AGC Roof Maintenance Northern Division Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 199

Catchwords: TAXES AND DUTIES — payroll tax — independent contractor — common law employee — relevant contract — 90-day exemption — se rvices to the public exemption — two-person exemption Civil and Administrative Tribunal New South Wales Medium Neutral Citation: AGC Roof Maintenance Northern Division Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 199 Hearing dates: 14 May 2020, 1-2 September 2020 Date of orders: 13 July 2021 Decision date: 13 July 2021 Jurisdiction: Administrative and Equal Opportunity Division Before: M Easton, Senior Member Decision: ( 1) The respondent’s amended assessments relating to payments made to the following persons in the nominated financial years are affirmed: ( a) O'Haras Roofing Pty Ltd (FY2014); ( b) Glenn Vazey (FY2014, FY2015, FY2016, FY2017); and ( c) Luisa and Patrick McManus t/a ABQ Roofing (FY2016). ( 2) The respondent’s amended assessments relating to payments made to the following persons in the nominated financial years are quashed: (a) PHN Roofit Pty Ltd (FY2014); ( b) Nathan Barry (FY2015, FY2016); ( c) Todd Burrows (FY2015); ( d) Michael Chalker (FY2016); ( e) Bell Roof and Gutter Maintenance Pty Ltd (FY2017); and ( f) Thomas Guilbot (FY2017). Catchwords: TAXES AND DUTIES — payroll tax — independent contractor — common law employee — relevant contract — 90-day exemption — se rvices to the public exemption — two-person exemption Legislation Cited: Home Building Act 1989 (NSW) Payroll Tax Act 2007 (NSW) Taxation Administration Act 1996 (NSW) Cases Cited: ACE Insurance Lt d v Trifunovski (2013 ) 209 FCR 146; [2013] FCAFC 3 ACE Insurance Ltd v Trifunovski (2011) 200 FCR 532; [2011] FCA 1204 Antegra Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 107 B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 ; [2008] NSWCA 187 Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2020) 279 FCR 631; [2020] FCAFC 122 Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) (2011) 214 FCR 82; [2011] FCA 366 Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448; [2010] FCAFC 52 Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19 Texts Cited: Nil Category: Principal judgment Parties: AGC Roof Maintenance Northern Division Pty Ltd (Applicant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: T Ensor (Respondent) Solicitors: Applicant (self-represented) Crown Solicitor (Respondent) File Number(s): 2019/00208861 Publication restriction: Nil Reasons for decision Background AGC Roof Maintena nce Northern Division Pty Ltd ( AGC ) engages employees and independent contractors to provide quotes and perform installation and repair work. Generally AGC and its related entities engages its workers as follows: some workers are engaged as independent contractors: contractors can select jobs by taking job sheets from a “ wall of work ” at AGC ’ s premises. These workers are paid a “ profit share ” , must provide their own equipment and vehicle, and are required to arrange individual jobs , labour and resources themselves; and some workers are engaged as employees, are allocated work by AGC and are paid wages. AGC ’ s payroll tax liability for wages paid to workers classified ( by AGC ) as employees is not in issue and does not req uire any further consideration. The central contest is whether payroll tax applies to monies paid by AGC to workers categori s ed by AGC as contractors . Monies paid to workers will count as taxable wages if either: the worker is in fact an employee under the common law ; or the contract between AGC and the worker i s a “ relevant contract ” under s 32 of the Payroll Tax Act 2007 (NSW) ( “ PTA ” ) and none of the exemptions in s 32 of the PTA apply . On 15 February 2018 the Chief Commissioner of State Revenue ( the Commissioner ) issued payroll tax assessment notices to AGC for FY 2014, FY 2015, FY 2016 and FY 2017. AGC objected to certain parts of the assessment and the Commissioner issued amended payroll tax assessment notices on 8 May 2019. In its amended notice s the Commissioner accepted that some AGC Contractors were actually independent contractors and that monies paid to those contractors was not taxable wages because an exemption under s 32 applied . The Commissioner also found that some AGC Contractors were common law employees and that payroll tax applied to monies paid to those workers. AGC seeks administrative review of the Commissioner ’ s amended assessment. AGC carries th e onus to prove its case (per s 100(3) of the Taxation Administration Act 1996 (NSW) ). Where applicable AGC must prove that an exemption applies on the balance of