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[2026] NSWCA 122
respondent. Appeal dismissed with costs. The Court upheld the conclusion that the cleaning contracts in issue were employment agency contracts. It did not need to determine grounds 3 and 4. [59]-[60]
The case concerned whether cleaning contractors' arrangements with business clients counted as employment agency contracts for NSW payroll tax. The Court said the question was not limited to whether clients could direct how individual cleaners did their work. It was necessary to consider the contracts as a whole and how the cleaning related to the ordinary activities of each client's business. Because the work was regular, continuous, general cleaning of business premises, and the contracts gave clients some control over workers or standards, the Court upheld the finding that the contracts were employment agency contracts. It dismissed the appeal with costs.
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2,468 words · generated 07/10/2026
The four appellants operated cleaning-service businesses and provided services to commercial and governmental clients in New South Wales, using subcontractors and, in some cases, their own employees. The Chief Commissioner assessed them for payroll tax on the basis that relevant client contracts were “employment agency contracts” under s 37 of the Payroll Tax Act 2007 (NSW). Under ss 38 to 40, that characterisation treats the employment agent as an employer, the person performing the work as its employee for the Act, and specified payments relating to the services as wages. Section 41 addresses the prevention of duplicate payroll tax liability in the circumstances it describes. The statutory provisions are set out at [27]-[30].
5 cited instruments linked from this judgment.
The assessment dispute arose over multiple contracts, including standard short-form cleaning contracts and selected longer-form contracts. The appellants described the disputed arrangements as “no indicia contracts”, meaning, in substance, contracts which specified the cleaning work and its timing but did not give the client control over who performed the work or how it was carried out. [8]-[23] The examples included standard contracts with provisions allowing the contractor to employ staff or contract labour, requiring workers to meet character standards, and allowing the client to object to a worker with due cause. [9]-[13]
Some longer-form agreements contained more detailed requirements. For instance, the MAX Solutions contract required services to comply with reasonable directions and contained provisions addressing unsatisfactory services, but schedules describing the scope and timing of work were not in evidence. [17]-[20] Other contracts were incomplete or lacked material documents. The Court treated those evidentiary gaps as relevant to the appellants' burden of proving their case, rather than filling in the missing terms. [15], [18], [22]-[23], [52]
The primary judge held that the contracts were employment agency contracts. The judge reasoned that the cleaning corresponded to each client's routine business requirements, was regular and continuous, and was performed at the premises where the client carried on business. [35]-[37] The primary judge also concluded that the appellants had not proved the assessments excessive because the evidence did not clearly separate work performed by subcontractors from work performed by employees. [38]-[39]
On appeal, the central challenge was to the role of client control. The appellants argued that the trial judge had wrongly treated contract specifications about what services were provided and when as significant control and direction. They also argued the clients lacked significant control over the cleaners' work. [40]-[41] The Court of Appeal rejected that framing, upheld the primary judge's conclusion on the contracts, and dismissed the appeal with costs. It did not decide grounds 3 and 4 about proof that the assessments were excessive. [59]-[60]
The Court began from the statutory language. Section 37 defines an employment agency contract as a contract under which an employment agent procures another person's services “for a client”. The character of the contract was to be determined principally from its terms and the context in which it operated. [30]-[31], [44] The Court emphasised that the relevant contract was generally the agreement between the employment agent and the client, rather than the practical arrangements between the agent, service provider, and person doing the work. [44]
The Court adopted the accepted construction that “for a client” carries the concept that services must be provided “in and for” the client's business. It explained that the connection between the client's ordinary business activities and the services under the contract gives the contract the necessary character. [45] It also warned against treating “in and for the client's business” as though it were additional statutory text requiring a further gloss. The statutory words remain the object of interpretation. [45]
The test is one of fact and degree. [46] The appellants' position treated a sufficient degree of control over how cleaners performed the tasks as necessary to show the relevant connection, in effect seeking an employment-like relationship between client and cleaner. The Court rejected that as too narrow because it concentrated on one aspect of the relationship and excluded other relevant considerations. [46]-[47]
The purpose of the provisions informed the inquiry. The Court referred to the anti-avoidance purpose described in UNSW Global: preventing payroll tax avoidance through interposing an agent to create the appearance of a contractor relationship where one did not exist in substance. [48] Against that purpose, a relevant question was whether, in the normal course of events, the client's employees would be expected to undertake the activities if they were not supplied through an employment agency contract. Client control could assist with that inquiry, but was not necessarily decisive. [49]
The Court also clarified that the cited passage in Integrated Trolley did not make control over the manner of performance a critical or exclusive test. That passage addressed regularity and continuity, and the client's control over the nature of the work. The Court read it in the context of the broader reasoning in that case and the approach in UNSW Global and E Group. [50]
Applying that approach, the Court found that the clients' premises required regular and continuous cleaning. In the ordinary course, businesses of the kinds involved would be expected to employ cleaners or have cleaning performed by a commercial cleaning business. The work under the contracts corresponded to ordinary cleaning activities expected of those businesses. The work's general nature closely defined what had to be done, even though the contracts varied in how specifically they listed tasks. [55]
The contracts' provisions about who could perform the work and the standard required also reinforced the connection. The standard-form agreements generally required workers to be of proper character and allowed clients, with due cause, to object to a worker. The IPC agreement referred to qualified personnel and background checks. The MAX Solutions agreement went further by permitting reasonable directions. [57] Taken together with the nature and continuity of the cleaning, these matters were sufficient to characterise the contracts as employment agency contracts. [58]
The judgment presents the result as an application and clarification of existing authority, not as a departure from it. Before this appeal, UNSW Global had interpreted “for a client” as services provided in and for the conduct of the client's business. E Group had rejected a challenge to that approach and explained it as a way of giving context-specific meaning to the word “for”. The Court treated that construction as accepted. [32]-[33], [45]
Integrated Trolley had also discussed regularity, continuity, and the extent to which the nature of work was under the client's control and direction. The Court explained that this did not make control over the way a worker performs tasks indispensable to the statutory test. [34], [50] Its reasoning places control among the relevant considerations, while requiring a broader assessment of the contract and the relationship between the services and the client's ordinary business activities. [46]-[50]
After this judgment, the stated rule for the case remains a fact-and-degree inquiry under s 37, rather than a checklist or an automatic rule covering every cleaning arrangement. The judgment confirms that routine, recurring cleaning of business premises can have the necessary connection, even where a contract does not give the client extensive control over the cleaners' methods. [54]-[58] It does not say that every cleaning contract is an employment agency contract. The Court expressly noted that specialised cleaning could present a different case. [56]
The judgment also records the separate evidentiary issue. The appellants bore the onus of proving their objections and review case, and the Court said that incomplete contracts missing material terms could not establish that the contracts were not employment agency contracts. [52] However, because the Court upheld the primary judge's characterisation of the contracts, it did not decide the appeal grounds directed to the alternative conclusion about whether the assessments were excessive. [59] The judgment therefore does not supply an appellate ruling on that alternative ground.
