The Optical Superstore Pty Ltd as trustee for Name & Patient Q Trust

The Optical Superstore Pty Ltd as trustee for OS Name & Client Trust

The Optical Superstore Pty Ltd as trustee for the Optical Products Trust

Margaret Douglas as trustee for The Celestial Inheritance Family Trust

Celestial Inheritance Pty Ltd as trustee for the Celestial Inheritance Investment Trust

Optom Admin Pty Ltd as trustee for Business Admin Trust

Ian Noel Melrose as trustee for IO Business Unit Trust

The Optical Superstore Pty Ltd & Ors v Commissioner of State (Review and Regulation) (Corrected) [2018] VCAT 169

1. Pursuant to section 111(3) of the Taxation Administration Act 1997, the payroll tax assessments issued on 3 October 2012 to the first applicant for the 2006 to 2011 financial years are varied to reflect the concessions made by the Commissioner of State Revenue (set out at paragraph [41] of the reasons of the Tribunal) and otherwise to reflect the decisions of the Tribunal in these proceedings.
2. The Commissioner of State Revenue is to issue amended assessments in line with Order 1, and otherwise in accordance with the requirements of section 114(1) of the Taxation Administration Act 1997.
3. The applicants are to provide the Commissioner of State Revenue with any documents or information reasonably requested by the Commissioner of State Revenue for the purposes of issuing the amended assessments required by Order 2, as soon as reasonably practicable and in any event within 7 days of being requested to do so by the Commissioner of State Revenue.
4. The parties have liberty to apply for further orders or directions if any dispute arises between the parties in relation to the steps taken or required to be taken to give effect to these Orders.

1. The Optical Super Store Pty Ltd (Trustee) is the trustee of four related trusts (the first, third, fourth and fifth applicants) that together[1] carry on an optical dispensary business known as The Optical Super Store (TOSS). The TOSS business is carried on through "corporate" stores owned by the Trustee (in its capacity as trustee of the OS Management S Trust (OSMT)), or licensed by the Trustee (in its capacity as the trustee of the Name and Patient Q Trust or OS Name and Client Trust) to other parties (licensees). The Trustee (in its capacity as the trustee of the Optical Products Trust (OPT) supplies lenses and frames to the TOSS stores and to some other parties.
2. The first, third, fourth and fifth applicants are effectively controlled by Ms Margaret Douglas through the Douglas Family Trust (second applicant) (DFT), of which she is the trustee.
3. On June 2011, there were eight licensees operating TOSS stores in the Northern Territory, Queensland, New South Wales, the Australian Capital Territory and Victoria. The licensee of certain stores in Queensland and Canberra is Optom Admin Pty Ltd (the ninth applicant) as trustee of the Business Admin Trust (BAT). The BAT is effectively controlled by Mr Ian Melrose through the Melrose Family Trust (MFT).
4. Mr Melrose (the tenth applicant) is trustee of the IO Business Trust (IOBT), which carries on an optical dispensary business in Tasmania and which is also controlled by Mr Melrose through the MFT. Although it does not carry on business under the TOSS name, and is not a licensee, the IOBT enjoys some of the same benefits as licensees. For example, it acquires frames, lenses and other optical products from the Trustee (in its capacity as the trustee of the OPT).
5. Mr Melrose and Ms Douglas were married to each other in 1989.
6. The sixth, seventh and eighth applicants are family trusts controlled by Ms Douglas that receive indirect distributions from the TOSS business, through the DFT.
7. As settlor of the DFT, Mr Melrose is excluded from benefiting under that trust. However, he is a named beneficiary of the seventh and eighth applicants. Ms Douglas is named as an excluded beneficiary of the MFT.
8. A diagram included as Attachment B to the witness statement of Ms Douglas dated 13 June 2017 (Douglas WS1), which illustrates the relationships between the applicants, is included as Attachment 1 to these reasons.
9. On 4 May 2010, after receiving a letter from a third party,[2] the Commissioner of State Revenue (Commissioner) notified the Trustee that it was commencing an investigation into the payroll tax compliance of the applicants.[3]
10. That investigation led to the issue of multiple payroll tax assessments in October 2012 for the 2006 to 2011 financial years imposing additional payroll tax totalling $192,387.44, penalties totalling $48,096.86 and interest (to the date of assessment) totalling $27,076.04, broken down as follows:-

1. The assessments for the 2005/2006 and 2006/2007 financial years were made under the Pay-roll Tax Act 1971 (PTX Act 1971). The assessments for the remaining financial years were made under the Payroll Tax Act 2007 (PTX Act 2007). As the parties agreed,[4] there were no significant differences in the relevant provisions under these two enactments, or over the relevant financial years.
2. By reason of a decision by the Commissioner to group the first to tenth applicants, they are each jointly and severally liable for the assessments.[5]
3. The assessments have not been paid.[6]
4. By correspondence dated 17 August 2012, 23 October 2012 and 3 November 2012,[7] the Trustee and the other applicants objected to those assessments.
5. On 12 November 2014, the Commissioner determined not to allow the objections,[8] except to concede that the Trustee (as nominated employer for the group) was entitled to a threshold deduction.[9]
6. On 22 December 2014, the Trustee and the other applicants requested that the matter be referred to VCAT under section 106 of the Taxation Administration Act 1997 (TA Act), noting that further material in relation to exemptions would be provided by the end of February 2015.[10] No additional information was provided by the applicants and the referral was ultimately made on 23 December 2016.
7. The hearing took place over 4 days in late December 2017, with some delay from the originally scheduled hearing date of 24 May 2017, caused by the need to deal with a number of procedural applications made by the applicants. The evidence tendered included:

1. 6 volumes of documents filed by the Commissioner with the Tribunal under clause 89(1) of Schedule 1 to the VCAT Act on or about 23 December 2016 (T Documents); 2. a further 3 supplementary volumes of documents filed by the Commissioner under clause 89(1) of Schedule 1 to the VCAT Act on or about 8 May 2017 (ST Documents);

1. transcripts of interviews conducted by the Commissioner,[11] during the course of his investigations with the following optometrists: 1. Jenny Wu; 2. Sarah Dinh; 3. Sam Liang (Liang TS); and 4. Michael Kozulin (Kozulin TS).

1. witness statements from: 1. Ms Douglas dated 13 June 2017 (Douglas WS1), 11 August 2017 (Douglas WS2) and 27 October 2017 (Douglas WS3); 2. Mr Melrose dated 13 June 2017 (Melrose WS); 3. Mark Draper dated 26 October 2017 (Draper WS); 4. Matthew Buckis dated 26 October 2017 (Buckis WS); and 5. Michael Kozulin dated 25 October 2017 (Kozulin WS). 2. a small number of documents and summaries handed up by the parties during the hearing.
2. Each of the witnesses referred to in paragraph [17(d)] attended (in person or by telephone) to give evidence and be cross-examined. In addition, Maria Hill (nee Ilic) also attended by telephone to give evidence and be cross-examined.

1. Under the Victorian payroll tax legislation, payroll tax is imposed on taxable wages paid by an employer to its employees in Victoria in a financial year.[12]
2. The payroll tax legislation includes provisions (contractor provisions) by which amounts paid to a person under a "relevant contract",[13] that are "for or in relation to the performance of work", are taken to be wages.[14] Such amounts are taxable wages to the extent paid under a relevant contract to a person in Victoria.
3. However, the payroll tax legislation provides that services provided under certain contracts are excluded from the relevant contract provisions (contractor exemption provisions), such as where they are provided for less than 90 days in a financial year (90 day exemption)[15] or the services are provided to the public generally.[16]
4. As payroll tax is only payable on taxable wages where the taxable wages and interstate wages (ie. wages paid to persons outside Victoria) exceed a specified threshold, the payroll tax legislation includes provisions to group certain employers, such as where they are under common control (grouping provisions).[17] However, the Commissioner has a residual discretion to exclude a person from a group in certain circumstances (grouping exemption provisions).[18]
5. The proceedings concern the application of the above provisions to the arrangements between the Trustee (and the trustees of the BAT and IOBT) and optometrists or their related entities in relation to eye testing carried out in the TOSS stores. There are three main issues in contention:

1. The contractor provisions: Whether the contractual arrangements (Optom Agreements), by which optometrists (generally through related entities) undertake eye tests in the TOSS stores are relevant contracts and, if so, whether the Trustee and the trustees of the BAT and IOBT pay amounts to those optometrists or their associated entities that for or in relation to the performance of work. 2. The contractor exemption provisions: Whether any of the optometrists to whom wages may prima facie be treated as being paid under the contractor provisions are exempt from those provisions under the exemption for persons who provide services to the public generally. [There were also a number of optometrists who only worked in the TOSS stores for a short period of time in the relevant financial years but, by the end of the hearing, the Commissioner had conceded they were exempt under the 90 day exemption.]

1. The grouping exemption provisions: Whether the businesses carried on by the trustees of the BAT and IOBT were carried on independently, and not connected with, the businesses carried on by the other applicants such that the discretion to exclude the ninth and tenth applicants from the group should be exercised. All applicants concede that the grouping provisions were properly applied by the Commissioner, and the first to eighth applicants do not seek the exercise of the discretion in relation to the grouping between them.
2. In addition, the applicants argue that VCAT should:
   1. determine that no penalties are payable on the basis that they took reasonable care;[19] or
   2. exercise the discretion to remit the penalties[20] and interest[21] due to the time the Commissioner took to investigate the matter, consider the objection and make the referral to VCAT.

1. The applicants submit that the assessments should be set aside in their entirety. The following outlines the applicants' position on the three main issues, and in relation to penalties and interest.

