by Mr Yeo and in relation to the contract made between Mr Yeo and Novus.
In respect of these invoices, wording such as capital raising, offer, IPO (in respect of a named company) and placement fee for a named company (with a percentage) was in my opinion more likely than not to be associated with work for a client.
I note in relation to services by Mr Xu that these services were substantially identical to services I have found above that he had provided to one or more ARs having regard to evidence given by the relevant AR.
The invoices from Bay or Bay Pty Ltd are as follows: Invoice Date Invoicee Particulars Amount (inc GST) item A 30 November 10 (for services for Sep 10) …apital Ltd [otherwise illegible] Benjamin Andrew Yeo Consulting for Novus Capital Ltd - Expenses (Rongtai International Group camp Holdings Ltd) Road Show Presentation Drinks (08/11/2010) Lets Cook & Serve - Tumbler Glasses (08/11/2010) $4178.06 B 1 Jul 11 Nicholas Kapes Consulting Services Fees for Bluechip Ltd $550 C 21 Mar 12 Gossan Hill Gold Ltd Gossan Hill Gold Ltd Initial Public Offering Information Summary $1100

[92]

Effect of grouping on payments

Novus submissions concerning grouping of Novus and Cennlen and the effect of the grouping included: 69. … The effect of grouping is to make each member of group jointly and severally liable for payroll tax if a member of the group fails to pay tax. …. 70. Section 46(2)(b) of the Act is the provision, under which the respondent assessed Novus to payroll tax in relation to payments by it to Cennlen…..
Novus then submitted at [72] that it was arguable that there was an analogy between the grouping provisions in the Act and: …. the tax consolidation regime under the Income Tax Assessment Acts (see Part 3-90 of the Income Tax Assessment Act 1997 (Cth)), which regard one member of a consolidated group as liable for the tax liabilities of all members and ignore internal transactions within the group… 74. Novus contends that the payments to Cennlen could not constitute payments that are caught by section 46 as, first, as Novus and Cennlen are grouped and, second, because they are, in any event, payments in accordance with the License Agreement.
The Chief Commissioner's submissions concerning the purpose of the grouping provisions and how they work includes: 317. The purpose of the grouping provisions is to ensure that businesses which are connected and dependent on one another are grouped as one business with one tax free threshold being applied and so that all members of the group are liable (s. 81 PRTA) (see Tasty Chicks v CCSR (2009) 77 ATR 394 at [99]). The … grouping provisions … do not provide, as Novus would have it, that the payments between group members are to be ignored for payroll tax purposes. That would give the grouped companies a payroll tax advantage, which certainly was not the purpose of the grouping provisions and there is not a single case that Novus can cite as authority for that proposition. 318. The way the grouping provisions in this case work are as follows: (a) By force of s 74(1) of the PRTA 2007 Novus and Cennlen are grouped. Novus is the designated group employer for the group and hence is able to claim the benefit of the solitary tax free threshold available for the group. (b) In this case, because Novus is the designated group member, PRTA sch 1 pt 3 cl 9(2) provides that: The designated group employer for the group is liable to pay as payroll tax for the financial year the amount of dollars calculated in accordance with the following formula: [ TW-[GTW/(GTW+GIW) x TA x C/FY] ]x R where the variables in the formula are defined in either cl 1 or cl 7: …. … (d) Section 81 of the PRTA sets out what the second main effect of grouping is for the PRTA (the first being that in relation to the tax free threshold referred to at [318(a)] above. If one member of a group fails to pay then every other member of the group is jointly and severally liable to pay that amount to the Chief Commissioner. Section 81(4) of the PRTA provides that if a person pays an amount then that person has a right of contribution or indemnity from other persons in the group as are just.
The Chief Commissioner made submissions at [305] to [307] concerning 13(1)(c) and 46(2)(b) and explained s 46(2)(b) operated to deem an amount to be wages. 307. Section 46(2)(b) of the PRTA is limited to amounts that would otherwise have been wages or would be included as wages for the purposes of the PRTA. … Section 13(1)(c) includes as wages "an amount paid or payable by a company by way of remuneration to or in relation to a director of that company".
Novus made no expIicit reference to s 13 in its reply to the Chief Commissioner's submissions concerning Cennlen. In ASR Novus referred to s 8 and Schedules 1 and 2 and made a detailed submission concerning its interpretation of s 46.
Novus relied on ss 8, 45 and 46 and Schedules 1 and 2 for its contention that grouping Novus and Cennlen requires that Novus' payments to Cennlen are to be disregarded for payroll tax purposes.
I now deal with these and related legislative provisions.
Section 45, set out below, merely extends the meaning of the expression "wages paid or payable by a member of a group": 45 Wages paid by group employers A reference in this Act to wages paid or payable by a member of a group includes wages that would be taken to be paid or payable by a member of a group if the member were the employer of the employee to whom the wages were paid.
Schedule 1 refers to ss 8 and 82. Section 8 provides that the amount of payroll tax payable by an employer is to be ascertained in accordance with Schedules 1 and 2. Section 82 provides that the correct amount of payroll tax will be determined in accordance with Schedule 1. Schedule 1 itself contains formulae pursuant to which payroll tax is to be determined in different factual situations.
Schedule 2 refers to ss 8 and 100 and contains provisions that apply only in New South Wales.
Section 100 merely states that Schedule 2 has effect.
None of ss 8, 45, 82 and 100 or Schedules 1 or 2 contain any requirements to the effect that internal transactions between members of a group are to be ignored for payroll tax purposes.
Novus made submissions at [37.3] and [37.4] concerning wages paid or payable by "the group" and submitted it is "implicit that the payments must be made to parties outside the group as the words "by the group" take their ordinary meaning. There is no deeming provision that states that payments within the group are to be treated as if made by the group."
Novus seeks to extend its analysis from [37.4] to [38] by considering selective wording from s 46. The foundation for Novus' submission is: … the heading of section 46 refers to wages "paid by or to third parties". The intention of the draftsman is therefore to catch payments to parties outside the employer group. It is at that point that the imposition of payroll tax is properly made …
This submission disregards s 46(1) which states: 46 Wages paid by or to third parties (1) If any of the following amounts of money or other valuable consideration would, if paid or given or to be paid or given directly by an employer to an employee, be or be included as wages paid or payable by the employer to the employee for the purposes of this Act, they are taken to be wages paid or payable by the employer to the employee: (a) any money or other valuable consideration paid or given, or to be paid or given, to an employee, for the employee's services as an employee of an employer, by a person other than the employer, (b) any money or other valuable consideration paid or given, or to be paid or given, by an employer, for an employee's services as the employee of the employer, to a person other than the employee, (c) any money or other valuable consideration paid or given, or to be paid or given, by a person other than an employer, for an employee's services as an employee of the employer, to a person other than the employee.
In my opinion the unambiguous wording of s 46(1) indicates that the third parties referred to in the heading of s 46 are each person other than an employer who is providing a relevant benefit to an employee (s 46(1)(a)), each person other than an employee who is receiving a relevant benefit from an employer (s 46(1)(b)), and each person other than an employer and each person other than an employee when the former provides a relevant benefit to the latter (s 46(1)(c)).
Section 46(2) provides analogously for benefits paid or given or to be paid or given by persons other than a company to a person other than a director of the company, in place of the employer and employee referred to in s 46(1), where the money or other valuable consideration paid or given would have been by way of remuneration from the company to the director for the appointment or services of the director.
Section 46(2) states: (2) If any of the following amounts of money or other valuable consideration would, if paid or given or to be paid or given directly by a company to a director of the company, be or be included as wages paid or payable by the company to the director for the purposes of this Act, they are taken to be wages paid or payable by the company to the director: (a) any money or other valuable consideration paid or given, or to be paid or given, to a director of a company, by way of remuneration for the appointment or services of the director to the company, by a person other than the company, (b) any money or other valuable consideration paid or given, or to be paid or given, by a company, by way of remuneration for the appointment or services of the director to the company, to a person other than the director, (c) any money or other valuable consideration paid or given, or to be paid or given, by any person, by way of remuneration for the appointment or services of a director to the company, to a person other than the director.
Section 46(3) provides an inclusive definition of "director", for the purpose of the section.
The Explanatory Note which related to the Payroll Tax Bill 2007 as introduced into Parliament states: Clause 46 ensures that payments of money or provision of other valuable consideration, which is referable to an employee's services to his or her employer, is taken to be wages paid or payable by the employer to the employee (and therefore subject to payroll tax), even if the amount is paid, or the benefit is provided, by: • a third party to the employee, or • the employer to a third party, or • a third party to a third party. The same principles apply to payments of money or provision of other valuable consideration by way of remuneration for the appointment or services of a company director.
Having regard to the lack of supporting authority for Novus' submissions, my interpretation of the legislation and the Explanatory Note, I reject Novus' submission as to both the intention of the parliamentary draftsman and that s 46 could not apply to payments between members of groups in general and to payments by Novus to Cennlen in particular.