probabilities (per B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 ; [2008] NSWCA 187 at [104] and most recently Antegra Pty Ltd v Chief Commissioner of State Revenue [ 2021] NSWSC 107 at [8]). The Taxation Administration Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the Commissioner ’ s assessments be sustained or supported by evidence. I have concluded that some of the workers were employees at common law, some were independent contractors and some, but not all, of those independent contractors f ell within an exemption under s 32 of the PTA. AGC’s work arrangements Roof workers Mark Osborn is a director of AGC and gave evidence about AGC ’ s arrangements with its workers. In this decision I will use the term “ AGC Contractors ” when referring generally to those workers that AGC has engaged as independent contractors, and I will use the term “ Disputed Contractors ” to refer to the AGC Contractors whose status remains in dispute. Mr Osborn ’ s evidence was that the arrangements for each AGC C ontractor were substantially the same . In the amended assessment in 2018 the Commissioner accepted that monies paid to some workers were not taxable wages. Mr Osborne was clear in his evidence that no worker ha d been forced or coerced into a contractor arrangement . That said , there is a substantial difference between the rates paid to contractors and the rates paid to employees. Mr Osborn said that worker s who became AGC Contractor s did so at their own request, that he has never asked or suggested to an employee that they could work as a contractor , and that he “ does not care [whether the worker is an employee or a contractor] as long as they are a good worker. ” AGC require d each AGC Contractor to sign a written agreement and to either be incorporated or to have an ABN . The written agreement is in standard terms and was drafted by AGC . Mr Osborn indicated that some AGC Contractors have insisted on variations to the standard terms . AGC allocates work to selected AGC C ontractors based on their experience and qualifications. Price can be negotiated, although a default “ profit share ” arrangement applied: AGC pays AGC Contractors 42% of the profit on each job. For example, if a job is priced at $10,000 and the cost of materials is $2 , 000, the default profit share is 42% of $8 , 000. On some jobs the “ profit share ” going to the AGC Contractor is higher than 42% by negotiation . AGC does not determine which day or days contractor s work, nor does AGC determine which particular job is to be done on any particular day. AGC Contractors tend to arrange their work a fortnight ahead and the only requirement imposed by AGC is that they contact AGC ’ s customers at least 24 hours before attending site. Depending on the work, AGC Contractors deploy their own labour and , importantly, the contractor decides how much labour to deploy. T he profit share price for each job is not directly linked to the amount of labour required . E ssentially AGC pays for the result, rather than the labour. It is a matter for the contractor how long any particular job take s and how much labour the contractor deploy s . Mr Osborn said that m any AGC C ontractors advertise their s ervices, have websites and vehicle signs, and work for other roofing companies and builders. T he contractor bears the risk that the profit share will be sufficient to cover the labour deployed. Mr Osborn ’ s evidence was that there is a significant shortage of roo f workers in Sydney, and I must necessarily recognise that market forces require AGC to price jobs to attract contractor s to take the work . AGC Contractors are generally free to work for others, though some evidence indicate s that some AGC Contractors work almost exclusively for AGC. The Home Building Act 1989 (NSW) requires that individuals who do residential building work, defined to include roof plumbing work , m ust hold an endorsed contractor licence or work under the supervision of an endorsed licence holder (per s 13(1)). AGC and its related entities held relevant contractor licen c es and , relevantly, most of the AGC Contractors did not hold licen c es. Mr Osborn ’ s evidence was that “ all contractors are covered under [AGC ’ s] licen c e ” and that for quality control purposes jobs over $5 , 000 are inspected by an employee of AGC prior to payment . J obs under $5 , 000 are checked by way of an exchange of photographs. AGC insists that AGC Contractors maintain public liability insurance, workers compensation and personal protection insurance, and that they have an ABN, as well as various WHS equipment and certificates. AGC Contractors are not required to wear a uniform . AGC