At [45], the Court said: “It is the connection between the ordinary activities of the client’s business and the services that are provided under the contract that gives the contract the necessary character.” In plain English, the analysis looks at how the contracted services relate to what the client ordinarily does as a business. Merely asking whether the client can instruct a worker about the method of each task is not enough.
At [46], the Court described the connection as “a question of fact and degree”. This means the answer depends on the particular contract and circumstances. The judgment does not turn the test into a single-factor rule or specify a numerical threshold.
At [49], the Court stated that the extent of client control “may assist” but “is not necessarily determinative”. In plain English, control can be evidence, but the absence of a strong right to direct individual cleaners does not end the inquiry. The Court also considered whether employees of the client would normally be expected to undertake the activities if workers were not supplied through an employment agent. [49]
At [54], the Court said the primary judge was right to focus on the closeness of the relationship between cleaning and the ordinary conduct of the business requiring it. That identifies the key shift from the appellants' argument: the inquiry was broader than contractual control over how cleaners did their work.
At [55], the Court explained that the cleaning was regular and continuous and matched normal cleaning activities expected of businesses of the relevant kinds. The work's general nature closely defined the work required. The Court treated those characteristics as important to the statutory connection.
At [56], the Court cautioned that not all cleaning contracts would necessarily qualify. It gave cleaning external windows of a high-rise building as a possible example of specialised work not ordinarily expected to be undertaken by the business. The example illustrates a boundary, but the Court did not decide any case involving that hypothetical service.
At [58], the Court concluded that the combined matters were sufficient to characterise the contracts as employment agency contracts. The result depended on the particular contracts and evidence, not on a general statement that all outsourced cleaning attracts payroll tax treatment under these provisions.
The decision is most directly relevant to contracts for regular and continuous general cleaning of premises used by a business. The reasoning is particularly pertinent where the work corresponds to routine cleaning activities the business would ordinarily need, and where the contract specifies services and timing but gives the client limited control over the cleaners' methods. [54]-[58]
The decision also matters where client control takes forms other than day-to-day instruction about how tasks are performed. The contracts discussed included rights to object to workers, requirements about worker character or qualifications, background checks, and service-quality standards. The Court treated these provisions as reinforcing the characterisation, rather than as independent requirements that must appear in every contract. [57]-[58]
The decision is not a categorical rule for every service labelled cleaning. The Court distinguished the possibility of specialised work that would not normally be undertaken by the business, using high-rise external-window cleaning as an example. Relevant considerations identified in the judgment include the ordinary activities of the client's business, the nature and frequency of the service, regularity and continuity, the terms of the contract, and the extent of client control. [44]-[50], [56]
A further relevant pattern is an evidentiary record that does not contain the full contract. The Court said that where material terms are missing, the taxpayer cannot establish the contract's character merely by producing the incomplete version. [52] It also noted the primary judge's concern that the appellants had not separated subcontractor work from employee work for the assessments, but the appellate court did not determine grounds 3 and 4 on that issue. [38]-[39], [59]
The judgment text identifies no later court decisions treating this decision as precedent. It is a 2026 Court of Appeal judgment, and the material supplied contains no subsequent judgments or citations to it. Accordingly, later judicial treatment, including whether a court has followed, distinguished, or questioned its reasoning, cannot be established from this judgment alone.
The judgment itself describes its relationship with earlier authorities. It applied E Group's construction of “for a client” and relied on the approach in UNSW Global. [45], [48] It explained the control-related passage in Integrated Trolley and considered that case's observation about cleaning and security services. [50], [56] Those are the relationships the text supports; they are not evidence of how later courts have treated SKG Cleaning Services.
For research use, the central propositions to track in any later treatment are the fact-and-degree nature of the s 37 connection, the non-determinative role of control over work methods, and the distinction between ordinary recurring cleaning and potentially specialised services. These are propositions expressed in this judgment. Whether later decisions adopt or qualify them requires sources beyond the judgment supplied here.
The judgment does not decide exactly how the test applies to specialised or infrequent cleaning. High-rise external-window cleaning is only a hypothetical example at [56]. The Court did not set out a complete test for distinguishing specialised work from ordinary business cleaning, or decide how much specialisation or infrequency would be sufficient to change the characterisation.
Nor does the judgment establish that the presence or absence of any one contractual control is decisive. It identifies control as potentially helpful, not conclusive, and points to provisions about personnel, standards, and directions in the contracts before it. [49], [57] The relative weight of those provisions in a different contract remains a matter for the fact-and-degree assessment.