[93]

Consideration of the Licence Agreement between Novus and Cennlen

There is no dispute as to the existence of a deed dated 5 May 2004 made between Novus as Licensee and Cennlen as Licensor. The deed, a copy of which is at Tab 16B of Exhibit A3, bears the name "Licence and Confidentiality Agreement" (Licence Agreement).
Novus submitted: 10. …. the payments to Cennlen were made in accordance with the License (sic) Agreement. … The monies paid to Cennlen were in response to invoices for payment of "license fees"; this fact is also accepted by the respondent. … 74. Novus contends that the payments to Cennlen could not constitute payments that are caught by section 46 as … they are … payments in accordance with the License Agreement.
At the outset, I reject the submission that the Chief Commissioner accepted that money paid by Novus to Cennlen was "in response to invoices for payment of "license fees"". Novus was well aware at the time it made the submission that whether payments to Cennlen related to invoices for "licence fees" was a live issue in the proceedings.
The Chief Commissioner's submissions in RS included: 302. …. payments by Novus to Cennlen, called for convenience the Cennlen payments, were in truth payments for the services provided to Novus by Mr Wayne Gooley as the Managing Director of Novus who is "directly responsible for the overall management and strategic direction of the Novus group of companies". They were "amounts paid or payable by [Novus] by way of remuneration to or in relation to a director of that company" {and were] amounts "that would, if paid or given or to be paid or given directly by [Novus] to [Mr Gooley], be or be included as wages paid or payable by [Novus] to [Mr Gooley] for the purposes of this Act".
The Licence Agreement provides that from the date of the deed, for an open-ended period, Novus grants to Cennlen a non-exclusive licence to use and exploit "Intellectual Property" as defined, in consideration for the payment by Cennlen to Novus of licence fees being the sum of one dollar upon entering into the deed "together with such further sum(s) and payable in such manner as it is from time to time mutually agreed between the parties".
"Intellectual Property" is defined in clause 2 to mean: all computer software developed by or on behalf of [Novus] including but not limited to client management systems, copyright in templates and materials, a client list and systems for the recruitment, appointment, monitoring and supervision of proper authority holders and/or authorised representatives appointed by the relevant securities dealer or licensee.
The Chief Commissioner summarised in [310] certain of Mr Gooley's evidence in respect of his relationship with Novus, including payments he said he received from Novus, and payments made by Novus to Cennlen. Paragraphs [310(i) to (viii), (x) and (xi)], the details of which have been checked and I am satisfied are correct (to the extent that they represent Mr Gooley's evidence not to the extent that Mr Gooley's evidence is factually correct) are as follows: 310. Mr Gooley's evidence establishes the following propositions ….: (i) Mr Gooley has been, since the commencement of Novus, its Managing Director and sole shareholder with day to day responsibility for the operations of the company: see T/S 100.01-17. (ii) The "role purpose statement" for his role of Managing Director of Novus: Ex A4 (T/S 108.40) confirms the details of the work that he was required to undertake as Managing Director of Novus: see also T/S 108-109, 110.03, 111.06-111.13. (iii) That he had (in the past) received fees for work performed as the Managing Director, albeit on an "ad hoc" basis pursuant to an oral contract between himself and Novus: see T/S 109-110. Because he was the Managing Director of Novus he could decide when and how much that he would be paid for any work to be performed for Novus: see T/S 110.14-110.24. (iv) Whilst he received Director's fees or Management fees for his work in the early days, from 2009 a decision was made that he be paid a licence fee pursuant to the Licensing Agreement between Novus and Cennlen for the provision of his intellectual property to Novus: see T/S 110.38-111 generally. (v) That whilst the Licensing Agreement between the two companies was in place from 2004, no licence fee was paid by Novus to Cennlen until 2009 because, during that period, he was content to receive payments directly for the work that he performed for Novus: see T/S 110-112 generally. (vi) In the period 2009-2012 (being the first four of the relevant years for the purpose of these proceedings, prior to notification of the OSR audit) he did not receive any remuneration for work performed for Novus but rather Cennlen received licence fees instead: see T/S 112-113. (vii) Mr Gooley resisted …. the proposition that a decision was made to convert his remuneration to licence fees because of the OSR audit: see T/S at 113.21-113.34. (viii) He also resisted …. the proposition that thereafter he performed his work as Managing Director of Novus on a gratuitous basis during the relevant six years, but agreed that there were no documents or board minutes that reflected the asserted change sometime in the period 2008/2009: see T/S 114. …. (x) Mr Gooley agreed that the Licensing Agreement between the two companies provided no guidance whatsoever as to how to set the licence fee payments and no formula was ever struck by reference to revenue levels or profitability or anything else to guide the setting of those fees: see T/S 117. (xi) He resisted (untenably in the Chief Commissioner's submission) the assertion that there was a connection between the commencement of the OSR audit in January 2013 and the decision that he made not to take any further licencing fees from Novus: T/S 117.30-118.
Novus' response in AFSR included:: 3. …. No principled basis has been articulated for treating all of the payments to Cennlen as director's wages. First, the fluctuating nature of the payments militates against such a finding. These payments ($63,000 in 2009 and then $1,900,000 in 2010) cannot all be regarded as director-related payments (even if the Tribunal were to find that any of it should be so regarded). Mr Gooley was the ultimate owner of Novus. There was a valid agreement between Novus and Cennlen concerning intellectual property. Nothing in Mr Gooley's cross-examination or the respondent's submissions demonstrates any proper basis for a finding that anything but a small portion of those payments could ever be regarded as "wages" (even if the Tribunal were to reject the applicant's arguments in its final submissions in chief and reply). There was evidence that Mr Gooley had received somewhere between $100,000 and $150,000 in the years 2004 and 2008 for his work for Novus. Even if the Tribunal were to find that a portion of the Cennlen payments were "wages" for work performed by Mr Gooley, it should use the higher of the aforementioned figures in evidence and extrapolate them to cover the years 2009 to 2013. Finally, whilst the respondent focuses on payments to Cennlen as an entity also owned by Mr Gooley, he ignores Novus' liabilities to such entities at all. The existence of such large liabilities does, again, militate against the finding that all of the payments to Cennlen ought to be considered as taxable wages.
The above submission by Novus reflects an incorrect view of Novus' obligations in its application to the Tribunal. The onus lies on Novus to prove its case and show by probative evidence how various payments should be categorised. It is not sufficient for Novus to merely assert that the Chief Commissioner has made an error by not making a proper basis for a finding and then make an unsupported submission that some other figure may be more accurate.
Novus submission at AFSR [3] included "…No principled basis has been articulated for treating all of the payments to Cennlen as director's wages. First, the fluctuating nature of the payments militates against such a finding …" and that there was evidence that Mr Gooley "had received somewhere between $100,000 and $150,000 in the years 2004 and 2008 for his work for Novus".
Novus' submission disregards Mr Gooley's oral evidence at T112, that the range of $100,000 to $150,000 was a "best guess" and that after being presented with Novus' financial statements for the period 2004 to 2008 (from Exhibit R4) which showed amounts paid by Novus to Cennlen for his director's remuneration of $1,005,955, $615,000, $415,000, $670,158 and $670,000 respectively, Mr Gooley accepted those accounts, T144.
The acceptance by Mr Gooley of the accuracy of amounts paid for his "director's remuneration", which varied between $450,000 and over $1,000,000 in the space of two years, makes a nonsense of its submission that the fluctuating nature of the 2009 and 2010 amounts paid by Novus to Cennlen militates against a finding that the amounts paid from 2009 could have been "director-related payments". Accordingly, I reject Novus' submission that there was no basis for treating the varying payments from Novus to Cennlen between 2009 and 2014 as director's wages.