Contractors can choose to wear an AGC uniform, which is supplied and charged to them at cost. Mr Osborne said that most AGC Contractors refuse to wear AGC ’ s uniform because of the cost . AGC Contractors are not allowed to wear clothing that promotes their own business when working on AGC jobs . Similarly AGC Contractors have their own vehicles and do not have to display AGC signage , but are prevented from displaying their own signage on their vehicle. AGC Contractors are required to identify themselves when they attend a site . When the work requires the use of safety signage, such as “ danger working above ” signs, the signs used are AGC safety signs provided by AGC . Mr Vazey One particular contractor, Mr Vazey , did not provide roofing services but provided estimator services. Mr Osborn ’ s evidence about Mr Vazey included the following: “… Glenn Vazey has worked with and for AGC for at least 14 of the 17 years I have been associated with the Company. Glenn came to the Company as an employee estimator. He was then promoted to employee Operations Manager, after an unsuccessful time in this role, Glenn was put back to employee estimator. Soon after Glenn requested that AGC allow him to work with AGC as an estimator on an independent contractor basis. Glenn wanted to earn more money, he wanted more control over the hours he worked, and the days he worked, and he wanted control over who he worked for. AGC agreed to allow Glenn to become a independent contractor estimator/tradesmen under the following agreement. He would have an ABN, public liability insurance, personal protection insurance, his own vehicle, his own ladders, his own tools. He would supply his own office, he would supply his own telephone, stationary, computer, internet connection, and all or any other tools of trade to complete his work. Glenn would decide which days he quoted, Glenn would decide which days he sent the quotes he had inspected, Glenn would decide which days he did or did not work at all, Glenn would decide what hours he worked.” Mr Vazey ’ s situation must be considered separately to the other roofing workers. Common law employment The common law distinguishes between contracts of service (employees) and contracts for service (independent contractors). Though there may be an infinite variety of relationships in commercial situations, courts and tribunals generally categorise labour-related contracts into either contracts of service or contracts for service. As the High Court observed – the two central conceptions are “ now too d eeply rooted to be pulled out ” : see Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19 at [33], and see also Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2020) 279 FCR 631 ; [2020] FCAFC 122 at [72]). In ACE Insurance Lt d v Trifunovski (2013) 209 FCR 146 ; [2013] FCAFC 3 at [25] Justice Buchanan described contracts of employment as follows: “Contracts of employment (contracts of service traditionally so-called) are contracts for personal service. Benefits and obligations of contracts of individual service of this kind are not unilaterally assignable by either party. The requirement for personal service has the effect that a contract which truly permits discharge in another fashion or by another person, is not a contract of employment. Thus, contracts with corporations, contracts with partnerships, contracts permitting unlimited delegation and contracts which do not actually compel the performance of work but pay only on results, are each prima facie not contracts of the necessary quality (although the last category is more contestable than the first three).” (Footnotes omitted.) The tribunal ’ s or c ourt ’ s task in distinguishing between contracts for and of service has been described as finding the "overall picture from the accumulated detail ” , avoiding a "mechanical approach ” . In finding the overall picture one must examine the various indicia pointing one way and the other, stand back and examine the overall effect of the detailed facts found ( Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448 ; [2010] FCAFC 52 at [31]). Labour c ontracts must be viewed in a "practical manner" ( Hollis v Vabu Pty Ltd (2001) 207 CLR 21 , [2001] HCA 44 at [46]) , and courts and tribunals must examine the reality of the relationship . There is no single applicable test to determine whether a particular relationship is one of employment or contractor, and often the question is not easy to determine ( On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) (2011) 214 FCR 82; [2011] FCA 366 at [188]) . Justice Perram ’ s non-exhaustive list in ACE Insurance Ltd v Trifunovski (2011) 200 FCR 