The Court also did not decide the alternative grounds concerning whether the assessments were excessive. Those grounds became unnecessary once the Court upheld the finding that the contracts in issue were employment agency contracts. [59] The judgment therefore does not resolve, on appeal, the consequences of evidence that fails to distinguish amounts paid for subcontracted work from amounts associated with employees, although it records the primary judge's concern about that evidence. [38]
Finally, some contracts in the case were incomplete or missing referenced schedules. The Court stated that the appellants could not discharge their burden by producing incomplete contracts that appeared to omit material terms. [52] It did not decide how the characterisation would have differed if the complete documents had been produced. The judgment's treatment of the HINO Motor Sales contract was also limited: because the services appeared to have been performed by the appellants' employees, the Court said there was no reason to think the assessment was excessive on that account. [51]
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: SKG Cleaning Services Pty Ltd v Chief Commissioner of State Revenue [2026] NSWCA 122
Hearing dates: 9 June 2026
Date of orders: 30 June 2026
Decision date: 30 June 2026
Before: Leeming JA at [1]
Ball JA at [2]
Free JA at [61]
Decision: Appeal be dismissed with costs.
Catchwords: TAXES AND DUTIES – payroll tax – whether contracts for the provision of cleaning services are employment agency contracts – whether services provided “in and for” the client’s business –consideration of significance of degree to which the client controls the way in which the activities are performed by the service provider – appeal dismissed
Legislation Cited: Payroll Tax Act 2007 (NSW), ss 6, 13, 37, 38, 39, 40, 41
Taxation Administration Act 1996 (NSW), ss 88, 97
Cases Cited: Chief Commissioner of State Revenue v E Group Security Pty Ltd (2022) 109 NSWLR 123; [2022] NSWCA 115
Chief Commissioner of State Revenue v Integrated Trolley Management Pty Ltd [2023] NSWCA 302
SKG Cleaning Services Pty Ltd v Chief Commissioner of State Revenue; Ezko Property Services (Aust) Pty Ltd atf The Ezko Unit Trust v Chief Commissioner of State Revenue [2025] NSWSC 1219
UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; (2016) 104 ATR 577
Category: Principal judgment
Parties: SKG Cleaning Services Pty Ltd ACN 162 372 125 (First Appellant)
SKG Pty Limited ACN 076 694 061 (Second Appellant)
Ezko Property Services (Aust) Pty Ltd atf The Ezko Unit Trust ACN 111 037 659 (Third Appellant)
Ezko Property Services (Aust) Retail Pty Ltd ACN 137 527 283 (Fourth Appellant)
Chief Commissioner of State Revenue (Respondent)
Representation: Counsel:
S Balafoutis SC with D Stretton (Appellants)
A Gerard with RE Raffell (Respondent)
Solicitors:
Marque Lawyers (Appellants)
Crown Solicitor of New South Wales (Respondent)
File Number(s): 2025/444038
Publication restriction: Nil
[This headnote is not to be read as part of the judgment]
The appellants provide cleaning services to commercial and governmental enterprises in New South Wales using subcontractors and, in some cases, their own employees to undertake the relevant cleaning work.
The Chief Commissioner of State Revenue assessed the appellants as liable to pay payroll tax on the basis that a number of the contracts under which the appellants provide those services are “employment agency contracts” within the meaning of s 37 of the Payroll Tax Act 2007 (NSW) (Payroll Tax Act), with the consequences that (1) the subcontractors who perform the work in respect of those contracts are taken to be employees of the appellants; and (2) the appellants are liable to pay payroll tax calculated by reference to the “wages” paid to those persons for that work as determined in accordance with s 40 of the Payroll Tax Act.
The Chief Commissioner disallowed objections to the assessments. In proceedings by way of review under s 97 of the Taxation Administration Act 1996 (NSW), the primary judge concluded that each of the contracts in question was an employment agency contract and that the appellants were liable to pay payroll tax (plus penalties) in the amounts assessed by the Chief Commissioner.
The Court (Ball JA, Leeming and Free JJA agreeing) held, dismissing the appeal:
Chief Commissioner of State Revenue v E Group Security Pty Ltd (2022) 109 NSWLR 123; [2022] NSWCA 115, applied.
UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; (2016) 104 ATR 577, applied.
Chief Commissioner of State Revenue v Integrated Trolley Management Pty Ltd [2023] NSWCA 302, considered.
LEEMING JA: I agree with Ball JA.
BALL JA: The appellants, SKG Cleaning Services Pty Ltd (SKGC), SKG Pty Ltd (SKG) (together, the SKG Parties), Ezko Property Services (Aust) Pty Ltd atf The Ezko Unit Trust (Ezko Property) and Ezko Property Services (Aust) Retail Pty Ltd (Ezko Retail) (together, the Ezko Parties), carry on the business of providing cleaning services to commercial and governmental enterprises in New South Wales using subcontractors and, in some cases, their own employees to undertake the relevant cleaning work. The principal question raised by this appeal is whether a number of the contracts under which the appellants provide those services are “employment agency contracts” within the meaning of s 37 of the Payroll Tax Act 2007 (NSW) (the Payroll Tax Act) with the consequences that (1) the subcontractors who perform the work in respect of those contracts are taken to be employees of the appellants; and (2) the appellants are liable to pay payroll tax calculated by reference to the “wages” paid to those persons for that work as determined in accordance with s 40 of the Payroll Tax Act.
A further question is raised by the appeal if the Court concludes that all or some of the contracts in question are not employment agency contracts. That question is whether the appellants have discharged their onus of proving that the assessments issued by the Chief Commissioner which were the subject of the review in the Court below under s 97 of the Taxation Administration Act 1996 (NSW) were excessive. Precisely how that question arises is explained shortly.