1. Optometrists, or companies or trusts associated with optometrists (referred to below as Optometrist Entities), enter into the Optom Agreements with the Trustee, licensees and the trustee of the IOBT. It is as a result of entry into the Optom Agreements that optometrists (generally as employees of the Optometrist Entities) undertake eye tests in TOSS stores and the stores owned by the trustee of the IOBT. Collectively, the Trustee (in its capacity as Trustee of the OSMT), the licensees and the trustee of the IOBT are referred to below as Store Owners. In these reasons, references to Optometrist Entities includes optometrists who contract directly with the Store Owners.
2. The applicants argue that the Optom Agreements are not relevant contracts because, properly construed, they are tenancy agreements[22] between the applicable Store Owner and applicable Optometrist Entity, rather than a contract for the performance of services which are provided by optometrists (usually as employees of the Optometrist Entities) directly to members of the public.[23]
3. In this regard, the applicants submit the arrangements are similar to a tenancy in a shopping centre.[24]
4. If, contrary to the applicants' position, the Optom Agreements are relevant contracts, the applicants contend that there are no payments made by the Store Owners to the Optometrist Entities that are for or in relation to the performance of work.[25]
5. In this regard, they say that the majority of the funds which flow from the Trustee (and the trustees of the BAT and IOBT) to the Optometrist Entities are the return of Medicare and private patient fees (Consultation Fees) received by the Trustee (and the trustees of the BAT and IOBT) on trust for the Optometrist Entities. Although paid after deduction of fees payable by the Optometrist Entities for use of the consulting rooms in the stores (Occupancy Fees), the return of the Consultation Fees cannot be seen to be payments made for or in connection with any services under the relevant contract.
6. The net amount that is returned to the Optometrist Entities is equal to an amount (for convenience, the Reimbursement Amount) derived by applying a specified hourly rate to the period of time that the relevant optometrist has been conducting eye tests in stores. The difference between the gross Consultation Fees and the Reimbursement Amount is equal to the Occupancy Fee.
7. There are some situations where a Store Owner makes a payment, referred to as a location attendance premium (LA Premium), to an Optometrist Entity. This occurs where the Consultation Fees derived by the Optometrist Entity is less than the Reimbursement Amount which would otherwise be paid to them under the arrangements above.
8. The applicants argue that these are also not payments for services, but rather in the nature of rental incentives to encourage Optometrist Entities to enter into agreements with the Store Owners.[26]

1. The applicants contend that the optometrists set out in the table below are exempt for the financial years indicated:-

1. As previously mentioned, an exemption applies where the Commissioner is satisfied the services provided under a contract are performed by a person who ordinarily performs services of that kind to the public generally. The applicants submit that the evidence demonstrates that the above parties were also providing optometry services to other optical stores or practices during the above periods, and that the Tribunal should be satisfied that the exemption applies.[27]
2. It should be noted that the applicants do not concede that the contractor exemption provisions do not apply to the other optometrists, or for the relevant optometrists in other years, but acknowledge that they have been unable to discharge their onus of proof to demonstrate that the exemption provisions apply.[28]

1. The applicants accept that, by reason of Mr Melrose being a potential object of the seventh and eighth applicant trusts, there is a "technical" grouping of the ninth and tenth applicants with the other applicants.[29] However, they argue that VCAT should exercise the discretion in the PTX Act to exclude or de-group the ninth and tenth applicants from the group. In this respect, they submit, VCAT should have regard to the deliberate separation of the businesses controlled by Ms Douglas and Mr Melrose at a "formal, legal, geographical and financial level",[30] that there is "no mutuality of ownership, control or management"[31] and the absence of any tax avoidance motive in establishing the relevant arrangements.[32] Apart from the "technical" grouping, each of Ms Douglas and Mr Melrose is expressly excluded from benefiting from the other's family trust and Mr Melrose operates optical dispensary stores in locations (Queensland, the Australian Capital Territory and Tasmania) where the Trustee does not operate (although there are some licensee stores in Queensland).
2. While the applicants accept that Mr Melrose does undertake some activities on behalf of the TOSS business - for example, he is quite involved in helping to establish the Optom Agreements with optometrists - that is done in his capacity as a licensee and is similar to the way that all licensees act to support the network.[33]

1. The applicants say that no penalties should be imposed because the Tribunal should be satisfied that they took reasonable care.[34] In particular, the contractual arrangements were developed in the 1990s, at a time before the TOSS business had any exposure to payroll tax. Further, the applicants point to reviews of the arrangements which have been conducted by the Australian Taxation Office (ATO), Queensland Office of State Revenue and West Australian Department of Treasury and Finance, all of which have (in colloquial terms) given the arrangements a 'clean bill of health'.[35]
2. In relation to the remission of the penalties and interest, the applicants complain that it took 2 years to investigate the matter, a further 2 years to consider the objections and a further 2 years to refer the matter to VCAT.

1. The Commissioner accepts that the assessments should be varied to reflect the following concessions made:-

90 day exemption for Wyma International Pty Ltd (Wendy Ma)

Transcript, 19 December 2018, Page 175 (lines 15-17)

* Amount represents the reduction in tax, penalties and interest, except for Wyma International Pty Ltd where the amount is the reduction in taxable wages.

1. Except as outlined above, the Commissioner submits that the assessments should be confirmed.[36]
2. The following outlines the Commissioner's position on the three main issues, and in relation to penalties and interest.

1. The Commissioner argues that a close analysis of the Optom Agreements between the Trustee and the Optometrist Entities shows that they are not "mere" tenancy arrangements; for example there are no specific premises to which they relate.[37] Rather, those contractual arrangements are relevant contracts for payroll tax purposes as the optometrists provided services to the Trustee (in its capacity as trustee of the OSMT), as well as to patients and customers of the TOSS business, which were services 'for or in relation to performance of work'.[38]
2. The Commissioner says it is clear from the Occupancy Fee formula that the gross Consultation Fees are not held for the benefit of optometrists, but rather operate as a security or mechanism to ensure payment to the Trustee (in its capacity as trustee of the OSMT).[39] Accordingly, such amounts are deemed to be wages for payroll tax purposes.
3. Alternatively, if the gross Consultation Fees are regarded as being held on trust for optometrists, the Commissioner submits that the distribution of those trust funds would still be wages,[40] or at least the component of any payments representing the LA Premiums.[41]

1. Apart from the exemption concessions identified in paragraph [41] above, the Commissioner says that the evidence provided by the applicants has failed to discharge the onus of proof that the exemptions were available.[42]

1. The Commissioner submits the grouping of the ninth and tenth applicants with the first to eighth applicants should be maintained given Mr Melrose's "informal interest" in the first to eighth applicants arising from the number of occasions on which he has sought to represent the interests of the Trustee and other applicants,[43] as well as the evidence of significant interdependence in the management and control of the first, third, fourth, fifth, ninth and tenth applicants.[44]

1. The Commissioner says that the penalties should be maintained as there is no evidence of the applicants having taken professional advice on the arrangements or having sought a ruling from the Commissioner.[45] The Commissioner submits the reviews by the other taxation authorities are irrelevant because they occurred after the Commissioner's enquiries commenced and involve different legislative schemes.
2. In relation to remission of the penalties, the Commissioner submits that there was no significant delay between the commencement of the investigation and issue of the assessments, having regard to the failure of, or delays in, the applicants providing information requested by the Commissioner.[46] The Commissioner also says that any delay after the issue of the assessments is not relevant to remission of penalties.[47]
3. In relation to remission of the interest, the Commissioner submits that the amounts imposed should be maintained as the assessments have not been paid, the interest has only been charged at the market rate (ie. no premium has been added as provided for in section 25(1)(b) of the TA Act) and much of the delay can be explained by the failure of the applicants to provide information.[48]

1. The assessments which have been issued by the Commissioner to the applicants will need to be varied, and amended assessments issued to reduce the amount of payroll tax, penalties and interest payable, to reflect both the concessions made by the Commissioner and the matters where my decision differs from the approach taken by the Commissioner in the assessments.
2. To briefly summarise, I have decided:

1. The contractor provisions: the Optom Agreements are relevant contracts (paras [73]-[89]) but that, only the LA Premiums (as finally determined at the end of each financial year) paid to the Optometrist Entities are to be treated as wages (paras [111]-[118]), not the net Consultation Fees (paras [90]-[110]); 2. The contractor exemption provisions: the exemption for contractors that provide services to the public generally should be applied to Northern Optical Trust for the 2005/2006 financial year (paras [132]-[136]), Maria Hill (nee Ilic) for the 2010/2011 financial year (paras [127]-[139]) and the Darran Yeow Trust for the 2007/2008 financial year (paras [140]-[145]), but not in relation to Eyecare Solutions Pty Ltd (paras [124]-[131]), Jenny Kravchencko (paras [146]-[150]) or Aleksev Petchkov (paras [151]-[153]);

1. The grouping exemption provisions: the discretion to exclude the ninth and tenth applicants from the group with the first to eighth applicants should not be exercised (paras [157]-[181]);

1. Penalties and interest: the 25% rate of penalties has been properly imposed under the TA Act (paras [190]-[192]), and should be recalculated; however, neither the penalties nor the interest ought to be remitted (paras [193]-[205]).

1. The TOSS business commenced in Queensland in around July 1989.[49] Apparently, at that time, it was not possible in Queensland for an optical dispensary to sell both spectacle frames and prescription lenses, with the latter having to be ordered and purchased from an optometrist.
2. Ms Douglas and Mr Melrose (who were married around this time) entered into an arrangement whereby entities owned by Ms Douglas would sell spectacle frames, and entities owned by Mr Melrose would provide optometry services and sell lenses, from adjacent stores (and later adjacent desks in Myer department stores).[50]
3. Ms Douglas was new to the industry, but Mr Melrose had previously been the owner of optometry businesses in Victoria and Tasmania.[51]
4. To limit exposure to professional negligence claims which might arise from any employment arrangements, the entities associated with Mr Melrose would structure the arrangements with optometrists as tenancy arrangements.[52] Under the original arrangements between the trustee of the BAT and optometrists, the Optometrist Entity would be entitled to receive any Consultation Fees, and would be required to pay an Occupancy Fee to BAT in arrears, with the Consultation Fees calculated as a percentage of the revenue earned by the optometrist.[53] These arrangements are illustrated in a diagram from the applicants and included as Attachment 2.
5. In 1992, Ms Douglas opened a TOSS store in a Myer department store in South Australia.[54] As this was not subject to the same restrictions as in Queensland, the South Australian stores were operated by Ms Douglas (at the time, as the trustee of the OSMT) and sold both frames and lenses. It would appear that Ms Douglas adopted the same arrangements with optometrists as BAT.[55]
6. Between 1992 and 2002, Ms Douglas opened further TOSS stores in Myer department stores in South Australia, Victoria, Western Australia and New South Wales.[56]
7. The first licensee arrangement was with William Chin, who entered into a licence agreement with Ms Douglas as trustee of the OS Name and Client Trust to operate a store in the Northern Territory on 1 July 1997.[57]
8. In around 2000, the Queensland restrictions on the advertising of optical appliances were lifted.[58] To simplify the operations of the retailing of frames and lenses, Ms Douglas and Mr Melrose agreed that BAT should become a licensee of the TOSS stores in Queensland operated by the Trustee (which had become the trustee of the OSMT in January 2001).[59] In July 2002, the trustee of the BAT and the Trustee (in its capacity as trustee for the Name and Patient Q Trust) entered into a licence agreement,[60] under which Mr Melrose (as trustee of the BAT) became a licensee in return for an initial fee of $600,000 and annual licence fees of $80,000.[61]
9. In order to remove the risk of non-payment of the Occupancy Fee, and also to increase the rental payments being received, there was a change in the arrangements with optometrists around 20 years ago.[62] Under the revised arrangements, optometrists would direct Medicare and private patients to pay the Consultation Fees to the Store Owner, to be held by the Store Owner on trust for the Optometrist Entities. The Store Owner would then deduct the Occupancy Fees due, and pay the net amount to the Optometrist Entities.[63] The revised arrangements are illustrated in a diagram from the applicants and included as Attachment 3.
10. While there have been changes in the Optom Agreements over time, particularly in terms of the hourly rates applied in calculating the Occupancy Fees, the essential terms appear to have been consistent throughout the relevant payroll tax years.[64]
11. While the Optom Agreements do not specifically state that they are tenancy arrangements, the Trustee (in its capacity as the trustee of OSMT) is described as "the Landlord" and the Optometrist Entities are described as "the Tenant". Also, clause 15 provides that:

[t]he relationship between the Landlord and the Tenant is that of an independent Landlord and independent Tenant who is paying a licence fee to occupy space and use equipment on a non-exclusive basis.