532; [2011] FCA 1204 at [29] illustrates the range of matters a decision-maker might consider: “ With that in mind one can at least say this: first , the distinction between an employee and an independent contractor is ‘rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own’ ( Hollis v Vabu Pty Ltd [2001] HCA 44 ; (2001) 207 CLR 21 at 39 [40] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ citing Marshall v Whittaker’s Building Supply Co (1963) 109 CLR 210 at 217 per Windeyer J); secondly, the answers to that question are to be determined by reference to the ‘totality’ of the relationship ( Hollis at 33 [24]); thirdly , a number of indicia have accreted over time in the authorities which are thought to throw light to varying degrees on the outcome without being determinative: the terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party ‘represents’ the other; for the benefit of whom does the goodwill in the business inure; how ‘business-like’ is the alleged business of the putative employee – are there systems, manuals and invoices; and so on – the list is neither exhaustive nor short: see Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1 ; (1986) 160 CLR 16 at 24 per Mason J and 36-37 per Wilson and Dawson JJ; for application see Hollis at 42-45 [48]-[57] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Sweeney at 172-173 [30]-[33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. ” In recent times the more determinative test has been the business test. T his test examines whether in truth the worker is working in the business of the other, rather than in their own business. This test is strongly tied to notions of vicarious liability and the identification of the proper enterprise that created the risk that produced the tortious act (see Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 (“ Hollis v Vabu ” ) at [42] and [47]). In Hollis v Vabu , a vicarious liability case, the High Court found that the particular bicycle couriers were not running their own business or enterprise but were “ on the business ” of Vabu (at [90]). In Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19 at [31] the High Court found the circumstances to be “ very different ” to Hollis v Vabu . The Court found that the refrigeration mechanic was not an employee because he conducted his own business. The Court found that the work done by the mechanic was done in pursuing his own business (at [33]). In Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448, [2010] FCAFC 52 at [46] – [47] , the Court was persuaded by the fact that the work of the interviewers was to little commercial gain for the interviewers, that the interviewers took very little commercial risk and that they invested little save for their time and skills. Labels applied by parties are not decisive of the true legal character of the relationship ( per ACE Insurance L t d v Trifunovski (2013) 209 FCR 146; [2013] FCAFC 3 at [32] per Buchanan J ). The use of an intervening corporate entity can be significant , however in some cases courts have placed little weight on the fact that a worker can or could contr act through a corporate entity: see Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448 ; [2010] FCAFC 52 at [43]). Were the Disputed Contractors in fact common law employees? Roofing contractors Dealing firstly with the Disputed Contractors who provided roofing services, there are several factors that point against an employment relationship and there are several factors that point towards an employment relationship. I will identify these factors shortly. In assessing the overall picture of the arrangements between AGC and the AGC Contractors , my conclusion is that only Mr Vazey is an employee of AGC under the common law. AGC Contractors are predominantly running their own business when dealing with AGC. Even though AGC sources customers, and the AGC Contractors provide their services on the sites of AGC ’ s customers, the allocation of work, the pricing of the work and the assumptions of commercial risk each point to the AGC Contractors operating their own business: AGC ’ s ‘ business ’ is primarily to attract and deal with clients, negotiate the overall price for particular jobs and negotiate/entice AGC Contractors to do the work for an acceptable profit share; and AGC Contractors ’ business is primarily to choose commercially viable jobs from the wall of work at AGC and then organise their own schedule, labour and resources to complete the job in the most profitable way. Whilst many of the AGC Contractors deal predominantly with AGC, in my view they are not economically dependent upon AGC . The success or failure of an AGC