The primary judge concluded that each of the contracts in question was an employment agency contract and that therefore the appellants were liable to pay payroll tax (plus penalties) in the amounts assessed by the Chief Commissioner. The primary judge also concluded that, even if he was wrong in relation to one or more of the contracts, the appellants had failed to discharge their onus of proving that the assessments were excessive. That was because they had failed to prove precisely what work had been performed under those contracts by employees (in respect of whom payroll tax had been paid) and what work had been performed by subcontractors: see SKG Cleaning Services Pty Ltd v Chief Commissioner of State Revenue; Ezko Property Services (Aust) Pty Ltd atf T**he Ezko Unit Trust v Chief Commissioner of State Revenue [2025] NSWSC 1219 (PJ).
During the relevant period, 30 June 2017 to 30 June 2021 in the case of the SKG Parties and 30 June 2019 to 30 June 2023 in the case of the Ezko Parties, SKG had 43 business clients across various industries to whom it provided regular cleaning services of commercial offices. SKGC had 104 business clients across various industries to whom it provided cleaning services of a variety of premises, including large retail premises and governmental and institutional premises. It also supplied cleaning services to 12 commercial property managers or facility managers who managed properties or facilities for the relevant landlord. For many clients, SKG and SKGC used standard “short‑form” contracts. Not all those contracts were in evidence (some could not be found). In the case of SKG, 60 were in evidence, one of which (the contract with Sarina Russo) contained some additional terms suggested by the client. In the case of SKGC, there were 95 such contracts although again that included a contract with Sarina Russo which contained some additional terms.
In addition to those contracts, both SKG and SKGC entered into longer form contracts, principally with major clients, which had been the subject of negotiation and the terms of which differed. The primary judge concluded that, like the standard form contracts, each of those was an employment agency contract. On appeal, the SKG Parties only challenge the primary judge’s conclusions in relation to some of those contracts. In the case of the SKG Parties, those contracts are:
(a) A contract dated 5 March 2013 between SKG and Campbell Page Pty Ltd (Campbell Page); (b) A contract dated 1 August 2017 between SKGC and PYBAR Mining Services; (c) A contract dated 3 January 2018 between SKGC and McCain Foods (Aust) Pty Ltd (McCain Foods); (d) A contract dated 10 June 2020 between SKGC and IPC Information Systems (Australia) Pty Ltd (IPC Information Systems); (e) A contract dated 1 August 2016 between SKGC and MAX Solutions Pty Ltd (MAX Solutions).
(a) A contract between Ezko Property and HINO Motor Sales Australia Pty Ltd (HINO Motor Sales) the terms of which are evidenced by an undated tender submitted by Ezko Property; (b) A contract between Ezko Retail and Knight Frank Australia Pty Ltd (Knight Frank) relating to retail sites at Cherrybrook and Bella Vista, the terms of which are evidenced by a tender letter dated 13 October 2020 and an exchange of emails, the last of which is dated 10 December 2020; (c) A contract dated 15 November 2022 between Ezko Retail and Charter Hall Holdings Pty Limited (Charter Hall).
The appellants describe each of the contracts which they maintain on appeal are not employment agency contracts as “no indicia contracts”, although they might more accurately be described as “no control” or “limited control” contracts. They are said to have no indicia of an employment agency contract because they merely describe the cleaning work to be done and when it is to be done, but they do not give the relevant client any control, either directly or through the employment agent, of who is to do that work or how it is to be done.
It is not necessary to describe each of the contracts in question in detail. An example of the standard form contracts entered into by the SKG Parties is the contract dated 25 November 2015 between SKG and Ministry of Coffee Pty Ltd, which represents the high point of the SKG Parties’ case. Clause 1 of that contract set out the parties and relevantly provides:
| 1 AGREEMENT | | | Cleaning Days: | 7 days per week | | Cost Per Annum: | $10,920 + GST | | Cleaning Specifications Clean amenities at Lyne Park, Rose Bay during lunch time. |
The Contractor reserves the right to employee [sic] staff or contract labour as it see[s] fit.
3 DUTIES OF THE CONTRACTOR
3.1 The Contractor must:
a) Perform the Services in a conscientious expeditious and professional manner and to a standard reasonably requested by the Principal;
b) Advise the Principal of the names of its employees if requested, and ensure it only employs persons of proper character, in compliance with all laws.
c) Follow all security procedures required by the Principal in relation to its access to the Premises.
3.2 The Principal may with due cause at any time object to an employee. If this occurs, the Contractor must cease to provide the Services of that employee with reasonable notice and an alternate person must be provided. That alternate person must be acceptable to the Principal.
3.3 The Principal acknowledges that the Contractor does not provide services exclusively for the Principal.
The Contractor will supply all equipment and chemicals required to complete the scope of works.
Some of the standard form contracts entered into by SKG and SKGC contain detailed schedules setting out what activities are to be undertaken in each area to be cleaned (such as “empty bins”, “wipe down bench tops”, “wipe down stainless steel”, “clean sinks”, “vacuuming”, “mopping”) and the frequency with which the tasks are to be done (daily, weekly, fortnightly etc). But again, the characteristic that they are said to have in common is that they do not give the client control over how the work is to be done.
The contract between SKG and Campbell Page and the contract between SKGC and McCain Foods relevantly contain similar terms to the standard form contracts. Each places obligations on the SKG Party to ensure that its employees and subcontractors comply with certain standards set out in the contract and each gives the client a right to require the SKG Party to cease to provide the services of a person if the person fails to meet the required standards in the opinion of the client or, alternatively, if the client makes a reasonable request to that effect. Each also includes some form of schedule setting out what work is to be done and how frequently it is to be done.