1. Under the Optom Agreements, Optometrist Entities are required to nominate the Trustee as the recipient of any Medicare payments to which the optometrist engaged by the Optometrist Entity is otherwise entitled.[65] Similarly, where a patient is not covered by Medicare, the invoice is rendered by the optometrist, but payment is required to be made to the Trustee.[66]
2. The Consultation Fees are paid into the Trustee's main operating account, although these are deposited using bank deposit books in the names of each of the optometrists. In the bank statements issued to the Trustee, it is possible to identify which optometrist a particular deposit relates to, because it is tagged with a particular "agent number" reflecting the optometrist and store at which they provided optometry services.[67]
3. While Ms Douglas' first witness statement indicated that 'each optometrist (as required by clause 2(iv) [of the Sample Contract]) has a separate identifiable sub-account for each store location', it was accepted by Mr Sievers for the applicants that there were no separate sub-accounts and that the Consultation Fees were inter-mingled with funds from the Trustee's other activities.[68]
4. At the end of each month, the optometrist submits the number of hours worked in a given TOSS store.[69] Initially that was done manually and, from around November 2010, through a computer system referred to as TopCam.[70]
5. The evidence was that the hours had to be signed off by the relevant store manager, as well as (in the case of corporate stores) being subject to review by a manager at the Trustee's head office in Melbourne.[71] Once signed off, a monthly payment would be made to the Optometrist Entity of the Reimbursement Amount which was calculated by multiplying the number of hours worked by the then applicable rates.[72] No invoice is raised by the Optometrist Entity to the Trustee for this amount on the basis that it is a return of moneys belonging to the Optometrist Entity.[73]
6. The balance of the Consultation Fees are retained by the Trustee as payment of the Occupancy Fees due from the Optometrist Entity,[74] although it seems that this is only invoiced (with GST added) on a quarterly basis.[75]
7. The potential for the Reimbursement Amount to exceed the gross Consultation Fees received by the Trustee is dealt with in the Optom Agreement in the following terms:

If the Gross Consultation fees received does not exceed the amount re-imbursed to the Tenant, the Landlord shall classify the amount paid as a reimbursement which is in excess of the Gross Consultation fees paid as a Location Attendance Premium and pay GST to the Tenant on this amount and issue a recipient created GST Tax Invoice to the Tenant.[76]

1. In practice, it seems that the LA Premiums are initially treated as loans to the Optometrist Entities, with an invoice only being issued if there is a positive loan balance at the end of the year.[77]

1. The parties agree as to the relevant test to be applied. The question is whether the Optom Agreements were contracts under which the Trustee (and the trustees of the BAT and IOBT) had supplied to it the 'services of persons [the optometrist and Optometrist Entity] for or in relation to the performance of work [by the optometrist]'.[78]
2. The parties also agree that the definition of "relevant contract" is drafted in broad terms.[79]
3. Fundamentally, the applicants argue that the Optom Agreements are tenancy arrangements and that, because the optometrists provide their services to patients, there is nothing that meets the definition of relevant contract. The applicants submit that the proper characterisation of the arrangements is that given by the State Revenue Office of Western Australia, after investigation, that:

...OSS is in the business of providing an optical retail outlet and the optometrist is in the business of providing optometric services. The two are mutually beneficial to each other (or complimentary [sic]) as one could increase the business activity of the other and vice versa.[80]

1. It is not known whether this is because the revenue office accepted what Mr Melrose referred to as his "parrot explanation", being:

You've got a parrot in the kitchen. The parrot's in a parrot cage. It eats parrot food. It's got feathers like a parrot. It's a parrot. There's a dog in the house. The dog barks. The parrot's learnt to bark. Because the parrot can bark, it doesn't make it a dog. It's still a parrot. Because we introduced an hourly rate system to calculate the rent doesn't mean they're employees or they're contractors, they're still tenants, but they can bark like the parrot can bark.[81]

1. Of course, the obvious retort is that if a dog (ie. a contractor) is in a cage (ie. a consulting room in a TOSS store), and its owner (ie. the Trustee) puts a sign up describing it as a barking parrot (ie. a tenant), that sign would not make it so.
2. In this regard, the Commissioner says the Optom Agreements are not mere tenancy agreements and the fact that the optometrists provide services to members of the public does not mean they are not also providing services to the Trustee (or the trustees of the BAT and IOBT).
3. In relation to the first point, the Commissioner observes (among other matters) that the Optom Agreements:-

1. Do not specify a location at which the optometrists may work, rather the optometrists could work at any store across Australia; 2. Provided a formula for calculating the Occupancy Fee by reference to the Consultation Fees, minus 'reimbursement rates' for interstate or intrastate work, being hourly rates specified in the Optom Agreement;

1. Ensured that the optometrist was paid the hourly rates regardless of the actual level of Consultation Fees; and

1. Required the optometrist to ensure optometric services were provided during retail hours at agreed times at any of the TOSS locations (both corporate and licensee).[82]
2. The Commissioner also observes that the language used in the Optom Agreements is more consistent with a contracting arrangement than a tenancy (for example, references to "appointment", "reimbursement", "remuneration" and "work").[83] Similarly, the Commissioner points to the provisions concerning confidentiality, termination and restraints after termination as being more consistent with a contracting arrangement.[84]
3. The parties did not refer the Tribunal to any case involving a similar arrangement for optometrists. However, the Commissioner referred to Winday International Pty Ltd v Chief Commissioner of State Revenue[85] where the Appeal Division of the New South Wales Civil and Administrative Tribunal had occasion to consider the application of the payroll tax legislation in that State to certain arrangements involving radiologists. In that case, the taxpayer (which operated a radiology facility) sought to argue that payroll tax did not apply to fees payable to the radiologists under the arrangements. This was on the basis that all fees belonged to the radiologists because it was only the radiologists that could render fees, and that no services were provided by the radiologists to the taxpayer.[86] Ultimately, Senior Member Isenberg found that there was no relevant contract in that case, but this seems to have been on the basis of a specific exception for "employment agency contracts" which he found to exist in the relevant case.[87] However, Senior Member Isenberg did find that 'professional radiology services were provided by the radiologists and that those services were provided in the course of a business carried on by [the taxpayer]'.[88]
4. The Commissioner relied on Freelance Global Ltd v Chief Commissioner of State Revenue (Freelance Global 1)[89] for the proposition that, just because optometrists contract with patients does not mean they do not also render services to the Trustee. In that case, White J. stated:[90]

I accept the Chief Commissioner's submissions that the individual workers/contractors supplied services to Freelance by serving the needs of its clients (Accident Compensation Commission v Odco Pty Ltd [1990] HCA 43; (1990) 95 ALR 641 at 652). Adapting the language of the High Court in that case, by attending at the site of Freelance's client, a contractor supplies services to Freelance for the purposes of its business, notwithstanding he also at the same time supplies the same services to the client for the purposes of the client's business.

1. The applicants submit that the current arrangements should be distinguished from those considered by the High Court in Odco and White J. in Freelance Global on the basis that:

1. there is no agreement between the Trustee and a patient for the supply of an optometrist to provide optometry services; 2. there is no agreement between the Trustee and a patient that the patient will remunerate the Trustee for supplying the optometrist and for the provision of medical services;

1. patients are billed by the optometrist and the patient pays the optometrist for the services and the parties treat these payments as the GST-free assessable income of the Optometrist Entities - not of the Trustee; and

1. the Optometrist Entities pay rent to the Trustee - rather than the Trustee paying the Optometrist Entities for services. The rent is treated as income by the Trustee and a deduction by the Optometrist Entities.[91]
2. In my view, the essential arrangement between the Trustee (and the trustees of the BAT and IOBT) and Optometrist Entities was that the Optometrist Entities would ensure the attendance of optometrists (including but not limited to the optometrist associated with the entity) at locations and times to be agreed, in order that those optometrists would provide optometry services to actual or anticipated customers of the Trustee.
3. The arrangements were put in place to benefit the Trustee (and the trustees of the BAT and IOBT) because the provision of optometry services on site would lead to increased sales of frames, lenses and other optometry products.[92] The provisions of, and the language used in, the Optom Agreements are consistent with attempts to secure those benefits. Given the breadth of the terms used in the payroll tax legislation, there is no incongruity in finding that the services of the optometrists were provided to the Trustee as well as to the patients.
4. To focus on the payment structures and income tax or GST treatment is to put the cart before the horse, particularly in circumstances where there is no reference to payment or income in the definition of relevant contract. Those matters may be relevant to whether there are any amounts which are treated as wages, or whether any of the contractor exemptions might apply, but should not detract from the breadth of the notion of a relevant contract.
5. In relation to the contention that the arrangements are simply tenancy arrangements, I note the observation of Croft J. in Swan v Uecker,[93] that:

..the characterisation of an agreement .... As a lease or licence

depends upon the proper construction of that agreement - looking to

substance and not form - and having regard to relevant surrounding

1. Similarly, the fact that the parties have erroneously referred to themselves as landlord and tenant (it being admitted that there was no grant of exclusive possession) does not mean that the Tribunal is bound to find that the arrangement is a tenancy (or licence) arrangement. In particular, the absence of references to any specific TOSS store makes a conclusion that there is an ongoing tenancy implausible. At most, there is a licence of a particular consulting room on a particular day at a particular location when the schedules for a given month are set. Even then, it does not prevent there also being an arrangement for the supply to the Trustee of the services of the optometrists for or in relation to the performance of work.
2. Accordingly, I find that the Optom Agreements are relevant contracts under the payroll tax legislation.

