Outcome of litigation
On 12 February 2020, the High Court of Australia dismissed the taxpayer's application for special leave. This leaves the Court of Appeal decision in Commissioner of State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197 undisturbed.
The Court of Appeal found that 'paid or payable' in section 35 of the Payroll Tax Act 2007 (and section 3C(2)(c) of the Pay-roll Tax Act 1971 (Old Act)) means simply the provision of money. The Court of Appeal also found [at 67]: "The ordinary meaning of ‘payment’ readily embraces a payment of money to a person beneficially entitled to that money. When the entitlement is recognised and the money is provided to the person, it has been ‘paid’ to that person."
The Court of Appeal noted that the 'contractor provisions' are plainly intended to subject to payroll tax payments that would not otherwise fall within the definition of 'wages'. Essentially the contractor provisions are an elaborate set of definitions.
In general terms, the flow of funds from a taxpayer/trustee to employees/beneficiaries through a fixed trust (or any trust) does not deprive those funds of meeting the criteria of ‘paid or payable’ in the contractor provisions and therefore subject to payroll tax.
Commissioner's position
The Commissioner's view is that the Court of Appeal has interpreted section 35 (and section 3C(2)(c) of the Old Act) in a way that is consistent with the policy intention of the Acts.
It has always been the Commissioner's position that the existence of a relevant contract needs to be assessed on a case by case basis. This is true of the criteria in section 32(1) as well as the exclusions from that definition in section 32(2) (and their equivalent sections in the Old Act), and the outcome in the Optical Superstore matter has not changed this position. This is demonstrated by the factual findings in the Victorian Civil and Administrative Tribunal (The Optical Superstore Pty Ltd as Trustee for OS Management S Trust & Ors v Commissioner of State Revenue (Review and Regulation)[2018] VCAT 169), which were not challenged by the parties before Trial and Court of Appeal proceedings.