The contract between SKGC and PYBAR Mining Services in evidence sets out the services to be performed under the contract and the frequency with which they are to be performed together with several other contractual terms, including price. However, the terms on which those services are to be performed appear to be set out in “PYBAR Contract Terms” which are said to be attached to the contract, but which are not.
Like the other contracts, the contract between SKGC and IPC Information Systems contains a schedule setting out what work is to be done and its frequency. It does not give the client a specific right to request that the services not be provided by a particular person. However, under cl 2, the “Contractor shall provide qualified personnel to perform the services specified in the schedule of work”. Clause 5 gives the client a right to terminate the contract upon “any default or breach in the terms and conditions set forth in this agreement which continues without cure for thirty (30) days after written notice … to correct such a breach or default”. Clause 13 states that the client may conduct or may require SKGC to conduct “background, reference, educational, criminal record, credit and other checks … for all personnel who are assigned to perform [SKGC’s] obligations …”.
The final contract concerning the SKG Parties is the contract dated 1 August 2016 between SKGC and MAX Solutions, which Mr Balafoutis SC, who appeared for the appellants, frankly conceded was “on [the] border”, and perhaps represents the low point of the appellants’ case. Clause 3 of that contract provides:
PROVISION OF SERVICES
(a) The Service Provider must provide the Services:
(i) for the Service Fee;
(ii) with the due care and skill, and to a standard reasonably to be expected of a person both competent and experienced in providing services similar to the Services;
(iii) subject to clause 12, from (and including) the Commencement Date to (and including) the Expiry Date, or by such other date as MAX Solutions may direct by giving notice to the Service Provider in writing;
(iv) in accordance with the Agreement Details;
(v) in accordance with any Appendix attached to this Agreement;
(vi) in accordance with all applicable Legislative Requirements and requirements of relevant Authorities; and
(vii) in accordance with MAX Solution's Representative's reasonable directions.
The contract states under the heading “Services” in the agreement details “‘See Appendix A’ for scope of works” and under the heading “Service Fee” “‘See Appendix B’ for schedule of work”. Those schedules were not in evidence.
Clause 4.2 provides:
Quality of Services
If MAX Solutions is not reasonably satisfied with the quality of any part of the Services provided by the Service Provider:
(a) MAX Solutions may refuse to provide payment for that part of the Services (Non-Performed Services);
(b) MAX Solutions may perform, or have performed, the Non-Performed Services; and
Clause 5 relevantly provides that SKGC “indemnifies MAX Solutions against all costs incurred by MAX Solutions in connection with having the Non-Performed Services performed in accordance with clause 4.2(b) that exceed the costs that would have been incurred by MAX Solutions if the Service Provider had performed the Non-Performed Services in accordance with this Agreement”.
The contract between Ezko Property and HINO Motor Sales is only evidenced by a tender document. That document relevantly states that “At Ezko, we employ our staff directly on all contracted sites and pay them the award wages with all … entitlements …”. Something more will be said about the significance of that statement later in this judgment.
The contract between Ezko Retail and Knight Frank is evidenced by a written quote and an exchange of emails which accepts that quote. However, the quote itself refers to “our enclosed submission for the cleaning services assessment criteria” which is not in evidence. Consequently, it is not possible to say what the terms of this contract are.
The contract between Ezko Retail and Charter Hall relates to a number of sites owned by Charter Hall. It contains detailed provisions including provisions requiring the services to be performed “efficiently, promptly, diligently and with due expedition” and “in the most cost effective manner”, in accordance with “the reasonable directions of [Charter Hall]” and “using due skill and expertise”. Clause 4.10 permits Charter Hall to give Ezko Retail a notice requiring Ezko Retail to remove a member of its personnel where it “reasonably believes that [the] member … in performing the Services [as defined in the agreement] is performing at an unacceptable level of service or acting in an unsuitable manner in the Property”. The services to be performed under the contract are detailed in a “Technical Services Specification”, which is not in evidence.
| Assessment summary Your assessment details for the period 01-JUL-2016 to 30-JUN-2017 are: | | Tax payable | 38,830.65 | | Interest assessed as at 10-DEC-2020 | 1,758.26 | | Penalty tax | 9,707.66 | | Interest on penalty tax | 0.00 | | Assessment Total | 50,296.57 | | Less amounts previously paid | 0.00 | | Total amount payable | $50,296.57 | | If you do not pay the full amount by the due date you will be charged interest. You can find information on the current rate of interest at www.revenue.nsw.gov.au. For more information refer to the back of this notice. If you have any questions about this assessment, contact [redacted] on [redacted]. [redacted] Chief Commissioner of State Revenue |
| Supporting information | | Name: Client ID: Assessment no: Issue date: | SKG CLEANING SERVS PTY LTD [Redacted] [Redacted] 20-OCT-2022 | | Assessment calculation | | Period 01-JUL-2016 to 30-JUN-2017 | $ | $ | | NSW wages | 1 442 585.00 | | | NSW apprentices/trainee wages | 0.00 | | | Gross NSW wages | 1 442 585.00 | | | Interstate wages | 118 172.00 | | | Total Australian wages | 1 560 757.00 | | | Threshold entitlement | 730 096.04 | | | Payroll tax liability @ 5.45% | | 38 830.65 | | NSW apprentices/trainee offset | | 0.00 | | Balance of payroll tax liability | | 38 830.65 | | Summary | | | | Total payroll tax liability | | 38 830.65 | | Interest assessed at 10-DEC-2020 | | 1 758.26 | | Penalty tax | | 9 707.66 | | Interest on penalty tax | | 0.00 | | Assessment total | | 50 296.57 | | Less amount previously paid | | 0.00 | | Total amount payable | | $50 296.57 |
Imposition of payroll tax
Payroll tax is imposed on all taxable wages.