Are the payments made to Optometrist Entities from Consultation Fees for or in relation to the performance of work?

1. While it is clear that there are payments made from the bank account of the Trustee (and the bank accounts of the trustees of the BAT and IOBT) to the Optometrist Entities, the question is whether those payments are "for in relation to the performance of work".
2. The applicants contend that any payments do not meet this description because they are simply the return of funds held on trust[95] for the Optometrist Entities.
3. The Commissioner argues that there are no trusts in place, and the arrangements are more properly characterised as security or a mechanism to ensure payment of the Occupancy Fees to the Trustee. Alternatively, the Commissioner contends that the existence of a trust does not prevent the payments being treated as wages.

1. Clause 2(iii) of the Sample Contract provides that:

...the Tenant agrees to pay all fees received for Optometric Services into a bank account in the name of the Landlord and nominated by the Landlord which the Landlord shall hold in trust for the Tenant

1. It appears that the Optom Agreement for Matthew Buckis (and perhaps other Optom Agreements made prior to 2004) did not expressly refer to a trust, but rather that the relevant amounts would be held "for the benefit of" the Optometrist Entity.[96] It was not contended by the Commissioner that anything turned on this difference, and it seems to me that this is a matter of form rather than substance.
2. Ms Neskovcin QC referred me to the High Court decision in Korda v Australian Executor Trustees (SA) Limited[97] (Korda) as the most recent authoritative exposition of the law in relation to the existence (or otherwise) of an express trust.
3. It is trite law that there are three "certainties" necessary to evidence a trust, namely certainty of intention, certainty of subject matter and certainty of object.[98]
4. There was no real debate between the parties about the certainty of subject matter (ie. the Consultation Fees) or the certainty of object (ie. the Optometrist Entities or the optometrists).
5. In relation to the certainty of intention, the applicants rely on the express language in the Optom Agreements, and the evidence given by the optometrists,[99] as conclusive evidence of intention.
6. The Commissioner contends that there are a number of "contra-indications" that the parties did not intend to create a trust, but rather intended to create security or a mechanism to ensure payment to the Trustee of the amounts to which it was entitled. The contra-indications relied upon are:

1. The evidence that the reason for the arrangements was concern as to non-payment of rent,[100] which is consistent with a security rather than trust arrangement. 2. The Trustee treated the money as its own and property passed. In this regard, it was paid into the Trustee's own operating account (as opposed to any separate trust account) and, in the financial statements for the OSMT, the current assets included the full amount of the operating account, with no recognition of any interest held by the optometrists or Optometrist Entities.

1. All interest received in respect of the operating account was treated as income of the Trustee.

1. The applicants' description of the trust changed from bare trust to express trust, and there was some prevarication about whether it was a trust over the whole or part of the Consultation Fees.[101]
2. Ms Nesckovcin QC relied on the analysis by Gageler J. in Korda, where he said:[102]
   1. Where there is no reason to consider that parties entering into a contract have not said what they meant or meant what they said, an express term in the contract that one party is to hold property on "trust" for another party, or for a third party, will be recognised and enforced in equity as a trust. Conversely, where parties to a contract have refrained from contractual use of the terminology of trust, an intention to create a trust will be imputed to them only if, and to the extent that, a trust is the legal mechanism which is appropriate to give legal effect to the relationship, between the parties or between a party and a third party, as established or acknowledged by the express or implied terms of the contract. The question is whether recognition and enforcement of a trust is appropriate to give effect in law to entitlements and obligations which the parties, according to ordinary principles of contractual interpretation, can be taken together to have intended to exist in fact. Those cases in which one party takes action beyond the terms of a contract sufficient to manifest a unilateral intention to constitute a trust can for present purposes be put to one side.
   2. Amongst the numerous and otherwise largely equivocal indications of contractual intention to which the parties to the present appeal have drawn attention in argument, one contractual omission is, in my view, decisive. It is the acknowledged absence of any contractual indication that Forest Co and Milling Co should hold the proceeds separately from other moneys of their own. As Robson AJA pointed out in dissent in the Court of Appeal, not only were those companies not contractually obliged to hold the proceeds in separate accounts, but the delay of between seven and eleven months permitted by cl 9(f) of the Tripartite Agreement in payment by Milling Co to Forest Co carried with it the implication that Milling Co "was able to use those moneys as it saw fit in the interim".
   3. A duty to hold trust money separate from one's own is the "automatic consequence of the imposition of a trust" and "is a hallmark duty of a trustee". An intention that money be held in a separate fund is for that reason indicative, although not conclusive, of an intention to create a trust over that money. For the same reason, although failure in fact to hold money in a separate fund need not negate the existence of an express trust otherwise conclusively established, absence of a contractual intention that money be held in a separate fund must surely be fatal to the imputation of a contractual intention to create a trust over that money.

1. The applicants respond to this by saying that the factors referred to by the Commissioner may indicate one or more breaches of trust, but do not operate to deny its existence.[103] The applicants rely on the earlier majority High Court decision in Associated Alloys Pty Limited v ACN 001 452 106,[104] and the comments of French CJ in Korda that:[105]

The question whether an express trust exists must always be answered by reference to intention. An express trust cannot be created unless the person or persons creating it can be taken to have intended to do so. Absent, as in this case, an explicit declaration of such an intention, the court must determine whether intention is to be imputed. It does so by reference to the language of the documents or oral dealings having regard to the nature of the transactions and the circumstances attending the relationship between the parties.

1. In my view, the applicants' contentions are to be preferred. The parties to the Optom Agreement used the explicit language of a trust. The optometrists understood that they were entitled to the Consultation Fees after deduction of the Occupancy Fees payable to the Trustee, and regarded and accounted for this as the return of their money rather than as fees payable by the Trustee for their services. There is nothing to suggest that the parties to the Optom Agreements "have not said what they meant or meant what they said". The:
   • failure to keep the money separate from the Trustee's own funds;
   • accounting for some or all of the Consultation Fees as the Trustee's own; and
   • failure to account for interest on funds belonging to the optometrists,

may have individually or collectively given rise to a breach of trust actionable by the Optometrist Entities. However, although such matters may in some cases be fatal to the imputation of a contractual intention to create a trust, it is otherwise if there is an explicit declaration of intention as in this case.[106]

1. The applicants also say that, in the event of insolvency of an Optometrist Entity, the liquidator or trustee in bankruptcy could pursue the Trustee for the relevant entitlements.[107] I agree. In the same vein, it seems to me to be highly likely that a court would exercise its equitable jurisdiction to require the Trustee to pay the Optometrist Entities their full Consultation Fees at the end of each month, if the Optometrists Entities were to call for those funds. This might impact on the efficacy of the TOSS model, but would support the existence of a trust.
2. Accordingly, in my view, the Consultation Fees were held by the Trustee (and likewise by the trustees of the BAT and IOBT) on trust for the Optometrist Entities.

Is the distribution of the trust amounts a payment for or in relation to the performance of work?

1. The Commissioner says that the decision of White J. of the Supreme Court of New South Wales in Freelance Global is authority for the proposition that the fact that payments to a party are trust distributions does not prevent them from being deemed to be wages.
2. That case concerned a contractor agency business carried on by Freelance Global as trustee of a discretionary trust which arranged the provision of services by individual contractors to clients of Freelance Global. The model involved individual contractors becoming objects of the discretionary trust. The funds from clients were paid into the general account of the trust, and "advances" were made to "Beneficiary Contractors" of the client funds after deduction of management fees payable to Freelance Global.[108] While Freelance Global had a discretion as to whether or not to make distributions to beneficiaries, '[a]s a matter of practice, it determines to make distributions to the contracted beneficiaries in the same amount as the advances made during the course of the financial year and there is a set-off of those advances against the income notionally distributed'.[109] Despite the existence of the trust, and the discretion held by Freelance Global as trustee of that trust, White J. found that the distributions were taxable wages under the employment agency or relevant contract provisions in the New South Wales payroll tax legislation.
3. The decision in Freelance Global is largely concerned with whether there was an employment agency arrangement and/or relevant contract between Freelance Global, the independent contractors and the clients. It does not appear to have been argued that because the amounts were distributions from a discretionary trust they could not be payments for or in relation to any services provided.
4. In any event, the applicants argue that the decision in Freelance Global is distinguishable from the arrangements in the present case. The model considered in Freelance Global involved the trustee billing the clients as principal, and then making payments to the individual contractors in respect of the services provided by them. As the individual contractors were objects of a discretionary trust, they had no entitlement to payments unless and until the Trustee determined to pay them an amount. By contrast, in the present case, any Consultation Fees are billed to Medicare or patients by the optometrists or the Optometrist Entities, and the funds released to the Optometrist Entities (net of the occupancy fees) are simply the return of amounts to which they were entitled for the services provided to the patients, not to the Trustee.
5. In my view, the analysis of the applicants on this point is to be preferred. The situation in Freelance Global is distinguishable because in that case there was no entitlement on the part of the beneficiary contractors to the client fees.
6. Having found that there was an express trust in place between the Trustee and each Optometrist Entity in relation to the Consultation Fees, the payments to them (albeit net of the Occupancy Fees they contractually owed to the Trustee) was necessarily a return of their moneys and cannot be viewed as a payment for or in relation to the services provided to the Trustee (or the trustees of the BAT and IOBT).

Are the payments made by way of LA Premiums for or in relation to the performance of work?

1. While applicants argued that the LA Premiums (defined at paragraph [32]) should be regarded as tenancy incentives rather than payments for or in relation to the performance of work, their counsel accepted that if I was to find that there was a relevant contract, that position was more difficult to maintain than for the (net) Consultation Fees.[110]
2. In his witness statement, Mr Melrose indicated that it is not unusual for incentives to be offered by landlords to their tenants.[111] Likewise Ms Douglas gave some examples in her second witness statement of incentives that the Trustee had received over time, being fit-out contributions, rent-free periods, landlord contributions to advertising and rent relief when a store was performing badly.[112]
3. In cross-examination regarding the arrangements with optometrists, Ms Douglas accepted that an optometrist could attend a store and not see anyone, but that she would not accept an Optometrist Entity not paying rent for long, although the exact period might depend on various factors such as economic conditions and whether a new store was being established.[113]
4. The LA Premiums have a close connection with the performance of services in the stores in that they are calculated based on the number of hours that the optometrist engaged by the Optometrist Entity spends working in the stores (at the applicable rates).
5. As I have previously found, the services of the optometrists are provided to the Trustee, as well as to patients of the optometrists.
6. Accordingly, it follows that the LA Premiums are properly regarded as payments for or in connection with the performance of work. The LA Premiums are readily distinguishable from the lease incentives referred to in Ms Douglas's second witness statement given their close connection with work performed.
7. One issue that arises with the LA Premiums is the timing and amount to be treated as wages given the payments to Optometrists Entities are accounted for by the Trustee as loans when initially paid. The evidence is that the LA Premiums are offset against subsequent Occupancy Fees payable by the Optometrist Entities during the same financial year.[114] It is only if there is a net amount owing at the end of a financial year that an invoice is raised by the Optometrist Entity for the LA Premiums, with payment effected by offset against the loan.
8. In my view, the LA Premiums should only be regarded as having been paid at the end of each financial year based on the amounts invoiced. Until that time, the parties treat any amounts paid over as loans, which may need to be repaid, and there was no suggestion that this treatment was a sham or did not reflect the arrangements.