[94]

Financial records in evidence concerning payments by Novus to Cennlen before and during the Relevant Period

Mr Afshar conceded there is no evidence before the Tribunal as to the financial records of Cennlen.
ASIC's Form 388s are headed "Copy of financial statements and reports". There is no dispute that such forms are required to be lodged annually with ASIC by certain entities, including Novus, and certain financial statements are required to be attached to the forms.
Exhibit R4 contains copies of the Form 388s and attached annual financial statements and reports for Novus in respect of the 2004 to 2008 financial years inclusive.
During cross-examination, prior to being referred to Exhibit R4, Mr Gooley said he did not recall precisely his remuneration from Novus for his work on its behalf. However, his recollection was that he had received emoluments in range of $100,000-$150,000 in the years prior to the Relevant Period.
Mr Gooley was referred to page 17 of the 2004 report which includes the statement "Directors remuneration was paid or payable to [Cennlen], a company controlled by [Mr Gooley]". The amount shown as paid in respect of the 2004 year is $1,005,955 and the comparative figure for 2003 is $368,166.
Mr Gooley said "That would be an accurate record. That would make sense."
Mr Gooley was then showed the comparative figures in the 2005 to 2008 reports which were respectively $615,000, $415,000, $670,158 and $670,000. Mr Gooley conceded that those were the amounts shown in the reports.
Upon Exhibit R4 being admitted without objection, the transcript shows that the cross-examination continued as follows: Q. What those numbers reveal, especially the first year, the million-dollar sum, is that there's some history within Novus Capital of paying you as the managing director very substantial sums of money, correct, by way of remuneration for your services? A. That's what the accounts reflect, yes. Q. Those accounts, you don't deny the accuracy of them, do you? A. I accept those accounts.
Novus' Form 388s and attached financial statements for the Relevant Period are at Tabs 4 to 9 of Exhibit NJH 1.
Those Form 388s disclose under the heading "related party transactions" in the notes to the financial statements that; 1. in respect of 2009 "Director's remuneration was paid or payable" to "A company controlled by [Mr Gooley]." In the sum of $63,000; and 2. in respect of 2010, 2011 and 2012 "Consulting fees paid or payable to a company controlled by [Mr Gooley]" in the respective sums of $1,900,278, $1,085,169 and. $200,000.
Each of the reports referred to above from 2004 to 2008 and throughout the Relevant Period contains a declaration by the directors of Novus, signed by Mr Gooley and another director, to the effect that "the financial statements and notes …." give a true and fair view of Novus' financial position as at 30 June in each relevant year and of its performance for the year ended on that date. They also contain an opinion by an independent auditor to similar effect.
The Form 388 for 2012 was signed by Mr Gooley on 25 January 2013 and lodged with ASIC on 18 February 2013.
The Form 388 for 2013 which contains a directors' declaration signed by Mr Gooley and another director, dated 13 December 2013, appears at Tab 8 of NJH 1. The Notes to the financial statements with that Form 388 disclose under the heading "related party transactions", a reference to transactions described as "License fees paid or payable to a company controlled by [Mr Gooley]" with no amount recorded for 2013 and the amount of $200,000 recorded for 2012.
The provision in the 2014 Form 388 at Tab 9 in NJH 1, signed by Mr Gooley on the same basis as in respect of the 2009 to 2013 years, for "related party transactions" makes no provision for the payment to any related party of any licence fee or any consulting fee.
I observe that the Notes to all the financial statements states under the heading "related party transactions": Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

[97]

B Payments made as licence fees.

Novus submitted, until its final submission in AFSR to which reference is made below, that all relevant payments it made to Cennlen during the Relevant Period were in consideration of licence fees pursuant to the Licence Agreement.
Novus relied on WG1 and oral evidence by Mr Gooley. The original WG1 was uplifted by Novus unread and replaced by a second WG1 under cover of a letter from Novus' solicitors dated and filed 5 December 2016. All references to WG1 are to the affidavit filed 5 December 2016.
WG1 refers relevantly to the genesis of the Licence Agreement, a copy of which is Annexure A to WG1, and from paragraphs [12] to [18] refers to payments from Novus to Cennlen during the Relevant Period.
As mentioned above, there is no dispute as to the existence or contents of the Licence Agreement. The dispute relates to the characterisation of payments made by Novus to Cennlen during the Relevant Period..
Also said to be annexed to WG1 are a statutory declaration marked "B" made 2 December 2015 by Mr Nicholas Swan a director of Novus, a statutory declaration marked "C" made 3 December 2015 by the Hon George Gear, Chairman of Novus, a document described as an Intellectual Property Register marked "D", a letter from Boroughs Assurance dated 11 March 2015 marked "E" (Boroughs Opinion), and copies of documents described as "invoices issued to Novus" (the Cennlen Invoices) marked "F".
There were no documents annexed to WG1. However, the documents at Tabs 16B to 16G of Exhibit A3, match the description of the documents said to be annexed to WG1 with the exception of what appears to be an invoice from Christopher Murphy behind Tab 16E at page 993 of Exhibit A3.
The transcript shows at T105 and following that Mr Afshar informed the Chief Commissioner and the Tribunal that Novus did not read and did not rely on the statutory declarations of Mr Swan and the Hon George Gear, nor the invoice from Mr Murphy. Novus did rely on the Licence Agreement, the Cennlen Invoices, the Intellectual Property Register and the Boroughs Opinion.
Mr Gooley deposed in WG1: 1. at [13] that the OSR incorrectly alleged that "the payments made to Cennlen were payments of wages made to a Managing Director and subject to payroll tax"; 2. at [14] that to clarify the nature of the payments made by Novus, "Novus external and independent account[ant], Mr John Kite" and "Novus' external Legal Counsel and its Legal Advisers, King & Wood Mallesons, advised the OSR that payments made to Cennlen were not wages" and were made pursuant to the Licence Agreement.
The Boroughs Opinion is in evidence and I refer to it below. The communications to the OSR from Mr Kite and King & Wood Mallesons referred to at [14] were not identified in WG1. A letter and an email from Mr Kite are referred to in the transcript and in these reasons. A review of the transcript reveals that "King & Wood" was mentioned once only, at T434 in relation to a covering letter concerning an affidavit but not in the context of a legal opinion, nor was that firm named in AS, ASR or AFSR.
I deal below with Mr Gooley's oral evidence to the Tribunal, the Boroughs Opinion, the Cennlen Invoices, Novus' submission as to the effect of the Licence Agreement having been was entered into before the Act commenced and Mr Kite's communications to OSR.

[99]

