Kelima Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2019] VCAT 404
Background
One of the taxpayer’s major clients was DB Results Pty Ltd (DBR) which operated an IT consultancy business. DBR’s clients, in turn, relevantly included SPI Electricity Pty Ltd (AusNet), which was the ultimate client in the arrangement between the taxpayer and DBR.
The Commissioner assessed the taxpayer in respect of payments made in the two financial years to IT workers whose services the taxpayer provided to DBR.
The case turned on two questions:
- Whether the DBR was an employment agent in its own right, thereby giving rise to a case of chain of on-hire.
- If yes to 1, whether the payroll tax liability should then lie with DBR and the taxpayer be excused, by either application of s41 of the Payroll Tax Act 2007 (PTX Act) or under the Revenue Ruling PTA-027 ‘Employment Agency Contracts – Chain of on-hire’ (Ruling).
Decision
On 25 March 2019, the tribunal handed down its decision in favour of the Commissioner.
For the 2015 financial year assessment, the tribunal determined that DBR was not an employment agent as its contractual arrangements with its own client, AusNet, did not meet the description of an employment agency contract for the purposes of the PTX Act. The taxpayer, accordingly, could not be relieved of liability.
For the 2016 financial year assessment, due to the change in contractual arrangements, it was accepted that DBR was an employment agent for the purposes of that tax year. However, the tribunal determined that the taxpayer was not relieved of payroll tax liability under either s41 of the PTX Act or the Ruling, because:
- Section 41 did not apply as DBR had not paid payroll tax (a mandatory requirement in s41).
- The Ruling sets out an administrative practice only and cannot provide the basis for a discretion to relieve the taxpayer of liability where such a discretion does not exist in the legislation itself.