Amendments required to assessments to give effect to decisions on contractor issue

1. The omission from taxable wages of payments made by the Trustee (in its capacity as trustee of the OSMT) to Optometrist Entities by way of return of Consultation Fees. 2. The omission from interstate wages of payments made by the trustees of the BAT and IOBT to Optometrist Entities by way of return of Consultation Fees.

1. Subject to any exemptions, the inclusion in taxable wages of payments made by the Trustee (in its capacity as trustee of the OSMT) to Optometrist Entities by way of LA Premiums (if not offset against the return of Consultation Fees for the given financial year).

1. The inclusion in interstate wages of payments made by the trustees of the BAT and IOBT to Optometrist Entities by way of LA Premiums (if not offset against the return of Consultation Fees for the given financial year).

1. Having regard to my findings in respect of the contractor provisions, it is only necessary to consider the contractor exemption provisions for those Optometrist Entities and those years where LA Premiums have been paid. Unfortunately, there is insufficient information to determine whether any LA Premiums were in fact paid to Optometrist Entities in respect of which a contractor exemption is claimed. Accordingly, I have considered each of the contractor exemptions claimed.

1. The Commissioner conveniently summarised the principles to be applied in consideration of the contractor exemption provision, based on the decisions in Re Behmer & Wright Pty Ltd v Commissioner of State Revenue (Vic)[115] and Drake Personnel Ltd v Commissioner of State Revenue (Vic),[116] in the following terms:[117]

...the exemption ...applies only where the contractor's services are both made available to and used by the public generally in the relevant financial year. It is not necessary in order for the exemption to apply that the other clients to whom the services are provided are a large class of the public, nor do they need to be quantitatively significant or substantial - although there is a point below which the quantum of work is not sufficient to attract the exception.

It is, however, necessary to provide sufficient evidence that demonstrates that the services being supplied to the other clients each financial year are of the kind being supplied to the Applicants, and are not services of some other kind, such as those supplied as an employee ... only income received in respect of optometry services supplied by an optometrist as a contractor is relevant to whether the exception ... applies to the Optom Agreements

1. The applicants add that the optometrists will ordinarily render their services to the public generally where they are not tied to the Trustee and have at least one other client.[118]
2. The operation of the exemption depends on the Commissioner's state of satisfaction as to these matters. VCAT steps into the shoes of the Commissioner in deciding the necessary state of satisfaction,[119] based on the evidence provided at the hearing.

1. Mr Kozulin provided a witness statement and gave evidence (by telephone) at the hearing on which he was cross-examined. He also adopted the contents of the transcript of his interview by the Commissioner.[120]
2. Mr Kozulin's evidence is that during the 2011 financial year, he received income from three sources being the Trustee ($59,145.85), Village Eyewear ($43,043.02) and Victor Optical ($24,867.60).[121] Of relevance to the issue is that Village Eyewear carries on business as a TOSS licensee and, of the income from Victor Optical, only approximately $2,400 related to optometry services (with the balance representing sales of contact lenses).[122]
3. The applicants say that the evidence establishes that Mr Kozulin's services were provided to the public generally in the 2011 financial year because he had "two other separate clients, the combined quantum of which was around 40% of the total income of Eyecare Solutions from the provision of optometry services".[123]
4. The Commissioner says that the income from Village Eyewear cannot be regarded as being from services provided to the public on the basis that it was a licensee and the services were provided pursuant to the same Optom Agreement. If that income is excluded, then the income from optometry services provided to Victor Optical is below the quantum sufficient to attract the exemption.
5. The cases to which the parties referred do not address the issue of whether the rendering of services to an entity other than the deemed employer is always to be regarded as the rendering of the services to the "public" or if there can be situations where the range of parties to whom services are rendered is closed and so not to be considered as part of the public.
6. The form of the Optom Agreement between the Trustee and Eyecare Solutions is included in Attachment B to Mr Kozulin's witness statement. The recitals indicate that the agreement provides for Eyecare Solutions to undertake optometric services at the Trustee's business premises, being the "locations described in Clause 1 of the First Schedule". The First Schedules specifies the Trustee's locations in various states and territories (including jurisdictions where there are no corporate stores) "and the Landlord's associates or licensees [sic] of the Optical Superstore within Australia".
7. The evidence is that there was only one Optom Agreement that applied for all stores, whether owned by the Trustee or by licensees.[124] There was no evidence to suggest that Eyecare Solutions entered into the arrangements with Village Eyewear through some independent contact.
8. In those circumstances, I am not satisfied that Village Eyewear should be regarded as a member of the public for these purposes. Accordingly, I find that Eyecare Solutions does not qualify for the exemption.

1. Mr Buckis provided a witness statement and gave evidence (by telephone) at the hearing on which he was cross-examined.
2. His evidence is that he entered an Optom Agreement with the Trustee in the 2002/2003 financial year and provided optometry services in TOSS stores at various locations, including Southland, Knox, Chadstone and Frankston through to May 2012.[125]
3. For the period from July to November 2005, Northern Optical supplied the optometry services of Mr Buckis for:
   1. 3 days each week at corporate stores owned by the Trustee; and
   2. 2 days each week at another unrelated optical dispensary, Optical World.[126]
4. For that period, he estimated that 60% of his income was from the Trustee, and 40% was from Optical World.[127] There was no specific evidence as to whether Mr Buckis worked at TOSS stores full time for the rest of that financial year, but it seems reasonable to infer that was the case. On that basis and assuming that his overall income level remained constant, that would mean that approximately 17% of his income for the 2005/2006 financial year was derived from Optical World.
5. In those circumstances, I am satisfied that Northern Optical ordinarily rendered services of the same kind to the public generally in the 2005/2006 financial year. Accordingly, the exemption applies.

1. While no witness statement was filed for Ms Hill, she provided some information to Mr Draper which was included in his witness statement,[128] and she confirmed the information she gave to Mr Draper[129] and gave evidence (by telephone) on which she was cross-examined.
2. Her evidence was that, during the 2010/2011 financial year, she derived approximately 59% of her income from providing optometry services in TOSS stores, and approximately 41% from optometry services provided as a contractor to Frewin Cunningham, an unrelated optometry store.[130]
3. In those circumstances, I am satisfied that Ms Hill ordinarily rendered services of the same kind to the public generally in the 2010/2011 financial year. Accordingly, the exemption applies.

1. No witness statement was filed for Mr Yeow or in relation to the Darran Yeow Trust, and he was not called by the applicants. However, in his witness statement, Mr Draper provides a summary of conversations and email correspondence he exchanged with Mr Yeow.[131]
2. Mr Draper says that Mr Yeow told him that after he ceased providing optometry services at the TOSS stores in the 2007/2008 financial year, he commenced performing optometry services as a locum at Kevin Paisley Optical. In the email exchange with Mr Draper, Mr Yeow estimates that 19.39% of his income for the 2007/2008 financial year was from Kevin Paisley Optical. However, under cross-examination, Mr Draper said that he had not asked Mr Yeow about the capacity in which he worked for Kevin Paisley Optical.[132]
3. The Commissioner submits that the applicants bear the onus of proof,[133] which they have failed to discharge in relation to the Darran Yeow Trust.
4. While VCAT is not bound by the rules of evidence[134] and, as such, can receive hearsay evidence, it does not displace the onus of proof. This means that any gaps in the evidence may effectively work against the taxpayer. That said, the standard of proof is a civil one, based on the balance of probabilities.[135]
5. In this case, it is not entirely clear in what capacity Mr Yeow worked with Kevin Paisley Optical. However, in Mr Yeow's email to Mr Draper of 21 September 2017, he indicates that while he could not locate his tax return, his own excel records showed that the "trust business income I have on record was $112,213. That's not too far away from the figure you received from the State Revenue Office of $112,119". It was based on this information that Mr Yeow estimated the percentages outlined above.
6. While this evidence is not perfect, and the failure of Mr Yeow to attend and give evidence is unfortunate, on the balance of probabilities, I am satisfied that the services he provided to Kevin Paisley were as a contractor through his trust and that he ordinarily rendered services of the same kind to the public generally in the 2007/2008 financial year. Accordingly, no exemption applies.

1. No witness statement was filed for Ms Kravchenko, and she was not called by the applicants.[136] However, in his witness statement, Mr Draper provides a summary of conversations with Ms Kravchenko.[137]
2. Mr Draper says that Ms Kravchenko told him that while she worked with the Trustee during the 2008/2009 to 2010/2011 financial years, she also operated a business of supplying eye testing services and selling optical products from a medical centre on Wednesdays.
3. Based on that information, material from the Commissioner and a review of the monthly statements issued by Ms Kravchenko for some of the financial years, Mr Draper asserts that "it seems to be clear that Ms Kravchenko derived a significant amount of her business income from non-TOSS sources during all the years in which she was a tenant".[138]
4. However, a difficulty with this evidence is that there is no information on the split of income that Ms Kravchenko derived from selling optical products at the medical centre as compared to eye testing services. The evidence provided by Mr Kozulin suggests that the selling of optical products can be quite remunerative.
5. In those circumstances, I am not satisfied that Ms Kravchenko ordinarily rendered services of the same kind to the public generally in the 2008/2009 to 2010/2011 financial years. Accordingly, no exemption applies.

1. No witness statement was filed for Mr Petchkov, and he was not called by the applicants. However, in his witness statement, Mr Draper provides a summary of email correspondence he exchanged with Mr Petchkov.[139]
2. Based on the email correspondence, it seems that Mr Petchkov was practising as an optometrist elsewhere before and after the period he worked with the Trustee (from December 2007 to early/mid 2008). However, there is no information as to whether he worked as an employee or contractor or as to the amounts that he derived from those other activities.
3. In those circumstances, I am not satisfied that Mr Petchkov ordinarily rendered services of the same kind to the public generally in the 2007/2008 financial year. Accordingly, no exemption applies.