Mr Gooley's evidence

Mr Gooley describes his business experience in WG2 as follows: 8 I have had 30 years of experience working in the financial services industry. I have extensive background in the corporate advisory, merchant banking and financial services industries with a focus on advisory services, mergers and acquisitions and capital raisings generally. I have also worked at Westpac and at the ASX. 9 Before establishing Novus in March 2000, I was the head of corporate services at Bridges Financial Services.
Mr Gooley said the amount of the licence fees paid for the use of Intellectual Property pursuant to the Licence Agreement is "from time to time mutually agreed between the parties".
Neither Novus nor Mr Gooley has provided any explanation as to why the amount of, according to Novus, "licence fees" changed so significantly from year to year. Mr Gooley, who said he determined the amounts paid by Novus to Cennlen, said there were no records that could explain or throw any light on the variation in those fees.
Mr Gooley conceded that Cennlen, which he controlled, did not charge licence fees for the period 2004 to 2008. He also conceded that during that period he received emoluments for work performed for Novus as its managing director and those emoluments were paid to Cennlen..
Mr Gooley said that in (approximately) 2008 he determined to invoke the provisions of the Licence Agreement for Cennlen to charge a licence fee for the Intellectual Property. When asked in cross-examination what was going to happen henceforth by way of proper emoluments for the work he was performing as managing director of Novus he said: A. Well, no decision had really been made. The fact that I didn't receive any fee as a managing director during that period, I think that speaks for itself. Q. What it speaks to me, Mr Gooley, and I want to put it to you, it sounds like it was resolved, or at some stage it was resolved, whether it was 2008 or whether it was later because of the OSR audit, that you resolved that it would be better if the payments you received from Novus were all characterised as licensing fees. Do you understand what I'm putting to you? A. I do, but I don't agree with that. … Q. But once you say the decision was made that Semlin would charge licensing fees, it happened to coincide with the time at which you stopped receiving emoluments for your work as Mr Gooley; is that right? A. Yes, that's correct. Q. In that sense, there would seem to be a foundation for deducing or concluding that whatever you resolved to charge by way of licensing fee from Semlin to Novus, it was to incorporate, or it would take account of payments that were effectively on account of the work that you were doing for Novus as its managing director; do you agree with that? A. No, I don't. Q. Your evidence must be that … you made a decision that thereafter it wasn't necessary or appropriate for you to receive any emoluments as Mr Gooley for your work as the managing director; is that right? A. I elected to trigger the licence agreement for intellectual property and I elected not to receive a managing director's fee, as owner of the business and as the director of an investor, being Semlin Pty Ltd, into Novus Capital Ltd. Q. The licensing fees that were agreed that you would take effectively served to cover, did they not, compensation for you for your work as a managing director? A. With respect, I don't see it that way. Q. The only other way to say it is that you resolved out of the goodness of your heart that you wouldn't henceforth charge any money to Novus for the work you were doing as managing director. Is that what you say? A. I'm saying that in earlier years I elected not to charge Novus a licence fee and it's a very difficult decision to move forward sometimes and I've relied on the licensing agreement for intellectual property. Q. Should the Tribunal accept that there will be minutes of meetings of Novus and other documents evidencing this change of approach, from you receiving fees for your work as managing director, to receiving instead only licensing fees payable to Semlin, will there be documents that show that change as at 2008 or early 2009 when you said that this change took place? A. The board were fully aware of the licence agreement between Semlin and … A. There's no written executive board minutes concerning around that period. … Q. At any level within Novus. Was there any piece of paper created to evidence this change in approach? A. Not that I'm aware.
The transcript of Mr Gooley's cross-examination included the following: Q. The issue of the setting of the fee from year to year, is it something that was discussed at board level, or not discussed at board level? Was it delegated to you to make the decision on your own? A. No, I recall talking to a couple of the other directors at the time. We deal with 30 June numbers on a regular basis, we have board meetings on average of once every three months or thereabouts. So they're formally aware of the licence agreement and the payments made to Semlin and the significance of the Semlin contribution to the business.
Notwithstanding Mr Gooley's above evidence, there is no confirmation from any other director that they were aware at any relevant time of a decision that Novus would cease paying Cennlen amounts for Mr Gooley's services and instead would pay a licence fee for the use of intellectual property, nor any acknowledgment that they were aware at any relevant time that Novus' audited accounts were incorrect for four years. Indeed, no relevant evidence from any director other than Mr Gooley is before the Tribunal, nor is there any explanation as to why no other director gave evidence.
The transcript records the following cross-examination of Mr Gooley at T116 - 117 in relation to manner in which the "licence fees" payable by Cennlen to Novus were determined: Q. …. in the second paragraph there's a chart there showing figures that were paid from Novus to Semlin in 2009, 63,000. Just dealing with that matter, your assertion is that that was the first year where Semlin charged a licence fee to Novus? A. That's correct. Q. 2010, a further licence fee of $1,900,000 that year; correct? A. Yes. Q. In 2011, 1,085,000 from Novus to Semlin, and then in 2012, 200,000. A. That's correct. Q. As I understand your evidence, for 2013 and 2014, Semlin didn't charge any licence fees at all? A. That's correct. Q. Are you able to explain how it came to be that after a pattern of paying licensing fees for a valuable commodity, valuable both to Semlin and to Novus, why those payments were reduced to nil? A. The decision was made by me. 2013 and 14 were rather difficult years. That's all I put it down to. Q. Just so that I understand, in terms of the great variation in the level of these licensing fees, as you've described them, is there documentation bearing upon how these figures were arrived at in the various years? A. Only other than the invoices. Q. The invoices for these sums would only tell you the outcome of any agreement. I'm really asking you about documentation bearing upon the thinking behind the setting by agreement of the fees between Novus and Semlin. Do you understand I'm asking you that? A. Yes, I do. The only agreement was the licence agreement pertaining to Q. The licence agreement provides you no guidance whatsoever as to how to set your fees. A. That's correct. Q. It just says the fees as agreed from time to time? A. That's correct. Q. Was there a formula ever struck by reference to revenue levels or profitability or anything else to guide you in setting the licensing fees? A. No. Q. It was completely ad hoc and a matter for you? A. It was discretionary, which I make a determination on at the time. Q. Do I understand from what you've just said that there was no company records within Novus that will demonstrate how these fees were set in those four years? A. That's correct. Q. The OSR audit of Novus Capital started in January 2013, did it not? A. Correct. Q. Would it be right to say there was some connection between the commencement of that audit and the decision that you made not to take any further licensing fees from Novus? A. No. Q. No correlation at all? A. No.
Mr Gooley agreed that the Licensing Agreement between the two companies provided no guidance whatsoever as to how to set the licence fee payments and no formula was ever struck by reference to revenue levels or profitability or anything else to guide the setting of those fees: see T/S 117.
He resisted (untenably in the Chief Commissioner's submission) the assertion that there was a connection between the commencement of the OSR audit in January 2013 and the decision that he made not to take any further licencing fees from Novus: T/S 117.30-118.
In re-examination Mr Gooley agreed that the years during which payments were made by Novus to Cennlen "were good years" (TS 218) and that the time the payments stopped was at the start of a number of bad years (TS 219).
Mr Gooley was then shown Novus' accounts at pages 138, 175, 214 and 263 in respect of the 2010 to 2014 years and agreed that the revenue in 2012 had dropped significantly and that that was the start of the bad years. Mr Gooley also agreed that the same trend in terms of revenue dropping continued in 2013 and 2014.
However, Mr Gooley's attention was not drawn to the "total comprehensive profit/(loss)" figures in Novus financial records for each of the years mentioned and he made no comment on the profitability of Novus, concentrating on gross revenue.
The table below details the relevant financial years and figures for revenue on the pages of the accounts to which Mr Gooley was referred and also includes the "total comprehensive profit/(loss)" figures for each of the years from those accounts, including adjustments for revaluations. Where comparative figures for the previous year are shown and those figures have been adjusted from the figures used in the accounts for the relevant year, both the original figures and the adjusted figures are shown.
For completeness I have inserted in the fourth column the payments to Cennlen, initially described in financial records as "consulting fees" and then re-categorised by Novus as licence fees. Financial year Revenue received from rendering services Total comprehensive profit/(loss) Payments to Cennlen 2010 $11,371,707 $43,300 $1,900, 278 2011 $12,466,644 - adjusted to $11,682,508 ($98,237) - adjusted to ($19,529) $1,085,169 2012 $7,150,106 ($501,161) $200,000 2013 $7,226,633 $22,193 - adjusted to $22,192 Nil 2014 $6,290,616 $72,873 Nil

[101]

Boroughs Opinion of 11 March 2015

Mr Gooley and Novus relied on the Boroughs Opinion to support the submission that Novus' payments to Cennlen during the Relevant Period were licence fees paid pursuant to the Licence Agreement.
At [15] in WG1 Mr Gooley deposed that the Boroughs Opinion was a "detailed letter outlining that a simple error was made in the financial Accounts, and while this error was corrected, it did not affect the nature of the License Payments".
The Boroughs Opinion does state "it seems that these amounts had been incorrectly recorded …". However, I observe that the statement in the Boroughs Opinion that it is the author's "understanding that these payments were made or accrued in favour of Cennlen" under the Licence Agreement is not based on any reference to an audit or investigation by Boroughs. The "understanding" is stated to be based on "representations made to [the author] by Novus directors/representatives" together with the author's undefined "knowledge of the specific Novus and Cennlen relationship".
The Boroughs Opinion does not provide a copy of any written representations to the author nor does it state the specifics of any oral representations nor does it identify the "directors/representatives" who made the representations nor indicate when they were made.
I find it implausible that although the Boroughs Opinion is dated 11 March 2015 and refers to payments made or accrued during the financial years ended 2009 to 2012, and the "Cennlen invoices" in evidence are dated on or before 30 June 2012, the Boroughs Opinion makes no reference to those or any other invoices.
The Boroughs Opinion refers to amounts which may be payable under the Licence Agreement "from time to time when (sic) mutually agreed between the parties". However, the Opinion gives no indication that the author has sighted any such written agreements nor has any specific knowledge of any oral agreements for any of the four years in which payments were made or accrued.
In the circumstances, I am not satisfied on the balance of probability that the "clarification and confirmation regarding payments" which the Boroughs Opinion purports to provide is based on any rigorous consideration of reliable evidence or any reasonably independent investigation.

