As payroll tax provisions come under increased scrutiny by Revenue Offices, another case has provided clarity on how they should be interpreted.
In Nationwide Towing & Transport Pty Ltd v Commissioner of State Revenue (No 2)  VSC 609, the Victorian Supreme Court has dealt the Victorian State Revenue Office a blow by setting aside payroll tax assessments issued in relation to a taxpayer engaged by RACV Roadside Services Pty Ltd (RACV) to provide emergency roadside services.
The taxpayer in-turn engaged and paid subcontractors to provide those services to the RACV. Payroll tax applies not only to the payment of wages to employees but also to payments to contractors under a “relevant contract” unless an exemption applies. One exemption applies when services provided by the contractors are services performed by persons who ordinarily performed services of that kind to the public generally in that financial year (section 32(2)(b)(iv) of the Payroll Tax Act 2007 (Vic)).
The taxpayer argued that its subcontractors did provide the services to the public – they not only provided the services they were engaged to perform by the taxpayer (eg towing vehicles) but would often provide additional services such as mechanical repair services and the supply of car parts not covered by the RACV contract. The Commissioner’s view was that the contractor was not conducting a “genuinely independent business” because any services to the public was only in the course of providing services to the taxpayer.
Justice Croft decided in favour of the taxpayers. His Honour identified that the correct question at law was whether the subcontractors had indeed provided services of that kind to the public generally. The further criterion read in from Revenue Ruling PTA.021 about whether the contractors ran a genuinely independent business was not the relevant question to ask in relation to the application of this provision of the Payroll Tax Act.
This also serves as a timely reminder for taxpayers and their advisors to not rely solely on a public ruling, but instead carefully consider the actual provisions and case law when considering a challenge to an overly “aggressive” interpretation of the law by the revenue authorities.
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