Amendments required to assessments to give effect to decisions on exemption issue

1. the omission from taxable wages of the Trustee of any amounts paid to Northern Optical Trust in the 2005/2006 financial year; 2. the omission from taxable wages of the Trustee of any amounts paid to Maria Hill (nee Ilic) in the 2010/2011 financial year; and

1. the omission from taxable wages of the Trustee of any amounts paid to Darran Yeow Trust in the 2007/2008 financial year.

1. As the Commissioner submits, the power to exclude (or de-group) an entity from a group:[140]

can only be exercised where the Commissioner reaches a state of satisfaction that each business carried on by a member seeking to be de-grouped is "carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group". That state of satisfaction is to be reached having regard to the following categories of matters:

1. the nature and degree of ownership and control of the businesses;
2. the nature of the businesses; and

1. any other matters the Commissioner considers relevant.

1. In relation to the degree of independence and absence of connection required, after referring to relevant authorities, the Commissioner says that the test:[141]

is not one of "substantial connection", but rather whether there is a "real or meaningful connection", and not necessarily a large or weighty connection. The question is one of fact and degree.

Should the discretion to exclude the ninth and tenth applicants from the group be exercised?

1. The applicants say that the Tribunal should exercise the discretion on the basis that:[142]
   • The IOBT is not a licensee and carries on its own business and makes its own management decisions.
   • The BAT is a licensee and, like all licensees, carries on its own business and makes its own management decisions.
   • The services and benefits provided by the Trustee to the BAT flow equally to all licensees.
   • Like other licensees, Mr Melrose makes contributions to the growth and operation of the TOSS network without payment.
   • While services are provided by the Trustee to the IOBT, a fee is payable and they are a minor part of the expenditure of the IOBT.
   • All licensees and the IOBT have the ability to participate in marketing campaigns on an opt-in basis and, if they do so, pay the actual costs of printing, delivery and distribution.
   • No licensee (nor the IOBT) is required to purchase products from the Trustee (in its capacity as trustee of the OPT).
   • There is no connection or commonality between the management of the Trustee and the management of the licensees and the IOBT. That is, Mr Melrose does not control and is not involved in the managerial decisions or day to day administration of the first to eighth applicants, and Ms Douglas does not control and is not involved in the managerial decision or day to day administration of the BAT or IOBT.
   • There is a geographical divide between the businesses controlled by Mr Melrose (Queensland and Canberra) and Ms Douglas (all other State and Territories).
   • Ms Douglas and Mr Melrose do not own any real estate together, do not have any common directorships and each is excluded (and has not received distributions) from the other's trusts.
2. The applicants say that it would be "unreasonable" to apply the grouping provisions in this light.[143]
3. The Commissioner argues that the grouping should be maintained having regard to the three relevant categories of matters, summarised briefly as follows:
   • Nature and degree of ownership and control of the business: Mr Melrose has an informal interest in the TOSS business which is evident from the number of occasions when he has sought to represent the interests of the Trustee and other applicants, and the evidence suggests there is significant interdependence in the management and control of all of the applicants.[144]
   • Nature of the businesses: Each of the businesses carried on by the applicants are interdependent and connected by reason of being in the same industry and complementary, noting (for instance) that the OPT derives 44% of its revenue from sales to the OSMT, 37% from sales to BAT and 5% from sales to IOBT.[145]
   • Other matters: The other relevant matters include the existence of undocumented intra-group loans, the undocumented arrangements for sharing of staff, the (largely) undocumented arrangements for the provision of services by the Trustee to the BAT and IOBT, the existence of a shared website and common computer server (including the IOBT), the national marketing campaigns co-ordinated by the Trustee (including the IOBT), the group insurance policy for licensees in which the ninth and tenth applicants participated, the use of standard documents (eg. Optom Agreements) and the use of the same accountants.[146]
4. For the reasons explained below, I consider that there is a real and meaningful connection between the trustees of the BAT and IOBT on the one hand, and the remaining applicants on the other, which leads me to decide not to exercise the discretion.
5. Mostly, the connection arises from the acts of Mr Melrose for or to the benefit of the Trustee, which cannot adequately be explained by the position of the BAT as a licensee. To some extent, the connection also arises from the benefits conferred by the Trustee (in various capacities) on the IOBT, as well as the additional benefits provided to the BAT beyond those provided to other licensees.
6. Of the benefits provided by Mr Melrose to the OSMT, the most significant relates to the structure of the arrangements with optometrists.
7. The history of the TOSS business, as outlined at paragraphs [54] to [63] of these reasons, strongly indicates that it was Mr Melrose that developed and then refined the structure of the Optom Agreements. Under cross-examination, Ms Douglas rejected the suggestion that Mr Melrose introduced or recommended the structure to her. Her evidence was that she adopted the structure because she believed it worked well.[147] However, I reject her evidence in this regard. If Mr Melrose had not specifically introduced or recommended the structure to her, it must have been the case that she was able to access the form of the agreement from him to use in her business.
8. It also appears that it was Mr Melrose who (largely) managed the Optom Agreements, with the vast majority of the Optom Agreements in evidence having been signed by him on behalf of the Trustee. [148] Of the 18 Optom Agreements in evidence, Ms Douglas only signed five.[149] When cross-examined about the basis on which Mr Melrose signed for the Trustee, Ms Douglas said that he is not a director and does not have any formal authority, but she just lets him do so.[150] This seems extraordinary given the importance of the Optom Agreements to the business.
9. Mr Melrose suggested that he signed on behalf of the Trustee and all licensees,[151] and he did so because of his background knowledge[152] and because it was a benefit to him as a licensee to have a pool of tenants available.[153] However, that explanation does not ring true. First, as Mr Melrose accepted, the only party to the agreements is the Trustee, even if licensees may benefit.[154] Further, given Mr Melrose also suggested that interstate retail staff never went to work in the BAT stores in Queensland,[155] it is reasonable to infer that the interstate movement of optometrists was also rare. As such, there was no apparent benefit to the BAT (or the IOBT) from Mr Melrose assisting with Optom Agreements for staff in Victoria.
10. In closing, Mr Sievers suggested that the execution by Mr Melrose of the Optom Agreements involved some sort of "informal delegation of authority", but said there was no evidence that Mr Melrose was involved in deciding who might be a tenant.[156] Despite this assertion, there was evidence that, on at least one occasion, Mr Melrose was involved in the recruitment of the optometrists. In this regard, Mr Buckis gave evidence that Northern Optical Unit Trust became a tenant because he had previously received a letter from Mr Melrose indicating that optometrist positions were available and had followed up with Mr Melrose upon his return to Australia after a period overseas.[157] Mr Buckis is located in Victoria, where neither BAT or IOBT operate.
11. The evidence regarding Mr Melrose representing the Trustee also extends to licensing. Mr Kozulin gave evidence that when he expressed interest in becoming a licensee of a store in Brighton, it was Mr Melrose who met with him, discussed the financial position of the store and told Mr Kozulin that the Trustee was not prepared to license the store to him.[158] If Ms Douglas and Mr Melrose operated wholly independently, then it is hard to understand how Mr Melrose would have been aware of the Trustee's financial position and/or preparedness to license a store to Mr Kozulin.
12. A third situation where Mr Melrose represented the Trustee is in relation to the payroll tax investigation by the State Revenue Office (SRO). Mr Melrose sought to explain this on the basis that he happened to be in Melbourne on the day the SRO called and the call was put through to him.[159] However, he confirmed that when asked if he was authorised to represent OSMT that he would have said something like "yes, I'm handling it".[160] Mr Melrose also added that he had "handled" previous investigations in Queensland and in Western Australia.[161] I observe that neither the BAT nor the IOBT operate in Victoria or Western Australia.
13. Mr Melrose also confirmed that he did not charge for his time to the extent it benefited the Trustee, explaining he "stopped billing on six minute time incremental slots" many years earlier.[162]
14. In addition to the activities of Mr Melrose, it appears that his operation manager, Mr Steve Dorz, provides services of benefit to the Trustee. In a table filed with the SRO on behalf of the Trustee,[163] it is indicated that 40% of Mr Dorz's time was spent on matters for the benefit of the Trustee. Mr Melrose confirmed that there was no charge for Mr Dorz's time either.[164]
15. Looking at matters from the other direction, significant benefits were provided by the Trustee to the trustee of the IOBT even though it was not a licensee. The benefits included:
    • listing on the TOSS website;[165]
    • the ability to participate in advertising campaigns;[166]
    • benefiting from the group product pricing arrangements;[167]
    • participating under a preferred provider agreement with Medibank;[168] and
    • group insurance arrangements.[169]
16. While there is some evidence of fees being charged to IOBT, the only documents included in the Tribunal documents are for the 2010 and 2011 financial years,[170] at the end of the relevant period. There is no evidence of how significant these charges were when compared to the 50% of profits payable by licensees.[171]
17. The access given to IOBT to participate in the group product pricing arrangements is significant given the evidence from Mr Melrose that those pricing arrangements could actually provide a significant competitive advantage,[172] in circumstances where the Trustee (in its capacity as trustee of the OPT) only charges the licensees for frames and lenses on the basis of "cost plus a small margin to cover administrative costs".[173]
18. While the trustee of the BAT was a licensee, there was evidence that its licence agreement was less restrictive than other licensees. For instance other licensees were required to use the TOSS retail price list when they stocked the same frames as those that are stocked in the corporate stores, but no similar restriction was placed on the BAT.[174] Ms Douglas said that this was because she had worked side by side with Mr Melrose and knew how he operated.[175]
19. In re-examination of Ms Douglas, Mr Sievers sought to demonstrate that, in practice, the benefits provided to the licensees were the same based on a similar lack of restriction in the licence for Bundaberg Optical Pty Ltd (Bundaberg Optical).[176] However, the Commissioner handed up a table presenting a comparison of the licence agreements with the BAT on the one hand, and Bundaberg Optical on the other, showing that the BAT licence agreement was even less restrictive than the one with Bundaberg Optical.[177] For instance, clauses 5, 6, 7, 8 and 9 of the Bundaberg Optical licence agreement don't appear in the licence agreement with the BAT, or appear with variations. While some differences might be expected, having regard to the up-front licence fees payable by the BAT, in my view this does not satisfactorily explain the full extent of those differences.
20. In terms of other connections, there was evidence of loans and distributions crossing from the "Douglas entities" to the "Melrose entities". In this regard, the financial records show:
    • a loan of $58,004 from Golden Lineage Pty Ltd (a company associated with Mr Melrose) to Celestial Inheritance Pty Ltd (a beneficiary of the DFT) in the 2010 financial year;[178]
    • a distribution of $143,338 received by the Celestial Inheritance Investment Trust (associated with Ms Douglas) from Golden Lineage Investment Trust (associated with Mr Melrose) in the 2010 financial year;[179]
    • a loan of $212,000 from the IOBT to the OPT in the 2005 financial year;[180] and
    • loans from the BAT to the OPT throughout the period from the 2005 to 2009 financial years.[181]
21. Both Ms Douglas and Mr Melrose sought to portray these as mistakes made by accountants,[182] however there was no credible evidence to support this characterisation.
22. The Commissioner handed up a table at the end of the proceedings which illustrated other loans and transactions between the two sets of entities.
23. I am fortified in my conclusions by the decision of Katzmann J. in Specsavers Pty Ltd (ACN 097 147 932) v The Optical Superstore Pty Ltd (ACN 095 737 894),[183] who in the context of an application for disclosure regarding a "mystery shopper" relevant to the substantive proceedings in that case, said:[184]

the uncontested evidence is that [Ms Douglas and Mr Melrose] are both responsible for the overall management of the business, the products the company sells, the prices at which they are sold, the creation and implementation of discount offers and the design of all the respondent's marketing campaigns including television advertising. In short, the business is run by a husband and wife team.