Contractor ’ s business is not so closely tied to AGC ’ s business that one could say the contractor is economically dependent on AGC. Obviously if AGC ceased trading then each contractor would lose a significant amount of business, however the success or failure of a contractor ’ s business is more significantly determined by which jobs the contractor bids for, and how they allocate their time and resources to each job. This analysis is essentially another way of considering the risk borne by the AGC Contractor. In my view the risks borne by the contractor (for which they appear to be satisfactorily rewarded) travel beyond just the risk that AGC will cease to trade. The other factors that point against an employment relationship are: AGC does not determine or control when and how work is done; AGC essentially pays for a result rather than for labour; AGC Contractors can , and in fact do, engage other workers to perform work; AGC does not vet or control those who work for AGC Contractors; AGC ’ s supervision of the work is limited to only quality control measures (inspections or photographs); and s ome AGC Contractors are incorporated . The factors that point towards an employment relationship are: AGC maintains some control over what the workers wear. AGC does not insist on workers wearing an AGC uniform however AGC does insist that workers refrain from wearing clothing or using signage that would identify workers as being associated with a business other than AGC; s ome AGC Contractors appeared on AGC ’ s website in the “ Meet the Team ” page and are presented to the public as integral to AGC ’ s operation ; and AGC is actively involved in the establishment and maintenance of the administrative systems that underpin the relationship between AGC and each AGC Contractor. The Commissioner submitted that the very fact that AGC Contractors worked under the supervision of an AGC entity point ed towards the worker s being common law employee s of AGC rather than independent contractor s . I accept the Commissioner ’ s submission in this regard, recognising that supervision is but one factor in an overall assessment, and also recognising that the evidence of the way in which the work was actually supervised is more significant for present purposes than the requirements of the Home Building Act . Save for Mr Vazey, there was no matter raised in evidence that would cause me to distinguish any individual Disputed Contractor from the broader group of AGC Contractors and accordingly I find that the Disputed Contractors engaged to provide roofing services were not employees of AGC. Glenn Vazey Mr Vazey is in a different category to the Disputed Contractors who provided actual roofing services. Mr Vazey provided estimator services only to AGC, which I see is a material difference. The Disputed Contractors who provide roofing services carry the risks described above and their business interests are separate to AGC ’ s business interests . Mr Vazey ’ s business as an estimator is to visit clients ’ sites, for a fee, and perform a service on behalf of AGC. Mr Vazey presumably receives the same payment whether he estimates well or poorly. That is, on any particular estimation job, Mr Vazey does not appear to carry any risk. AGC carries the risk that Mr Vazey ’ s estimate is not correct or not done properly. Mr Osborn ’ s evidence was that Mr Vazey made a lifestyle decision to resign his employment and work as a contractor, obviously at a higher rate of pay, and to work less hours or days . The monies paid to Mr Vazey are surprisingly similar over the four relevant financial years that he was paid as an independent contractor . For the respective years AGC paid Mr Vazey $115,945, $124,310, $124,371 and $116,523.39 , which is indicative of a regularity of services over a sustained period of time. More significantly, Mr Vazey ’ s recorded total sales over the same years is basically the same as the amounts paid by AGC, being $116,568, $123,594, $121,362 and $114,118 respectively. In forming an overall picture from the accumulated detail I am satisfied that Mr Vazey was an employee of AGC. On balance , I find that in truth Mr Vazey was working in the business of AGC rather than in his own business. Applying the conventional dichotomy between either a contract of service ( i.e. employment) and a contract for services (independent contractor) I therefore find that Mr Vazey was an employee of AGC and that the monies paid to him in the relevant financial years was taxable wages for the purposes of payroll tax. As will be apparent from the analysis below, e ven if Mr Vazey was in truth an independent contractor, the contract between him