[104]

The onus lies on Novus to prove on the balance of probability that the invoices referred to above are genuine including that they were created or issued on the dates stated, that they were made pursuant to the Licence Agreement and that payment was made or accrued by Novus to Cennlen in respect of them.
Mr Gooley's evidence is that: 1. he charged Novus fees for his services to that company from 2004 to about 2008 or 2009. There was no written contract between him and Novus. The payments were pursuant to an oral contract made by Mr Gooley with himself. The terms of the oral contract were "totally flexible" as to when he would be paid and for what and in what amount. 2. from 2004 until about 2008 no licence fee was charged by Cennlen to Novus under the Licence Agreement. 3. in about 2008 he determined to invoke the provisions of the Licence Agreement for Cennlen to charge Novus a licence fee for the use of the Intellectual Property. No decision had been made concerning proper emoluments for the ongoing work he was performing for Novus and he said the fact that he did not receive any fee as managing director during that period "speaks for itself". 4. the invoices are what they appear to be on their face and that they were made pursuant to one or more oral agreements he made with himself as the sole director of Cennlen and the Managing Director of Novus in accordance with the Licence Agreement. 5. Boroughs Assurance, who have been the auditors of Novus for many years, and as at the hearing dates remained Novus' auditors, sent a letter to Novus darted 11 March 2015 which supported Novus position.
In cross-examination, at T136 to 138, Mr Gooley's evidence is that mistakes were made in the characterisation of Novus' accounts (the trial balance and general ledgers) and according to Mr Gooley an error was made by Boroughs the external auditors (the question put to him was that the error was made repeatedly for years by you and also your internal accountants - and also your external auditors.) Mr Gooley answered "by Boroughs, yes".
There is no dispute that: 1. the invoices appear on their face to have been created by Cennlen; 2. the invoices do not appear in any of the Novus accounting records in evidence; 3. payments made by Novus to Cennlen in respect of the years referred to in the invoices were recorded in the Novus Form 388 attachments "Copy of financial statements and reports" in evidence as "Director's remuneration" or "consulting fees"; 4. the Form 388 attachments were copies of audited accounts signed by Mr Gooley and another director as giving a true and fair view of Novus' financial position at 30 June in each relevant year and of the company's performance for the year ended on that date. In the auditors' written opinion the financial reports gave a true and fair view of the company's financial position and performance for the relevant year and the directors were responsible for the preparation and presentation of the financial reports. 5. Novus relies on the Boroughs Opinion regarding the alleged error in characterisation of payments to Cennlen for licence fees as payments for director's fees or consulting expenses. 6. Boroughs Opinion stated "it seems that these amounts had been incorrectly recorded in Novus' General Ledger and trial balance … within MYOB by Novus' accountant, without reference to the licence agreement. The recording in light of the licence agreement should have been recorded in a general ledger account for IP Licensing fees." And Boroughs placed reliance in forming its opinion on representations from directors/representatives of Novus. No details were provided as to either the identity of the directors/representatives or the representations which were made. 7. Boroughs Opinion made no reference to the Cennlen invoices.

[106]

Findings in respect of Cennlen

I am satisfied on the material before the Tribunal that: 1. the Licence Agreement was in existence from 2004; 2. the Licence Agreement provided that fees may vary from time to time; 3. the power to vary the fees from time to time during the Relevant Period lay with Mr Gooley; 4. on a practical basis Mr Gooley was the directing mind behind the Novus board; 5. Mr Gooley determined his own remuneration from Novus; 6. there are no minutes of board meetings of Novus before the Tribunal nor any evidence of resolutions of the board other than as referred to in the annual financial records of that company. 7. the Boroughs Opinion did not include any of the detail of the representations on which the author said he relied not was there any indication that the author was aware at any relevant time of the existence or content of the Cennlen Invoices. 8. the audited accounts of Novus for all relevant years were signed off by Mr Gooley and showed that all relevant payments to Cennlen were in consideration for work by Mr Gooley for Novus.
No evidence has been brought to the attention of the Tribunal: 1. as to the identity of the person(s) who made representations to Boroughs in respect of the Boroughs Opinion; 2. as to the detailed content of those representations; 3. as to the identity of the person(s) who made the apparent initial error in MYOB for each of 2009, 2010, 2011 and 2012; 4. that any documentation evidencing that any director of Novus other than Mr Gooley was aware at any relevant time that substantial payments, which had been made by Novus to Cennlen for several years in consideration for Mr Gooley's services to Novus, were ceasing and being replaced by payments to Cennlen in respect of a Licence Agreement which had been in existence since 2004 and in respect of which no licence fees had ever been paid; 5. other than from Mr Gooley, as to the validity of the Cennlen Invoices nor that any relevant payment by Novus to Cennlen was made pursuant to those invoices; 6. that at any relevant time the Cennlen Invoices were received by Novus and formed part of its accounting records.
The onus lies on Novus to prove its case on the balance of probability. I find it implausible that the internal accountants, external accountants, auditors and directors of Novus, including Mr Gooley who signed off on the Novus accounts each year, would not realise for four years that payments, which in each of two years exceeded $1 million had been incorrectly categorised to the extent that the managing director of Novus was no longer receiving any compensation for his services to the company.
I find it even more implausible that: 1. there is no potentially contemporaneous documentation regarding the change, other than the unsigned Cennlen Invoices and that they did not appear in any of the financial records of Novus which were provided to the Chief Commissioner over a period of several years, nor were they referred to in the Boroughs Opinion; 2. that no employee or officer of Novus nor any director of Novus has explicitly supported Mr Gooley's evidence in relation to the timing of the changed categorisation or the existence at any relevant time of the Cennlen invoices; 3. that the re-categorisation relates directly to the period in respect of which the Chief Commissioner was carrying out a payroll tax audit concerning payments by Novus.
Accordingly, I am not satisfied on the material before me that the Cennlen Invoices were sent to Novus on or about the dates which appear on their face; nor that any payments to Cennlen during the Relevant Period were made or accrued pursuant to the Licence Agreement rather than being a continuation of payments in respect of services provided to Novus by Mr Gooley.

[107]

Interstate wages

Section 3 provides that "interstate wages" are "wages that are taxable wages within the meaning of a corresponding law" and a "corresponding law means a law in force in another State or a Territory relating to the imposition upon employers of a tax on wages paid or payable by them and the assessment and collection of that tax".
The parties agreed that amounts paid by Novus in respect of Messrs Yeo, Moloney, Kapes and Swarbick (the Interstate ARs) all of whom were based outside New South Wales, are interstate wages.
Novus acknowledged at [35] that the proceedings were concerned with interstate wages, which bear on the calculation of the threshold in accordance with the Act. Novus' footnote 29 stated: There is no dispute concerning the operation of the formulae set out in the Act. The outcome as it pertains to the threshold would depend on the findings made by the Tribunal in relation to the interstate ARs.
The Chief Commissioner submitted that he did not treat the amounts paid by Novus to the Interstate ARs as taxable wages. Rather, he submitted that relevant payments made constituted "interstate wages" for the purpose of s 3 "and therefore affected the calculation of Novus's dollar liability to payroll tax" within the relevant formula in the Act.
I have found above that for all or part of the Relevant Period there was a relevant contract between Novus and each of the Interstate ARs.
The Chief Commissioner submitted at [328]: … although the interstate taxable wages paid were not directly subject to payroll tax as NSW wages, their existence operates to reduce the annual tax free threshold amount above which NSW wages are subject to tax under the Act.
Novus submitted at [39] in ASR: …. it has demonstrated the four interstate ARs ought to be exempted. Accordingly, the amounts paid to them would not feature in any calculation of the threshold.
I found above that: 1. all payments to or for both Mr Kapes and Mr Moloney in the years in dispute were exempt from payroll tax. Accordingly, payments for those ARs will not be taken into account as interstate wages 2. the years in dispute concerning Mr Swarbrick were from 2009 to 2012 and no exemption applied. Accordingly, I find that all payments to or for Mr Swarbrick are to be taken into account as interstate wages. 3. the years in dispute concerning Mr Yeo were 2010 to 2014 and the two-person exemption applied for 2010, 2011, 2012 and 2013. I was not satisfied that an exemption applied for 2014. Accordingly, I find that payments for Mr Yeo in 2014 are to be taken into account as interstate wages.