1. When this statement was put to Ms Douglas, her explanation was that the comment was made in the context of advertising in Victoria, Queensland and South Australia.[185] While that may have been the context of the proceedings, this does not explain why Katzmann J. referred to the involvement of Mr Melrose in a range of matters beyond advertising or who provided the "uncontested evidence".
2. Further, the conclusion of Katzmann J. is supported by the evidence of two witnesses in the present proceedings who said that they regarded Mr Melrose as the "head honcho"[186] or "owner of the business".[187] Similarly, when Mr Liang was asked in his interview with the State Revenue Office whether he knew who owned the business, he said "yes, Ian - Ian Melrose".[188] Mr Liang went on to explain that he had met Mr Melrose at continuing professional development (CPD) sessions. This exchange was put to Mr Melrose in cross-examination. While he challenged Mr Liang's statements in relation to CPD, he did not respond to the comment on ownership.[189] Indeed, it seems that the witnesses had few, if any, dealings with Ms Douglas.[190]

Amendments required to assessments to give effect to decisions on exemption issue

1. As my decision not to exercise the discretion to exclude the ninth and tenth applicants from the group with the first to eighth applicants is consistent with the assessments made by the Commissioner, no amendments are required in relation to this issue.

1. A liability to pay penalty tax is imposed under section 29 of the TA Act if there is a 'tax default', a term which is defined in section 3 of that Act 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.

1. There will have been a tax default by reason of my decision to the extent that the applicants did not include the LA Premiums in their payroll tax returns.
2. The rate of penalty tax is 25%,[191] unless the Commissioner is satisfied that the taxpayer took reasonable care to comply with the taxation law.[192]
3. The Victorian Court of Appeal had occasion to consider the issue of reasonable care in Commissioner of State Revenue v Snowy Hydro Ltd,[193] concluding:[194]

In our view, the Commissioner ought to have concluded that the taxpayer had taken reasonable care, within the meaning of s 30(3)(a)....

... the seeking of legal advice shows, unambiguously, that the taxpayer wished to know whether it had obligations under the Act and, if so, what they were. Seeking legal advice was both necessary and sufficient for that purpose. The non-disclosure of that advice did not, in the circumstances of this case, justify any inference that the taxpayer was acting otherwise than in good faith in applying the advice. Nor did the non-payment of the tax. As this litigation has demonstrated, the question of liability to duty raised issues of considerable complexity.

1. In a subsequent VCAT decision, Senior Member Davis determined (reluctantly) that no penalty should be applied in circumstances where legal advice was received, even if the advice was wrong.[195] This was so, even though the taxpayer concerned had not sought a ruling from the Commissioner.[196]
2. Where penalty tax has been properly imposed, the Commissioner has a discretion, "in such circumstances as the Commissioner considers appropriate" to remit penalty tax by any amount.[197] A similar discretion exists in relation to interest.[198]
3. In Conder Tower Pty Ltd v Commissioner of State Revenue,[199] Pagone J. described the discretion in relation to interest as:[200]

a broad and general discretion given to the Commissioner to be applied when the Commissioner considers it appropriate that it be applied in each case. Each case in which the question of remission under the section arises must be considered on its own facts and circumstances without the imposition of an unenacted threshold hurdle of a need for there to be "exceptional circumstances".

1. It is clear that the applicants did not seek a ruling from the Commissioner in relation to their payroll tax obligations. There was also no evidence that they sought external legal advice on their obligations under the payroll tax legislation. Indeed, when the question was put to Ms Douglas as to whether there was any advice taken, she said that should couldn't recall.[201]
2. In my opinion, the fact that the arrangements have been reviewed by other tax authorities and been given a 'clean bill of health' does not mean that reasonable care was taken in the relevant years in circumstances where those reviews concern different legislation (particularly given the significant differences between the payroll tax, income tax and GST regimes) and were undertaken after the filing of the payroll tax returns for the years relevant to these proceedings.
3. Accordingly, in my view, the applicants did not take reasonable care and the penalty was properly imposed at the rate of 25%.

Should the discretion to remit penalties and interest be exercised?

1. The applicants contend that the assessed penalties and interest 'should not have been imposed because there were significant delays in the Commissioner completing the investigation'.[202]
2. In response, in relation to penalties, the Commissioner argues that there was no significant delay between the time the applicants were notified of the investigation in May 2010 and its completion in June 2012, when regard is had to the failure by the applicants to provide information in relation to the investigation.[203] They say that any delays after the investigation was concluded and the assessments issued are not relevant to the issue of penalty.[204] Further, in relation to the time taken for referral of the matter to VCAT, the Commissioner points to the failure of the applicants to provide the information related to the exemption provisions that was flagged in their request for referral.[205]
3. In relation to interest, the Commissioner says:[206]

Given the function of the market rate component is to reimburse the Government for the financing costs incurred due to the late payment of tax, the Respondent contends that there is no basis for remitting the market interest due to delay for the reasons [set out in relation to penalties].

1. I accept the Commissioner's contention that any delay after assessment is not a relevant consideration in relation to the remission of penalties. This is because the imposition of penalties is fixed, rather than being calculated by reference to time.
2. In relation to the provision of information (which is relevant to the question of delay for both penalties and interest), both Ms Douglas and Mr Melrose were taken to the evidence which showed numerous requests being made and followed up for the provision of information.[207] In each case, they sought to blame others for the delay. This included the extraordinary proposition ventured by Mr Melrose that he had more than 8488 unopened emails on his phone and that it was therefore incumbent on the State Revenue Office to call him to tell him if there was information outstanding rather than writing to him.[208]
3. In my view, while there was a period of around 2 years taken by the Commissioner to conduct the investigation, this does not provide a basis on which to remit penalties or interest in circumstances where the issues were complicated (as evidenced by the need for 4 full days of hearing in these proceedings), a number of parties had to be interviewed by the Commissioner and the evidence clearly indicates the applicants were not entirely co-operative.
4. The one time period which warrants further consideration is the period from 22 December 2014, when the applicants requested the matter be referred to VCAT, until 23 December 2016 when the referral was made by the Commissioner. In this regard, section 106(3) of the TA Act provides that:

Subject to section 107, within 60 days after the request [for referral of a matter to VCAT], the Commissioner must refer the matter for review or cause the objection to be set down for hearing accordingly.

1. Section 107 of the TA Act allows the Commissioner to require a taxpayer to give further and better particulars of the objection, provided that the Commissioner does so within 30 days of the referral. If section 107 is activated, then the referral does not need to occur unless and until the Commissioner has received full details of the objection.
2. There is no suggestion that section 107 was activated in this case, although the Commissioner notes that in requesting the referral, the applicants referred to the provision of further information in relation to the exemption provisions, and that he provided a 'considerable amount of time' for the applicants to consider those matters.[209]
3. Neither party provided any evidence of what, if any, steps were taken by them between February 2015 (the time by which the applicants suggested they would provide the exemption information)[210] and the ultimate referral in December 2016 to advance matters.
4. In my view, the delay in referral to VCAT beyond the period mandated in the legislation is a matter to be considered in relation to remission. Set against that is the fact that the assessments have not been paid and interest has only been imposed at the market rate of interest, which has been described as 'a commercial sum of money that is payable on the money that was outstanding'.[211]
5. In the circumstances, I consider it appropriate to treat the applicants' reference to the provision of further information in a similar manner to the issue by the Commissioner of a request for further particulars under section 107 of the TA Act. As that information (which I equate to particulars) was never provided, it was not unreasonable for the Commissioner to delay the referral.
6. Having regard to the foregoing, the preferable decision is that the discretion to remit penalties and interest not be exercised, although the quantum of penalty and interest will need to be revisited by the Commissioner having regard to my decisions on the substantive issues in these proceedings.

Amendments required to assessments to give effect to decisions on penalties and interest

1. The assessments should be amended to reflect:
   1. The reduction in penalties (applied at the rate of 25%) based on the reduction in the additional primary payroll tax payable.
   2. The reduction in interest based on the reduction in the additional primary payroll tax payable.

[1] In his closing submissions, Mr Sievers indicated that, while there are four trusts, they are effectively treated as one entity (Transcript, Applicants' Closing Submissions (ACS), 20 December 2017, Page 328 (lines 12-15).

[2] The applicants made an application for an order by the Tribunal, pursuant to section 54(3) of the Victorian Civil and Administrative Act 1998 (VCAT Act), to have access to, or be able to inspect, the letter and certain related documents. That application was dismissed by the Tribunal on 7 September 2017.

[3] T18 (Vol 1). References to T documents are to the 6 volumes of documents filed by the Commissioner with the Tribunal under clause 89(1) of Schedule 1 to the VCAT Act on or about 23 December 2016.

[4] Transcript, ACS, 20 December 2017, Page 284 (lines 22-25); Respondent's Closing Submissions (RCS), 21 December 2017, Page 402 (lines 12-14).

[5] PTX Act 1971 s 8A; PTX Act 2007 s 81.

[6] Transcript, RCS, 21 December 2017, Page 479 (lines 16-17).

[9] Being the deductible amount allowed under Part R of Schedule Two to the PTX Act 1971 and clause 7A of Schedule 1 to the PTX Act 2007.

[12] PTX Act 1971 s 7(1); PTX Act 2007 s 6.

[13] PTX Act 1971 s 3C(1); PTX Act 2007 s 32(1).

[14] PTX Act 1971 s 3C(2)(c); PTX Act 2007 s 35(1).

[15] PTX Act 1971 s 3C(1)(e)(iii); PTX Act 2007 s 32(2)(b)(iii).