What are wages?
(1) For the purposes of this Act, wages mean wages, remuneration, salary, commission, bonuses or allowances paid or payable to an employee, including—
(a) …
…
(e) an amount that is included as or taken to be wages by any other provision of this Act.
(2) For the purposes of this Act, wages, remuneration, salary, commission, bonuses or allowances are wages—
(a) whether paid or payable at piece work rates or otherwise, and
(b) whether paid or payable in cash or in kind.
(3) This Act applies in respect of wages referred to in subsection (1) (a)–(e) that are paid or payable to or in relation to a person who is not an employee in the same way as it applies to wages paid or payable to an employee (as if a reference in this Act to an employee included a reference to any such person).
37 Definitions
(1) For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express or implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent.
(2) However, a contract is not an employment agency contract for the purposes of this Act if it is, or results in the creation of, a contract of employment between the service provider and the client.
(3) In this section—
contract includes agreement, arrangement and undertaking.
38 Persons taken to be employers
For the purposes of this Act, the employment agent under an employment agency contract is taken to be an employer.
39 Persons taken to be employees
For the purposes of this Act, the person who performs work for or in relation to which services are supplied to the client under an employment agency contract is taken to be an employee of the employment agent.
40 Amounts taken to be wages
(1) For the purposes of this Act, the following are taken to be wages paid or payable by the employment agent under an employment agency contract—
(a) any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract,
(b) the value of any benefit provided for or in relation to the provision of services in connection with the employment agency contract that would be a fringe benefit if provided to a person in the capacity of an employee,
(c) any payment made in relation to the service provider that would be a superannuation contribution if made in relation to a person in the capacity of an employee.
(2) Subsection (1) does not apply to an employment agency contract to the extent that an amount, benefit or payment referred to in that subsection would be exempt from payroll tax under Part 4 (other than under section 50 or Division 4 or 5 of that Part), or Part 3 of Schedule 2 (other than clause 5 or 13A), had the service provider performed the services as an employee of the client, if the client has given a declaration to that effect, in the form approved by the Chief Commissioner, to the employment agent.
41 Liability provisions
Subject to section 42, if an employment agent under an employment agency contract—
(a) by arrangement procures the services of a service provider for a client of the employment agent, and
(b) pays payroll tax in respect of an amount, benefit or payment that is, under section 40, taken to be wages paid or payable by the employment agent in respect of the provision of those services in connection with that contract,
no other person (including any other person engaged to procure the services of the service provider for the employment agent’s client as part of the arrangement) is liable to pay payroll tax in respect of wages paid or payable for the procurement or performance of those services by the service provider for the client.
As is apparent, under these provisions payroll tax is payable on amounts a person (the employment agent) who under a contract procures the services of another person for a client pays or is liable to pay to that other person in respect of the provision of services in connection with the contract. Section 41 prevents payroll tax from being paid more than once on any such payments. The relevant contract is the contract between the employment agent and the client: see Chief Commissioner of State Revenue v Integrated Trolley Management Pty Ltd [2023] NSWCA 302 (Integrated Trolley) at [32]ff (Basten AJA; with whom Ward P at [5] and Payne JA at [6] agreed). Understood in that way, the provisions require consideration of two principal issues. The first is whether it can be said that that contract has the character of a contract by which one person (that is, the employment agent) procures the services of another person for a client of the employment agent. The second requires consideration of whether the amounts paid (or other benefits provided) to the service provider are paid or provided in respect of services in connection with that contract.
It is the first of these issues that requires consideration in this case. The resolution of that issue requires characterisation of the contract as having the relevant quality. As the members of the Court pointed out in Integrated Trolley, that is a fact-based enquiry. It also requires identification of what is meant by the expression “procures the services of another person … for” the client. The two tasks are not wholly discrete, since the process of characterisation gives content to the expression. The question of characterisation involves questions of judgment and degree. The meaning of the expression depends heavily on what is meant by the word “for”, a word which was described by this Court (Bell CJ, Gleeson and Leeming JJA) in Chief Commissioner of State Revenue v E Group Security Pty Lt**d (2022) 109 NSWLR 123; [2022] NSWCA 115 (E Group) at [46] as “protean”, and one which was “capable of bearing a very wide range of meanings depending upon context”. It will be necessary to return to these questions later in this judgment.
Applying a purposive construction, as mandated by s 33 of the Interpretation Act, I think that the definition of an employment agency contract as being a contract under which a person (the employment agent) “…procures the services of another … for a client of the employment agent” can be read as meaning a contract under which a person procures the services of another person in and for the conduct of the business of the employment agent's client. That was the intended scope of the provisions. It does not do too much violence to the text (Taylor v The Owners – Strata Plan 11564 [(2014) 253 CLR 531; [2014] HCA 9] at [40]) to confine the operation of the phrase “for a client” in that way, rather than as meaning for the client’s benefit. (emphasis in original)
As the primary judge observed (at PJ[65]) a challenge to the correctness of that statement was rejected by this Court in E Group at [42] and [46].
The primary judge also referred (at PJ[68]) to the following passage from the judgment of Basten AJA in Integrated Trolley at [86]:
In addressing the application of the statutory test, as explained in [UNSW Global] and accepted by this Court in [E Group], the Chief Commissioner emphasised that the individuals who worked for the client should do so in much the same way as would an employee of the client. That meant that the business would involve work having a degree of regularity and continuity, and where the nature of the work was to a significant degree under the control and direction of the client. So long as the qualifiers are maintained, this approach should be accepted.