[110]

Net amounts paid by Novus to the ARs

Novus submitted at [40.2] in ASR that the Supplier Payment Histories in evidence "are business records extracted from Novus' accounting systems" which correctly set out the figures actually paid to the ARs, and they are "the best evidence of" those amounts.
The Chief Commissioner disputes the validity of this submission and said at [333(b)] that those figures "do not match the wages liability upon which payroll tax is properly assessed". He gave as an example an amount of $24,900.83 invoiced by Mr Glover to Novus on 8 November 2011 and, as set out in the Supplier Payment History, payment by Novus to Mr Glover of that exact amount. The Chief Commissioner submitted that Mr Glover's invoice made it clear that the amount of $24,900.83 was calculated (i) after deducting an amount of $1,688.50 for inter alia, desk fees and PI insurance contributions, which do not reduce the payroll tax liability on gross wages paid; and (ii) …
Novus' response at [40.3] in ASR was: It is unclear why the amounts in RFS[333(b)(i)] would be included in the amount on which payroll tax is calculated.
Section 35(1) of the Act relevantly states: … amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract … are taken to be wages paid or payable during that financial year.
As noted above section 35 (1) provides that the amount taken to be "wages paid or payable" are the amounts paid or payable "for or in relation to the performance of work relating to a relevant contract". Accordingly, "wages" as defined go beyond direct payments to employees. They include amounts "payable … in relation to the performance of work …".
The Novus "Individual Authorised Representative Agreement Share Trading Services" made with Mr Glover on 30 August 2013 (the Glover agreement) contains the terms of the contract pursuant to which Mr Glover was an AR of Novus in 2012 and 2014 which are the disputed years concerning payments by Novus in respect of work performed by Mr Glover. The Glover agreement appears in evidence at pages 484 to 516 of Exhibit A3.
I have found above that Mr Glover fell within the two-person exemption in respect of the years in dispute. However, that does not detract from the analysis of how wages are determined for the purpose of payroll tax in respect of payments to or for all relevant ARs.
Clause 8 of the Glover agreement is headed "Payment". It relevantly provides that in consideration for Mr Glover providing relevant Services and performing his obligations under the Glover agreement, Novus will pay brokerage and other fee splits to him "after deduction of any facilities charges, professional indemnity insurance contribution or other costs as set out in Schedule 2 and any other costs incurred on behalf of [Mr Glover] or sums owing … to [Novus] … in respect of which [Novus] may be or become liable …"
In Schedule 1 of the Glover agreement: 1. item 7 provides for payment by Mr Glover to Novus of $1000 plus GST per month for a desk area and office equipment: 2. Item 8 provides that amount of an amount of $3000 per annum plus GST is payable by Mr Glover in equal monthly instalments. 3. Item 9 list other fees payable by Mr Glover should he elect to use certain specified third party providers.
Schedule 2 to the Glover agreement provides that Mr Glover will be entitled to be paid a net fee based on revenue generated from brokerage charged to clients for Services as defined and portfolio management and other incentives and commissions howsoever described and brokerage and fees generated from the provision of insurance products and services. The Schedule sets out the method of calculation of the total fees and then provides that the payment to Mr Glover will be reduced by various items including fail fees, claims or bad debts and Authorised Representative specific fees.
There is no doubt that the amount taken to be wages pursuant to s 35 (1) goes beyond the net amounts payable by Novus directly to Mr Glover and includes payments by Novus to third-party suppliers of services "for or in relation to the performance of work" by Mr Glover and to the professional indemnity insurer in respect of Mr Glover and any amount properly set off by Novus relating to Mr Glover's performance of work, such as the provision by Novus of a desk area and office equipment.
Accordingly, in respect of the November 2011 invoice referred to above, for the purpose of calculating wages in respect of Novus' payroll tax obligation and subject to my finding that the two-person exemption applied, the correct, I find that the deduction of $1688.50 should have been added back to the net amount claimed by and paid to Mr Glover of $24,900.83.
At [333(b)(ii)] the Chief Commissioner observe that the invoiced and paid amount of $24,900.83 included 10% or $2263.71 for "sales tax", which was presumably intended to refer to GST. This additional amount was included in the Supplier Payment History for the purpose of calculating "wages" for payroll tax. As the Chief Commissioner correctly observed at [333(b)(ii)], GST is not subject to payroll tax pursuant to s 44 and $2263.71 should have been deducted from the $24,900.83 to calculate "wages" for the purpose of s 35(1).
Having regard to the incorrect methodology used by Novus in calculating the Supplier Payment Histories and my above analysis, the lack of certification as to the accuracy of figures used in the Supplier Payment Histories, and Novus' wording at [40.3] in ASR which indicates to me that Novus does not understand how the calculation process of wages operates, I am not satisfied that the Supplier Payment Histories put into evidence by Novus properly reflect amounts taken to be wages paid or payable by Novus for or in relation to the performance of work by its ARs.

[112]

Amounts of wages not attributable to the performance of work

Novus submitted in its 26 July 2016 submissions, inserted after [112] of AS, that: 1. the Chief Commissioner should make a determination under s 35(2) that 10% of the amounts remitted to ARs during the Relevant Period represented a non-labour component and were not attributable to the performance of work relating to a relevant contract; 2. specific amounts which should be excluded from "taxable wages" were amounts attributable to expenses incurred by the ARs and licence fees and other charges payable by the ARs to Novus and not remitted to the ARs, and 3. in the absence of a specific determination, the Chief Commissioner should apply a rate of not less than 10% of the amounts he asserted was wages, as representing the non-labour component.
The Chief Commissioner's reply was to the effect that he had already applied a reduction of 5% for the non-labour component. If Novus claimed that a greater reduction was appropriate then s 35(2) required that the labour and non-labour components of the services provided by each AR required analysis in conjunction with a consideration of the relevant contracts and whether the contracts expressly stipulated that labour and non-labour services were to be provided. If some of these services were not "work-related" services then s 35(2) was activated and an apportionment exercise was required to be conducted.
The Chief Commissioner submitted that Novus had the onus of proving both that the figure applied as wages the subject of the Assessments included a non-labour component and what that non-labour component was.
Novus' response at [2] in AFSR was that: 1. it was "clear from the AR Agreements that each was required to pay various amounts, by way of licence fees and expenses pertaining for the use of ETrade and other similar services; 2. the quantum of expenses varied as between the ARs; and 3. the 10% rate sought by Novus was "fair and reasonable in the circumstances".
I observe that s 35(2) relevantly provides: If an amount referred to in subsection (1) is included in a larger amount paid or payable by an employer under a relevant contract during a financial year, that part of the larger amount which is not attributable to the performance of work relating to the relevant contract … by an employee under the relevant contract is as determined by the Chief Commissioner
I am satisfied that in order to provide their services to Novus, each AR was required to pay various amounts in accordance with Novus' first submission. I am also satisfied that, having regard to his 5% concession for the non-labour component, the Chief Commissioner concedes that this requirement is likely to inform an amount payable by Novus which is not attributable to the performance of work relating to the relevant contract.
I am satisfied, having regard to the differences in methods of carrying on business by the ARs and the substantial variance in remuneration paid by Novus for different ARs' services, that the percentage of expenses to revenue may well vary among the ARs.
In my opinion Novus has not provided probative evidence to the Tribunal as to the non-labour component of any of the ARs sufficient to enable a determination to be made of an appropriate amount not attributable to the performance of work in each relevant year for each AR during the Relevant Period.
I also find that Novus has not provided any probative evidence to substantiate its submission that a 10% rate "is fair and reasonable in the circumstances".
Accordingly, I find that Novus has not satisfied its onus so as to make it appropriate that the Tribunal vary the 5% "discount" already determined by the Chief Commissioner.

[113]

Liability for interest and penalties

Part 5 of the TA Act imposes interest and penalties in respect of certain tax defaults (as defined) and empowers the Chief Commissioner to remit either or both interest and penalty tax by any amount in such circumstances as the Chief Commissioner considers appropriate.
The Assessments included the imposition of both interest and penalty tax. The Applicant has requested that the Tribunal review the decisions of the Chief Commissioner and remit both interest and penalties in full. The Chief Commissioner claims that none of the circumstances which would justify remittal of any interest or penalty are in evidence and there should be no remittance.
In these proceedings the Tribunal may exercise the Chief Commissioner's powers of remission.
Section 3 of the TA Act defines "tax default", subject to some exceptions, to mean "a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay". Section 4 states that the Act is a 'taxation law' for the purposes of the TA Act.
Sections 7 and 8 of the TA Act state: 7 The employer by whom taxable wages are paid or payable is liable to pay payroll tax on the wages. 8 The amount of payroll tax payable by an employer is to be ascertained in accordance with Schedules 1 and 2
Section 33(1)(b) provides that a person to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work … is taken to be an employer in respect of that financial year and s 34 (a) provides that a person who during a financial year performs work for or in relation to which services are supplied to another person under a relevant contract … is taken to be an employee in respect of that financial year.
I respectfully concur with the following useful summary of relevant law by Block SM in Boston Sales and Marketing Pty Limited v Chief Commissioner of State Revenue [2014] NSWCATAD 139: 63 By s.87(l)(a) and (b) of the PTA 2007 every employer who is registered or required to be must within 7 days after the end of each month except June, lodge with the Chief Commissioner a return relating to that month and within 21 days after the end of June in each year, lodge a return relating to June and to the financial year ending on the close of that month. In the case of a group if the group has a "designated group employer" the designated group employer for a group may lodge a joint return for the group: s.87(2) PTA 2007. 64 In turn, by s.9(l)(a) and (b) of the PTA 2007 a person who is liable to pay payroll tax on taxable wages must pay the tax within 7 days after the end of the month in which those wages were paid or payable, other than the month of June, in the case of which payment is required within 21 days after the end of the month of June.
I also observe that s 86(1) requires an employer who is not already registered to apply for registration as an employer if in any month the employer, pays or is liable to pay, or if the employer is a member of a group, the members of the group in aggregate, pay or are liable to pay anywhere, wages of more than the relevant threshold.
I found above that: 1. the Chief Commissioner issued the Assessments on the basis that certain payments made by Novus to or for certain ARs and to Cennlen were wages as defined in the Act; and that 2. I was not satisfied by Novus' submissions and evidence that the amounts paid were not wages.