and AGC was a relevant contract , none of the relevant exemptions appl y and therefore the monies paid to Mr Vazey are still taxable wages for the purposes of payroll tax. Payroll Tax Act 2007 Having determined that the Disputed Contractors , apart from Mr Vazey, were not employees under the common law , I must now consider the contractor provisions of the PTA. Under the PTA , payroll tax is imposed on all taxable wages (s 6). Taxable wages include wages paid or payable by an employer for or in relation to services performed by an employee wholly in NSW (s 11). If a contract for services ( i.e. an independent contractor) is a “ rel evant contract ” as defined in s 32, then the worker performing the wor k is taken to be an employee (s 34) and the amounts paid to the worker are taken to be wages for the purposes of payroll tax (s 35). Much depends, therefore, on whether the contracts under which the Disputed Contractors provided services to AGC a re “ relevant contracts ” under s 32 of the PTA and on whether any exemptions apply. Section 32 of the PTA is in the following terms: 32 What is a relevant contract? (1) In this Division, a relevant contract in relation to a financial year is a contract under which a person (the designated person) during that financial year, in the course of a business carried on by the designated person— (a) supplies to another person services for or in relation to the performance of work, or (b) has supplied to the designated person the services of persons for or in relation to the performance of work, or (c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for re-supply of the goods to the designated person or, where the designated person is a member of a group, to another member of that group. (2) However, a relevant contract does not include a contract of service or a contract under which a person (the designated person) during a financial year in the course of a business carried on by the designated person— (a) is supplied with services for or in relation to the performance of work that are ancillary to the supply of goods under the contract by the person by whom the services are supplied or to the use of goods which are the property of that person, or (b) is supplied with services for or in relation to the performance of work where— (i) those services are of a kind not ordinarily required by the designated person and are performed by a person who ordinarily performs services of that kind to the public generally, or (ii) those services are of a kind ordinarily required by the designated person for less than 180 days in a financial year, or (iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services— (A) provided by a person by whom similar services are provided to the designated person, or (B) for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person, for periods that, in the aggregate, exceed 90 days in that financial year, or (iv) those services are supplied under a contract to which subparagraphs (i)–(iii) do not apply and the Chief Commissioner is satisfied that those services are performed by a person who ordinarily performs services of that kind to the public generally in that financial year, or (c) is supplied by a person (the contractor) with services for or in relation to the performance of work under a contract to which paragraphs (a) and (b) do not apply where the work to which the services relate is performed— (i) by two or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or (ii) where the contractor is a partnership of two or more natural persons, by one or more of the members of the partnership and one or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or (iii) where the contractor is a natural person, by the contractor and one or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or (d) is supplied with services solely for or ancillary to the conveyance of goods by means of a vehicle provided by the person conveying them. (2A) Subsection (2) does not apply if the Chief Commissioner determines that the contract or arrangement under which the services are supplied was entered into with an intention either directly or indirectly of avoiding or evading the payment of tax by any person. (2B) Subsection (2) (a), (b), (c) or (d) does not apply to a contract under which any additional services or work (of a kind not covered by the relevant paragraph) are supplied or performed under the contract. (3) For the purposes of this section, an employment agency contract under which services are supplied by an employment agent, or a service provider is procured by an employment agent, is not a relevant contract. For the purposes of the relevant contract