[16] PTX Act 1971 s 3C(1)(e)(v); PTX Act 2007 s 32(2)(b)(iv).

[17] PTX Act 1971 s 9A; PTX Act 2007 Pt 5.

[18] PTX Act 1971 s 9A(1J); PTX Act 2007 s 79.

[22] Mr Sievers indicated that the use of "tenancy" is meant in a broad sense, conceding that the relationship is not strictly a landlord/tenant relationship (given the absence of exclusive possession), but rather a licence arrangement (Transcript, Applicants' Opening Submissions (AOS), 18 December 2017, Page 24 (lines 21-25); ACS, 21 December 2017, Pages 369 (lines 18-20) and 370 (lines 14-27)).

[23] Applicant's Written Submissions dated 20 December 2017 (AWS) [53].

[28] Transcript, AOS, 18 December 2017, Page 46, Lines 18-20; ACS, 21 December 2017, Page 391 (line 26).

[30] Transcript, AOS, 18 December 2017, Page 12, Lines 1-2.

[31] Transcript, ACS, 21 December 2017, Page 399 (lines 22-26).

[35] Transcript, ACS, 20 December 2017, Page 296 (lines 13-21).

[36] Respondent's Amended Statement of Legal Contentions dated 8 December 2017 (RASLC) [112].

[49] Douglas WS1 [31]. It seems a number of the trusts were established in 1985, and so the business may have commenced earlier than 1989 (but perhaps not under the TOSS brand): Transcript, ACS, 20 December 2017, Pages 301 (lines 27-31) and 304 (lines 26-30).

[50] Douglas WS1 [33], Melrose WS [9-10].

[52] Melrose WS [34], adopting the reasoning of Ms Douglas in her witness statement (Douglas WS1 [72]).

[55] Transcript, Cross-examination of Ms Douglas, 18 December 2017, Pages 88 (lines 27-31) and 89 (lines 1-6).

[62] Ibid. Transcript, AOS, 18 December 2017, Page 18 (lines 28-30).

[63] Melrose WS [34-35]; Douglas WS1 [71-94].

[64] Transcript, ACS, Page 31 (lines 25-30). A pro forma contract was included in the documents filed by the Commissioner at T46 (Sample Contract).

[65] Sample Contract, cl 2(v). This is done by completing a 'Request to Pay Group Link' (an example of which is included as attachment A to the Buckis WS).

[68] Transcript, ACS, 22 December 2017, Page 382 (lines 4-24).

[71] Transcript, Mr Draper's Cross-Examination (Draper XXN), 20 December 2017, Page 275 (lines 1-23).

[73] Kozulin TS, Page 31 (lines 10-20).

[75] Sample Contract, First Schedule, item 3. An example invoice was included as T257 (Vol 5).

[76] Ibid. An example invoice is found at T188.

[79] Mayne Nickless Ltd v Mackintosh [1989] VicRp 79; [1989] VR 878, 883. Transcript, ACS, 20 December 2017, Page 285 (lines 29-31); RCS, 21 December 2017, Page 402 (lines 24-29).

[81] Transcript, Examination of Mr Melrose, 20 December 2017, Page 245 (lines 12-21).

[83] Transcript, RCS, 21 December 2017, Pages 405, 406, 409.

[89] [2014] NSWSC 127.

[90] Ibid [173] (authorities omitted).

[91] AWS [36]. Transcript, AOS, 18 December 2017, Page 4 (lines 10-13).

[92] Trancript, Cross-examination of Ms Douglas (Douglas XXN), 18 December 2017, Pages 82-85; Cross-examination of Mr Kozulin (Kozulin XXN), 19 December 2017, Pages 133-134.

[93] [2016] VSC 313.

[95] The applicants originally contended that there was a bare trust, but accepted in the course of submissions that any trust was more accurately described as an express trust. Transcript, ACS, 21 December 2017, Pages 350-3; 22 December 2017, Page 381 (lines 23-29).

[96] Transcript, ACS, 21 December 2017, Pages 363-5.

[97] [2015] HCA 6

[99] Buckis WS [8]; Kozulin TS Pages 19 (line 13) and 31 (lines 12-15).

[100] Douglas WS1 [77]; Melrose WS [35].

[101] Transcript, RCS, 22 December 2017, Pages 432-6.

[102] [2015] HCA 6 [109-11] (footnotes omitted).

[103] Transcript, ACS, 22 December 2017, Page 477 (lines 4 to 6).

[104] [2000] HCA 25.

[105] [2015] HCA 6 [3] (footnotes omitted).

[106] Associated Alloys Pty Limited v ACN 001452 106 [2000] HCA 25 [34] (Gaudron, McHugh, Gummow and Hayne JJ); In the Matter of Freelance Global Limited (in Liqudation) v Bensted [2016] VSC 181 [32].

[107] Transcript, ACS, 21 December 2017, Page 386 (lines 5-15).

[108] [2014] NSWSC 127 [60].

[110] Transcript, ACS, 22 December 2017, Page 387 (lines 18-25).

[113] Transcript, Douglas XXN, 18 December 2017, Pages 92-94; 19 December 2017, Pages 150-151; See also Kozulin XXN, 19 December 2017, Pages 130-131.

[114] Transcript, Douglas XXN, 18 December 2017, Pages 102-103.

[115] (1994) 28 ATR 1082.

[116] [2000] VSCA 122; (2000) 44 ATR 413.

[118] Levitch Design Associated Pty Ltd ATF Levco Unit Trust v Chief Commissioner of State Revenue [2014] NSWCATAD 215 [64].

[120] Transcript, Examination of Mr Kozulin, 19 December 2017, Page 117.

[122] Ibid. Transcript, Examination of Mr Kozulin, 19 December 2017, Page 116 (lines 5-31); Kozulin,XXN 19 December 2017, Page 139 (lines 24-27).

[124] Transcript, Kozulin XXN, 19 December 2017, Page 127 (lines 14-20).

[125] Buckis WS [2]. A copy of an Optom Agreement between the Trustee and Mr Buckis "as trustee" of an unnamed trust was handed up. It is dated 1 October 2003, although the copy provided was only signed by Mr Melrose "for and on behalf of the Landlord". Mr Buckis confirmed that he signed it on or around 1 October 2003 (Transcript, Examination of Mr Buckis, 19 December 2017, Pages 161-162).

[129] Transcript, Examination of Ms Hill, 19 December 2017, Pages 182-183.

[131] Draper WS [11]. Attachment E to Mr Draper's witness statement contains copies of the email exchanges.

[132] Transcript, Draper XXN, 20 December 2017, Page 276 (lines 4-10).

[135] Rainn Pty Ltd v Commissioner of State Revenue [2016] VCAT 402 [8].

[136] The applicants had requested that the principal register issue a summons to Ms Kravchenko, however ultimately that was not issued or served as the applicants advised that they were uncertain of Ms Kravchencko's current address and contact details.

[139] Draper WS [16]. Attachment H to Mr Draper's witness statement contains copies of the email exchanges.

[140] RASLC [70] (footnotes omitted).

[141] RASLC [74] (footnotes omitted).

[143] Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; (2011) 245 CLR 446 [8].

[147] Transcript, Douglas XXN, 18 December 2017, Page 89 (lines 1-6); AWS [32].

[148] T118, T121, T124, T125, T127, T128, T129, T130, T182, T205, T222, T236, Optom Agreement of Mr Buckis (handed up by the applicants).

[150] Transcript, Douglas XXN, 18 December 2017, Pages 110 (lines23-31) and 111 (lines 1-8).

[151] Transcript, Melrose XXN, 19 December 2017, Pages 218 (lines 11-23) and 229 (lines 6-14).

[152] Ibid and also Page 229 (lines 24-31)

[155] Transcript, Melrose XXN, Pages 200 (lines 28-31) and 201 (lines 1-7).

[156] Transcript, ACS, 21 December 2017, Page 394 (line 22-25).

[157] Transcript, Cross-examination of Mr Buckis, 19 December 2017, Page 163 (lines 7-18) and 164 (lines 1-10).

[158] Transcript, Kozulin XXN, 19 December 2017, Pages 135 (lines 26-31) and 136 (lines 1-11).

[159] Transcript, Melrose XXN, 19 December 2017, Pages 230 (lines 19-31) and 231 (line 1). See also T13 at page 10.

[161] Ibid, Pages 231 (lines 16-21) and 232 (lines 1-4).

[163] T268 (which was attached to the objection at T13).

[164] Ibid, Pages 204 (lines 25-31) and 205 (lines 4-7).

[165] Transcript, Douglas XXN, 18 December 2017, Page 64 (lines 28-30).

[171] See, for example, clause (11) of the Licence Agreement With Unique Eyewear Pty Ltd at T135.

[172] Transcript, Melrose XXN, 20 December 2017, Page 241 (lines 9-31).

[174] Transcript, Douglas XXN, 18 December 2017, Page 107 (lines 16-31).

[176] Transcript, Re-examination of Ms Douglas, 19 December 2017, Pages 178 (lines 12 to 31) and 179 (lines 1-14). The agreement with Bundaberg Optical is at T134.

[177] Transcript, RCS, 21 December 2017, Pages 457 (lines 4-31) and 458 (lines 1-8).

[182] Transcript, Douglas XXN, 19 December 2017, Page 147 (lines 1-18) and Melrose XXN, 19 December 2017, Pages 216-218.

[183] [2010] FCA 151.

[185] Transcript, Douglas XXN, 19 December 2017, Pages 173 (lines 1-31) and 174 (lines 1-4).

[186] Kozulin TS, Page 9 (lines 30-35); Transcript, Kozlulin XXN, 19 December 2017, Page 135 (lines 7-23).

[187] Transcript, Cross-examination of Ms Hill, 19 December 2017, Page 186 (lines 7-11).

[188] Liang TS, Page 16 (lines 15-20).

[189] Melrose XXN, 19 December 2017, Page 224 (lines 1-18).

[190] Kozulin TS, Pages 9 (lines 35-40); Transcript, Cross-examination of Mr Buckis, 19 December 2017, Page 164 (line 31).

[193] [2012] VSCA 145.

[195] Denison Funds Management Ltd v Commissioner of State Revenue [2014] VCAT 1385 [66]-[69].

[199] [2012] VSC 107.

[201] Transcript, Douglas XXN, 19 December 2017, Page 155 (lines 5-12).

[207] Transcript, Douglas XXN, 19 December 2017, Pages 155-7; Melrose XXN, 20 December 2017 at Pages 207-9 and 235-6.

[208] Transcript, Melrose XXN, 20 December 2017 at Page 236 (lines 7-24).