[114]

Novus' submissions on interest and penalties

Novus submitted: 4 … that no penalty or interest is payable … … 28. In determining the scope of the various provisions of the Act, one must begin with a discussion of its stated purpose and aims. 29. The Act was introduced as part of inter-state harmonisation of payroll tax legislation. In the paper it published pertaining to the changes, the NSW Treasury stated: Some specific exemptions have to be removed in New South Wales to achieve the harmonisation with Victoria sought by business. However, it is expected their removal will have little practical effect or can be offset by the introduction of payroll tax rebates in New South Wales. From 1 July 2007: · The specific exemption paid to financial planners [Novus was a legitimate exempt entity in this regard] under relevant contract provisions will be removed. However, most financial planners will continue to be exempt under other general exemptions... 30. This statement by the NSW Treasury is important, because the Tribunal is asked to consider the basis for the significant penalties and interest imposed by the Commissioner on Novus. It is submitted that Novus was reasonable to rely on this public statement that the provisions of the Act would have little, if any, practical impact concerning Novus' payroll tax liability. 31. The second reading speech that accompanied the bill, which ultimately became the Act, aids the interpretation of the relevant provisions of the Act. Importantly, the second reading speech contains the following statements: This bill includes a number of measures which will catch schemes designed to avoid liability for pay-roll tax by severing the employer-employee relationship...Bona fide independent contractors will not be caught by the legislation …. 75. … The Tribunal ought to be satisfied that Novus took reasonable steps to comply with the Act ... 76. First, Novus relied on public statements to the effect that its payroll tax position would not be changed with the introduction of the Act. Second, the Tribunal would accept that Novus was advised by its auditors shortly after the introduction of the Act that its payroll tax position would not change by virtue of the Act. Third, given the diffuse nature of Novus' relationship with its ARs, which is supported by the evidence given by the ARs and given that the vast majority were found to be exempt (indeed, the vast majority of the ARs in this proceeding were exempted at least in relation to some of the Relevant Years), it was reasonable for Novus to consider that they would be exempt and that it would not be liable to payroll tax. Finally, as it pertains to Cennlen, these payments were made in accordance with a validly-constituted agreement, which had been entered into prior to the Act coming into force. For these reasons, it was clearly reasonable - and indeed, the legal advice Novus received on 4 September 2013 confirmed the position - for Novus to consider that the position concerning its liability to pay payroll tax had remained unchanged… … 211. … NSW treasury statement prior to the passing of the Act expressly stated that the payroll tax position of businesses such as Novus would remain unchanged… there was unchallenged evidence that after the Act came into force, Novus' auditors advised it that its payroll tax position was unaffected by the introduction and passing of the Act. In those circumstances and based on the matters set out above, the interest and penalty ought to be remitted

[118]

Analysis of the law in respect of interest

The TA Act relevantly provides the following in respect of the imposition of interest: 21 Interest in respect of tax defaults (1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division. 22 Interest rate (1) The interest rate is the sum of: (a) the market rate component, and (b) the premium component. …. 25 Remission of interest The Chief Commissioner may, in such circumstances as the Chief Commissioner considers appropriate, remit the market rate component or the premium component of interest, or both, by any amount.
Unlike the express legislative guidance in respect of the application of penalty tax, there is no legislative guidance as to the circumstances in which the Chief Commissioner, or in this case the Tribunal, should exercise the s 33 discretionary power to remit either or both of the market or premium components of interest.
In Trust Co. of Australia Ltd v Chief Commissioner of State Revenue [2002] NSWADT 21, Verick JM said: 24 The interest regime found in the TA Act is essentially designed to promote compliance of the relevant taxation laws. The interest regime also promotes equity between the taxpayers who meet their taxation obligations on time and taxpayers who do not meet such obligations as and when required by the law. In addition, it compensates the state for loss of use of funds. 25 The market rate component would reflect the use by the party in question of the relevant amount of money on one hand, and the lack of use of the relevant funds by the state on the other. But the fixed premium rate component is a rate imposed by way of a penalty for the "tax default" in question. A premium rate of interest is imposed where a "tax default" is a result of some culpable conduct on the part of the taxpayer. The Chief Commissioner can also impose a penalty tax under s 26 of the TA Act in cases where more serious tax defaults occur due to deliberate conduct of taxpayers. 26 Different considerations should apply when applications for remission of market rate or premium rate interest are determined by the Chief Commissioner. In considering applications, the Chief Commissioner, of course, needs to take into account all the facts of each individual case. 27 In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the "tax default" is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes). 28 On the other hand, a wider range of circumstances would be available to justify a remission of the premium rate interest.
In Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19 revised (Incise Technologies) the Appeal Panel of the then ADT considered an appeal by the Chief Commissioner against a decision by the ADT (Verick JM) to reduce penalty tax and to relieve the applicant taxpayer from payment of the premium rate component of interest. In the course of its reasons for decision the Appeal Panel said at [60]: In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Accepted Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation.
In Levitch Design Associates Pty Ltd atf Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215, Sorensen SM referred at [107] to [109] to Incise Technologies at [60] and to the decision of Verick JM in Trust Co of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 at [27] extracted above. Sorensen SM said at [110], in rejecting the taxpayer's submissions in that matter, that he was not satisfied that the taxpayer had demonstrated any exceptional circumstances to justify remission of the market rate component of interest.

[121]

Advice to Novus by its auditors that Novus has no liability to pay payroll tax

In WG2 Mr Gooley said: Advice concerning application of payroll tax 26 Prior to 2007, Novus received advice from Boroughs, its auditor, to the effect that Novus would not be liable to pay payroll tax under the law prior to the introduction of the Act. Boroughs never provided any contrary advice to the effect that the Act changed that position. 27 In or around 2007 or 2008, a representative from Boroughs provided to me and the board of Novus, advice to the effect that Novus' payroll tax position was unaffected by the introduction of the new legislation.
The Chief Commissioner submitted at [341] "Copies of this [pre-1 January 2007] advice were not produced."
I observe that in respect of paragraph 26 of WG2: 1. the advice Mr Gooley deposed had been given by Boroughs before 1 January 2007, Novus provided: 1. no evidence as to the details of the advice nor the factual or legal basis on which Boroughs presumably relied in order to be able to provide the advice nor Boroughs' reasoning for the advice. 2. no documents from Boroughs to support Mr Gooley's assertion that Boroughs had given any such advice; 3. no officer from Boroughs confirmed that such advice had been provided; and 4. no explanation for not providing any of the information referred to in the preceding three sub paragraphs; 1. Mr Gooley's statement that Boroughs had never provided any contrary advice to the effect that the Act changed that position, Novus provided no confirmation from any officer or employee or consultant to Novus nor from any officer of Boroughs.
I observe that in respect of paragraph 27 of WG2 and the advice Mr Gooley deposed had been given by a representative of Boroughs in or around 2007 or 2008 to himself and the board of Novus, Novus provided: 1. no identification of the representative of Boroughs; 2. no copy of the written advice if the advice was in writing nor the details of the advice if it was given orally nor the factual or legal basis on which Boroughs presumably relied in order to be able to provide the advice nor Boroughs' reasoning for the advice; 3. no confirmation by any Novus board member of the receipt of any such advice or the circumstances in which such advice was received; and 4. no explanation for not providing any of the information referred to in the preceding three sub paragraphs.
It seems to me that the "specific exemption paid to financial planners" on which Novus submitted that it relied prior to 1 July 2007, would have been important to Novus. Having regard to the large amount of detailed documentation and affidavits which Novus has produced for the purpose of these proceedings I am not satisfied that Novus, in failing to provide any evidence in support of Mr Gooley's affidavit and failing to provide any reason for not providing such supporting evidence, has satisfied its onus of proving the existence or content or timing of the advice referred to in either [26] or [27] nor that any other director received any such advice.