provisions, a "contract" includes an agreement, arrangement or undertaking, whether formal or informal and whether express or implied, and "services" includes results (whether goods or ser vices) of work performed (per s 31). Section 32 i s substantially in two parts: s 32(1) describes the kinds of contracts that are a “ relevant contract ” and then s 32 (2) and (3) describe the exemption s to s 32(1). There is no real contest that s 32(1) applies to each of the remaining Disputed Contractors and that they each supply “ services for or in relation to the performance of work ” to AGC. There are three relevant exemption s cont ained within s 32: The 90-day exemption per s 32(2 )( b)(iii) . If the worker has supplied services for less than 90 days per year, then the contract is not a relevant contract; The services to the public exemption in s 32(2 )( b)(iv) . If the worker supplies services of th e same kind to the public generally then the contract is not a relevant contract ; and The 2-person exemption under s 32(2 )( c) . If the services are performed by two or more persons employed by, or who provide services for , the contractor, then the contract is not a relevant contract. AGC’s claimed exemptions AGC relies upon the following exemptions for each respective AGC Contractor . The table is based up on a table helpfully compiled by the Commissioner : Disputed Contractor Financial Year Reason claimed for exemption from payroll tax O'Haras Roofing Pty Ltd 2014 • Services to the Public PHN Roofit Pty Ltd 2014 • Services to the Public • 2-Person Exemption Glenn Vazey 2014 • Services to the Public Glenn Vazey 2015 • Services to the Public Glenn Vazey 2016 • Services to the Public Glenn Vazey 2017 • Services to the Public Nathan Barry 2015 • 90- Day Exemption • Services to the Public • 2-Person Exemption Nathan Barry 2016 • 90- Day Exemption • Services to the Public • 2-Person Exemption Todd Burrows 2015 • 90- Day Exemption • Services to the Public Michael Chalker 2016 • 90- Day Exemption • Services to the Public Luisa and Patrick McManus t/as ABQ Roofing 2016 • 90- Day Exemption • Services to the Public • 2-Person Exemption Bell Roof & Gutter Maintenance Pty Ltd 2017 • Services to the Public • 2-Person Exemption Thomas Guilbot 2017 • 90- Day Exemption • Services to the Public O'Haras Roofing Pty Ltd (FY2014) AGC paid $96,853 to O'Haras Roofing Pty Ltd (O ’ Haras ) under a relevant contract in FY2014 . AGC maintains that in FY2014 O ’ Haras provided services to the public generally. O ’ Haras advertised their services to the public generally, which is not the same thing as actually providing “ services of that kind ” to the public generally. AGC did not provide any evidence that might explain how or why it says O ’ Haras actually provided services to the public generally. O ’ Haras ’ Company Tax Return for FY2014 records gross income of $76,425 (being $20,458 less than AGC paid O ’ Haras) which calls into question whether O ’ Haras did in fact provide any services to others in the public generally , let alone services of the same kind as the services provided to AGC. I am not satisfied that the services to the public exemption applies to O ’ Haras in FY2014. AGC does not rely on any other exem ption provision under s 32 in relation to O ’ Haras. Accordingly , I find that the Commissioner was correct in its amended assessments in relation to monies paid by AGC to O ’ Haras and its decision is relevantly affirmed. PHN Roofit Pty Ltd (FY2014) AGC paid $96,853 to PHN Roofit Pty Ltd (PHN ) under a relevant contract in FY2014. AGC says that it would not have been practical or possible to carry out roofing works in 2014 of such value without employees because one individual could not safely complete the work. AGC says that PHN had at least two employees in FY2014. Mr Osborn gave evidence of PHN employing mostly family workers of islander descent, including “ Tiny ” who weighed approximately 160kg. Mr Osborn witnessed PHN engaging other workers on “ plenty of occasions ” and relied also upon job sheets that referred to at least two workers providing services on particular jobs. Mr Osborn ’ s evidence in this regard was clear and consistent. I am satisfied that the 2- person exemption applies to PHN. Accordingly , the Commissioner ’ s amended assessment in relation to PHN must be quashed. Glenn Vazey (FY2014, FY2015, FY2016, FY2017) AGC relied upon the services to the public exemption for Mr Vazey. The servic es to the public exemption in s 32(2 )( b)(iv) only applies to “ services of that kind ” to the public generally. In Mr Vazey ’ s case this would be estimator services to the public generally. It is difficult to accept that