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Let’s now look at a payroll tax case in New South Wales. Now this payroll tax case is a little along the line of the employee vs contractor type of decision, although it’s not precisely the same. So the issue was whether payments made to sub-contractors by the taxpayer to install Foxtel equipment were subject to payroll tax in New South Wales. And it went to the New South Wales Supreme Court of Appeal, that’s the highest court in New South Wales, and the appeal was dismissed. That is, the taxpayer was not required to pay payroll tax on the amounts.
So here’s just a diagram on what was going on. Firstly, number 1, we have a potential Foxtel customer who wishes to become a Foxtel customer. They then subscribe and Foxtel, number 2, engages, in this case the taxpayer, Downer Engineering, to install the equipment at the subscriber’s household, the set-top box, perhaps the satellite dish, cables and so on. Now Downer sub-contracted this work to various workmen, and workmen would then, when they got the order for the work, they would go to the Downer warehouse, get the equipment, go out to the subscriber’s house and install it. So the issue was whether the payments that were made by Downer Engineering to the workmen for their subcontracting work, whether that was something that attracted payroll tax in New South Wales.
Now the issue was over the particular wording in the New South Wales Payroll Tax Act, but it does apparently have an application across the country. So the issue is this: whether the work of the workman was exempt from payroll tax because that was ancillary to the supply of goods or ancillary to the conveyance of goods. So we know that payroll tax is a tax on work, employment, that sort of thing. But what happens when you have goods in the mix? Is it for the goods? Is it for the installation? And how do we deal with that?
Well the exemption is in relation to work that is ancillary to the conveyance of the goods, and so that needs to be understood. So the taxpayer argued that in fact the work of the workman was ancillary to the conveyance of the goods, that is the set-top box and the satellite and so forth. They said, the taxpayer, that the sub-contractor purchased the equipment, and transferred the legal title in most things to the eventual Foxtel customer, so there was a supply of goods, and that when we’re talking about the labour that the workmen were undertaking, is that the use of the word ‘ancillary’ shouldn’t be seen as being subordinate or subservient to the conveyance of goods. So one view is that if the installation is just a little bit then payroll tax doesn’t apply. What they were saying is, well, it doesn’t matter if it’s a little bit or a big bit, compared to the goods, it’s still ancillary to the supply of the goods, that’s the taxpayer’s argument.