[122]

Legal advice to Novus from KB Legals as to its liability to pay payroll tax

Novus submitted at [75] that it had taken reasonable steps to comply with the Act. It gave several reasons at [76] in support of that submission including that it had received legal advice on 4 September 2013 which "confirmed the position".
In evidence from pages 57 to 69 in Exhibit R1 is a letter of advice dated 4 September 2013 (the September advice) to the Board of Directors of Novus, marked for the attention of Mr Gooley. The letter is from KB Legals - Solicitors.
The September advice does not state that it confirms any advice previously given. It refers to previous correspondence and states: … Novus is subject to a payroll tax audit and you seek legal advice on the liability of contractors contracted to Novus and in particular commission/brokerage and fee payments made as directed by and to its Authorised Representatives and Contractor/Consultants….
The September advice includes certain observations, refers to some information provided by some Novus ARs, some judicial authorities, some legislative provisions, and the contents of certain documents.
The conclusions in the September advice include the opinion that: 1. Novus ARs are not "employees and would instead be viewed by law as independent contractors quite clearly"; 2. "third party assistance is provided to the Authorised Representatives of a sufficient magnitude to satisfy the exemption provided in Section 3A(2)(c) of the Payroll Tax Act 2007" (sic); and 3. "the general exemptions [in the Pay-Roll Tax Act 1971] would still apply to the Authorised Representatives of Novus by reason of the modus operandi in which the Authorised Representatives conduct their respective businesses".
The September advice was apparently sent to OSR by Novus' external accountant, Mr Kite and is referred to in KB Legals letter of 18 November 2013, at page 47 of Exhibit R1.
I find on that Novus was entitled to and could rely on the September advice. However, I also find that it could not have relied on that advice prior to its receipt on 4 September 2013.

[127]

Findings in respect of penalty

It is essentially a question of fact whether Novus took reasonable care in attending to its tax obligations. Regard must be had to the nature of the obligation requiring the exercise of reasonable care and the particular circumstances in which Novus found itself.
Accordingly, it is for Novus to satisfy the Tribunal, with evidence, of ameliorating matters and Novus' particular circumstances are to be considered in applying the test.
In so far as it is relevant to the imposition of a penalty, Novus submitted that it took reasonable care to comply with its payroll tax obligations by acting on the advice it received from its auditors both before and shortly after the commencement of the Act and the legal advice it received from KB Legal on 4 September 2013.
In relation to the remission provisions: 1. I am not aware of evidence of any relevant disclosure by Novus before it was informed of the investigation. Accordingly, s 28 does not benefit Novus. 2. it seems to me that Novus denies there is any tax liability and I am not aware of evidence of any relevant disclosure by Novus before the completion of the investigation. I note in this regard that following completion of the audit of which Novus was given notice in January 2013, the 2014 Assessments were issued on 28 November 2014. I also observe Mr Afshar's advice to the Tribunal in his opening address on 7 December 2016 that a set of accounts showing what he said were the amounts Novus had actually paid to ARs bank accounts was provided to the Chief Commissioner on 13 April 2015, more than four months after the 2014 Assessments were issued. Accordingly, I am not satisfied that Novus is entitled to the benefit of the reduction in penalty tax allowed for by s 29.
I have had regard to the material before me, including: 1. communications between the Chief Commissioner and representatives of Novus from notification of Novus as to the commencement of the audit in 2013 until the issue of the Assessments, and subsequent communications in respect of the objection and the Objection Determination; and 2. Mr Afshar's concession during the hearing that Mr Kite, provided records, containing what were described as details of payments from Novus' bank account(s) to bank accounts of the ARs, to the Chief Commissioner in 2015, in respect of an audit which commenced some two years earlier and in respect of which Assessments pursuant to the investigation had already issued;
Payroll tax is imposed by the Act and is self-assessing in so far as employers are required to register, lodge monthly returns and make payments within a specified number of days after each relevant month. I am not satisfied that there is any requirement that a Notice of Assessment must be issued prior to the taxpayer's liability to pay tax arising.
The Relevant Period commenced on 1 July 2008.
There is no evidence before me to the effect that the failure to pay tax (on a monthly basis) occurred solely because of circumstances beyond Novus' control or the control of any person acting on behalf of Novus.
I found above that Novus relied on the September advice and I am satisfied that from 4 September 2013 it is arguable that Novus, in relying on that advice, may well have taken reasonable care to comply with the taxation law. However, I also found that Novus could not rely on the September advice in respect of any liability arising before 4 September 2013.
Accordingly, I am not satisfied on the balance of probability that there should be any reduction in the penalty imposed by the Assessments in respect of any taxation liability which arose during the Relevant Period before 4 September 2013.

In response Novus submitted in ASR: 7. The documents behind the affidavits of the witnesses, whose attendance Novus could not procure, ought to be accepted and given weight as business records. In RFS[11] and [12], the respondent argues that it did not concede that these documents were not business records; if that was his position, he did not say so at the hearing and cannot now raise it. In any event, the respondent has not explained why these documents are not business records; they are to be considered business records on their face. There has been no suggestion that they were prepared for the purposes of this proceeding; they predate it. Although the provisions of the Evidence Act 1995 do not apply in this Tribunal, it is clear that the documents in evidence satisfy the requirements of section 69. As submitted during the hearing, the evidence from one witness does not affect the weight of documents pertaining to the evidence of other witnesses, especially because contrary to Ms Yu's invoices, the invoices behind, for example, Mr Yeo's evidence are invoices issued not by Mr Yeo but to him. Further, the documents behind, for example, Mr Yeo's affidavit are corroborated by other documents in evidence behind other witnesses' affidavits. By way of example, invoices from Mr Xu are elsewhere in the applicant's evidence. Finally, the respondent has never said previously that the documents behind these witnesses' affidavits were inaccurate or otherwise not business records; he ought not be permitted to do so now. 8. The respondent tendered Exhibit R1, which contained Mr Yeo's statutory declaration. That document is supported by the records in evidence, including the invoices that are in evidence. Accordingly, the Tribunal should give the statutory declaration and other documents in the evidence full weight. … 30.1. …. There cannot be any question that the invoices are real, were issued and were paid for. There has never been any question as to the genuineness of the documents. It cannot be raised now. 30.2. The submissions at RFS[193] ought to be rejected. The invoices stand as evidence of the facts asserted therein. Clearly, the respondent is able to discern the services, to which the invoices relate. The Tribunal is clearly able to do so too.

The invoices to "Bay" comprise the following: Invoice no. Date Invoicer Particulars Amount (inc GST) 1 9 November 09 Tigermoth Investments Ltd Management advisory fee $750 2 12 Apr 10 Dynarest Pty Ltd Assist with Sky Shades Pty Ltd Capital Raising $550 3 26 November 10 International Othello Capital Pty Ltd Advisory services for MyATM Ltd offer $1925 4 31 Aug 11 Menzies Securites (sic) Pty Ltd Administration Fee for CGU IPO $8800 5 31 Aug 11 Menzies Securities Pty Ltd Fee for Placement of CGU @ 4% $1210 6 16 Mar 12 Royal Corporate Pty Ltd Marketing and advisory services $440 7 1 Aug 12 Jingsheng Xu Translation services during phone conference and various meetings with lawyers, directors, media relations company; board meeting, and offer summary notes from 5 to 12 Jul 12 $845.63 8 15 Sep 12 Jingsheng Xu Translation and research Services $1650 9 1 November 12 Jingsheng Xu Translation services - phone conferences from 2 to 23 Oct 12 $330 10 12 November 12 Menzies Securities Pty Ltd Fee for Placement of SBB @ 4% $1980 11 20 November 12 CBW (AUST) HOLDINGS Pty Ltd Placement Fee for SBB $352 12 23 May 13 Bourse Communications Pty Ltd Investor relations, business media/PR & communications services. Upfront payment on engagement $2750 13 24 Jun 13 Cognitive Wealth Pty Ltd Advisory Services Fee $1980 14 21 Aug 13 York Tian Sunbridge Group Ltd - IPO Summary (FINAL)_SCH - 2 pages (source) $120 15 5 Sep 13 Report Card Pty Ltd Q.BAY.20130905 lll EDM 105,000 TBA lll 500,000 Premium Banners TBA $18,150 16 5 Sep 13 Report Card Pty Ltd 105,000 TBA lll 500,000 Premium Banners TBA $18,150 17 5 Sep 13 The Australian Chinese Age Advertising fees from 6 Sep to 27 Sep 13 $2200 18 Several from Sep 10 to Sep 13 Harman Stockbroking and Financial Services Educational Training Fees/Administration $330 each 19 31 November 13 Menzies Securities Pty Ltd Fee for Placement of SBB @ 4% $440 20 16 Dec 13 Bourse Communications Pty Ltd Management and administration fee $2310 21 6 Apr 14 Boyce Corp Pty Ltd Placement Fee $440 22 7 Apr 14 Ballarat Ceramic Industries Pty Ltd Placement Management Services $308

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Judgment (130 paragraphs)

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