90 … Each of these contracts contained detailed specifications governing the nature of the services to be delivered, where and when they were to be delivered and how much time was to be spent delivering them. In this way, each contract reveals a close and relevant connection between the services to be performed (being the work described in the specification) and the ordinary conduct of the business of the client (which necessarily governed the content of the specification). Although the services were provided to a wide range of clients across a wide range of industries and government sectors, each client sought essentially the same thing: a cleaning service appropriate to the routine requirements of its particular business.
91 It is not to the point that none of the clients was itself a commercial cleaning business. A service may be provided ‘in and for’ a client’s business even if the service is not of the kind that the client offers as part of its revenue earning or ‘core’ services: Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue (NSW) [2019] NSWSC 657; (2019) 109 ATR 879 at [104] (Ward CJ in Eq).
92 I do not accept that the fact that the services were all required to be delivered on-site is a neutral factor. Nor can I accept that the regularity and continuity with which the work was to be performed is a neutral factor. It is true that it is in the very nature of cleaning services that they must be delivered regularly and at the premises to be cleaned. But these are circumstances that cannot be ignored just because they are in the very nature of cleaning services. To the contrary, these are circumstances that tend to demonstrate the closeness of the relationship between cleaning services, on the one hand, and the ordinary conduct of the business that requires them, on the other. It would be more appropriate to say that it is in the very nature of cleaning services that they have a strong tendency to reflect the day-to-day needs of the business to which they are provided.
96 … In the case of the cleaning services supplied by [the appellants] in these proceedings, the clients may not have control over the workers in the sense of having a contractual right to control or direct them as employees, but they remain entirely in command of the services to be provided by those workers. In every case, it is the clients who decide what services are provided and when they are provided. These are matters that are inevitably governed by the exigencies of the client’s business, not by [the appellants]. They are matters that find expression in even the simplest contract specifications.
97 … [The approach referred to by Basten AJA in Integrated Trolley at [86]] involves an assessment of matters such as the regularity and continuity of the work and the degree to which the ‘nature of the work’ is under the ‘control and direction of the client’. In the present case, the contracts do have these features. They are for the provision of regular and continuous services, the nature of which is to a significant degree under the control and direction of the client.
For similar reasons, the primary judge thought that all the other contracts then in issue were employment agency contracts.
As the primary judge pointed out, having reached those conclusions, it was strictly unnecessary for him to consider whether the appellants had discharged their onus of proving that the assessments were excessive. However, he indicated that had it been necessary, he would have accepted the Chief Commissioner’s submissions on that aspect of the case. He gave the following reasons:
113 … In circumstances where there is no clear evidence about the extent to which any particular client contract was performed through the use of subcontracted labour, as opposed to employed labour, I would not have been able to conclude that any particular assessment was excessive and if so by how much. The solution proposed by the [appellants] was that I would in that event set the assessments aside and remit them to the Chief Commissioner to determine which subcontractor payments should be excised from taxable wages, would only be productive of further dispute.
1 The trial judge erred in finding that the “no indicia” contracts gave the clients significant “control and direction” merely because they specified what services were provided and when they were provided: J[96].
2 The trial judge should have found that the clients lacked significant “control and direction” for the purposes of [the Payroll Tax Act] s 37 because the “no indicia” contracts did not give the clients a right to exercise a significant (or any) degree of control and direction over the work performed by the cleaners.
It is convenient to take these grounds together. Before addressing them directly, it is necessary to say something about the correct construction of s 37 of the Payroll Tax Act.
As has already been mentioned, the critical question raised by s 37 is whether it can be said that the contracts under which the services are provided have the character of being contracts under which the employment agent procures the services of another person for a client of the employment agent.
The character of a contract is to be determined principally from its terms and the context in which it operates. As Basten AJA explained at [111] in Integrated Trolley:
[T]he application of s 37 must be assessed by reference to the terms of the employment agency contract relied upon by the Chief Commissioner as the basis of the assessment under challenge. In principle, that will be the agreement between the employment agent and its client. Generally, the actual operation of the agreement, including arrangements between the employment agent and its service providers and between the service providers and the persons performing the work will not form a necessary part of the analysis, and will provide little guidance as to the characterisation of the employment agency contract.
It is now accepted that the expression “for a client” carries with it the concept that the services must be provided in and for the client’s business. It is the connection between the ordinary activities of the client’s business and the services that are provided under the contract that gives the contract the necessary character. As the Court explained in E Group at [46], this approach does not involve an impermissible gloss on the section but rather is a means by which a precise meaning is given to an expression that can have many. Having said that, it would be an error then to seek to give further meaning to the expression “in and for the client’s business”. It is the statutory text that must be interpreted, not the words chosen by a court to describe the meaning of that text as part of the interpretative exercise.
Whether the required connection exists is a question of fact and degree. Underlying the appellants’ submissions, and their grounds of appeal, is the contention that the necessary connection can only exist if the client has a sufficient degree of control over the way in which the activities to be undertaken by the service provider are to be carried out so that it can be said that the nature of the relationship between the client and service provider is akin to that of employer and employee.
In my opinion, that involves a different test from the one accepted by the authorities and involves an overly narrow interpretation of the section. The test is overly narrow because it focusses on one aspect of the connection between the services provided under the contract and the client’s business – namely, the degree to which the client through the contract controls how the service provider performs the services provided under the contract – to the exclusion of other considerations.
The provisions relating to employment agency contracts were included in the Payroll Tax Act as an anti-avoidance measure. As White J explained in UNSW Global at [41]:
“… the mischief against which the employment agency contract provisions was directed was the avoidance of payroll tax through the interposition of an agent to give the appearance of a contractor relationship where one did not exist in substance. … Although the legislation did not use the language of the Pay-roll Tax (Amendment) Act 1985 [the legislation that first introduced the employment agency contract provisions] which defined an employment agent as one who procured the services of a person for another under an arrangement where the worker, although not becoming an employee of either the agent or the client, carried out duties of a similar nature to those of an employee, that was the very mischief to which the 1998 provisions [which found their way into the Payroll Tax Act] were directed …”
Relevant to the question whether liability for payroll tax might be avoided is the extent to which, in the normal course of events, it could be expected that the relevant activities would be undertaken by employees of the client if they were not supplied by an employment agent under an employment agency contract. The degree to which the client has control over the activities of the service provider may assist in answering that question, but it is not necessarily determinative.
The appellants placed weight on the passage from the judgment of Basten AJA in Integrated Trolley at [86], reproduced at [34] above. But there is nothing in that passage which suggests that the degree to which the client controls the way in which the activities are performed by the service provider is critical. Indeed, his Honour does not refer to the degree of control the client has over how the activities are to be performed. Rather, his Honour refers to the degree of regularity and continuity in the activities performed under the contract and the extent to which the client controls the nature of the work. Moreover, it would be wrong to focus on one paragraph of what is a detailed discussion of the issue in which Basten AJA clearly accepts the approach adopted by White J in UNSW Global and approved in E Group.
Two other points should be made before addressing the grounds of appeal directly. First, it appears from what has been said about the contract between Ezko Property and HINO Motor Sales that all the services provided under that contract were provided by employees of Ezko Property (or possibly a related company). The parties accepted (albeit in relation to different contracts) that such a contract could not be an employment agency contract: see PJ[107]. However, any assessment issued by the Chief Commissioner to Ezko Property would properly include payroll tax payable on the wages and other benefits paid to those persons. As a result, there is no reason to think that the assessment was excessive because it included wages and other benefits of those employees. For that reason, nothing further needs to be said about that contract.
Second, it is apparent from what has been said that the contract between SKGC and PYBAR Mining Services and the contract between Ezko Retail and Knight Frank which are in evidence are incomplete and are missing terms which are material to the correct characterisation of the contracts. The appellants bore the onus of proving their case on their objection to the Chief Commissioner’s assessments: see Taxation Administration Act 1996 (NSW) s 88. Similarly, they bore the onus of proof on their application to the Court below for a review of the Chief Commissioner’s decision. In order to discharge that onus, it was necessary for them to prove that the relevant contracts were not employment agency contracts. However, they could not do that by producing incomplete contracts which on their face appear to be missing material terms. Accordingly, nothing more needs to be said about those contracts either.
It follows that the appeal must be dismissed with costs.
FREE JA: I agree with Ball JA.
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SKG Cleaning Services Pty Ltd
Chief Commissioner of State Revenue
(2022) 109 NSWLR 123
(2014) 253 CLR 531
Appeal dismissed with costs. The Court upheld the conclusion that the cleaning contracts in issue were employment agency contracts. It did not need to determine grounds 3 and 4. [59]-[60]
Against that background, it is possible to turn to the grounds of appeal.
Both grounds of appeal proceed on the assumption that the critical question is the degree of control and direction the client (here, the appellants) had over the work performed by the cleaners. For the reasons given earlier, that focus is too narrow. The primary judge was correct to focus more broadly on “the closeness of the relationship between cleaning services, on the one hand, and the ordinary conduct of the business that requires them, on the other”: see PJ[92]. And with that focus, his Honour was right to conclude that the cleaning contracts in issue were all employment agency contracts.
The nature of each of the businesses carried on by the clients of the appellants whose contracts are in issue meant that the premises where they carried on business required regular and continuous cleaning. In the normal course of events, it is to be expected that as part of carrying on their ordinary business those clients would employ cleaners to undertake that work, unless the work was performed by a commercial cleaning business. In each case, the work required to be performed by the service providers under the contracts between the appellants and their clients was of that nature. The work was regular and continuous. Although different contracts contained different levels of detail about the precise work to be performed, which to some extent corresponds to the complexity of the task, a feature of all of them is that the services to be performed under them correspond to the normal cleaning activities that a business of the relevant type would be expected to undertake. The nature of the work – that is, general cleaning of the relevant premises – necessarily defines closely the nature of the work that was required to be done.
The point made in the previous paragraph (that the cleaning of premises occupied by a business is typically part of the ordinary activities of that business) was what no doubt led Basten AJA to say in Integrated Trolley at [54] that “while the terms of the employment agency contract must, in each case, be addressed, the characterisation of cleaning and security services as otherwise than services provided in and for the conduct of the client’s business is suggestive of error”. That, however, is not to say that all contracts for the provision of cleaning services will be employment agency contracts. It is possible to envisage contracts for specialised cleaning services that would not normally be expected to be undertaken by the business because of matters such as the specialised nature of the service and the frequency with which it is performed. The cleaning of external windows of a high-rise building is an example. But none of the contracts in issue in this case falls into that category.
The conclusion of the previous paragraphs is reinforced by the fact that each of the contracts gives the client some control over who is to perform the cleaning services and the standard to which the work is to be performed. The standard form contracts between the SGK Parties and their clients require the SKG Parties to ensure that they only employ persons of “proper character” and permits the client “with due cause at any time [to] object to an employee”. The only contracts in issue that do not have terms specifically of that type are the contracts between SKGC and IPC Information Systems and Max Solutions. But the contract with IPC Information Systems has terms directed at giving it some control over who is to do the work by requiring that the work be performed by qualified people and by requiring SKGC to carry out background checks on the workers if requested to do so by IPC Information Systems. The contract with MAX Solutions goes further than the others, since it permits MAX Solutions to give the workers reasonable directions.
Together those matters are sufficient to characterise the contracts as employment agency contracts.