Mr Vazey provided estimator services to the public generally. Firstly, AGC did not provide any evidence of Mr Vazey providing any such services. Secondly, AGC paid $481,149 to Mr Vazey over the 4 relevant years , which basically correspond s with Mr Vazey ’ s recorded sales of $475,642 over the same period . The difference between the se amounts, whether taken over individual years or over the four- year period , is so small that I cannot find that Mr Vazey received payment for estimator services other than the payments he received from AGC. AGC does n ot rely on any other exemption. Accordingly, if Mr Vazey was not an employee of AGC then the contract between him and AGC was a relevant contract under s 32(1) and none of the exemptions under s 32(2) applied. I find that the Commissioner was correct in its amended assessments in relation to monies paid by AGC to Mr Vazey and its decision is relevantly affirmed . Nathan Barry (FY2015, FY2016) AGC paid $51,817 to Nathan Barry in FY 20 15 and $17,233 in FY 20 16 under a relevant contract. Mr Osborn ’ s evidence regarding Mr Barry included the following: “Nathan Barry worked with AGC on just a handful of small projects during the year. He was very inconsistent, and his work was of poor quality. AGC did not pursue this contractor for further work opportunities. Nathan Barry had his own vehicle, ladders, safety harness equipment and tools, along with his public liability and protection insurance. Nathan had staff as and when he required them, I personally witnessed Nathan in AGC office with his workers.” It does not appear that Mr Barry was ever registered for GST . AGC claims that Mr Barry provided 89 days of services in FY2015, whic h would bring him within the 90- day exemption for that year. This claim requires closer scrutiny b ecause it is so close to the 90-day exemption. AGC relied on worksheets prepared by an unknown author that list jobs completed by each contractor. The Commissioner dispute d the accuracy of some of the worksheets and provided detailed analysis of alleged inaccurac ies in its written submissions. The Commissioner submits that one FY2015 entry in the worksheet prepared for Mr Barry (#46995) wrongly states t hat a particular job took only 1 da y when it should have recorded 4 days of work – which would take Mr Barry over the 90- day threshold if properly recorded . AGC ’ s worksheet for Mr Barry for FY2015 includes 215 separately identified jobs and records the “ start date ” and “ date completed ” for each job. T he author of the worksheet has counted each individual job with the same completion date as being jobs that were all performed within a single day. For example, where three jobs are recorded as starting and finishing on the sa me day, the author has counted one day of work. I am prepared to accept that contractors can compl ete more than one job in a day. For Mr Barry in FY2015 a lmost every job is recorded as starting and finishing on the same day . Two jobs in FY2015 were not recorded as starting and finishing on the same day and the author of the worksheet unfortunately treat ed the two jobs differently: Four jobs were recorded as finished on Monday 13 April 2015. Three of the four jobs were recorded as starting on the same day and the fourth job is recorded as starting on Monday 6 April. The worksheet attributes eight days of work to the jobs finishing on 13 April, which makes sense when one of the jobs finishing that day was spread over the previous eight days; Only one job was recorded as finish ed on Tuesday 24 March 2015 (#46995). This job is, however, recorded as starting on Friday 20 March 2015. If the same counting methodology is applied to this job , then it should be recorded as at least 2 days ’ work finishing on Monday 23 March (allowing for the possibility that Mr Barry did not work over the weekend ). I note that in AGC ’ s worksheet four jobs started and finished on Thursday 19 March, three jobs started and finished on Friday 20 March and no work or jobs were recorded on Wednesday 25 March or Thursday 26 March. Mr Barry seems to have completed one job on Friday 27 March and then did not work over the weekend of 28-29 March. This causes me to have a significant concern about relying on AGC ’ s worksheet for Mr Barry for FY2015, particularly when the worksheet , as presented, records Mr Barry only on e day short of working 90 days. Overall I cannot be satisfied on the state of the evidence that AGC has met its onus of establishing t hat Mr Barry fell within the 90- day exemption in FY2015. Mr Barry f itted comfortably within the 90- day exemption for FY2016. Whilst the Commissioner disputes the accuracy of AGC ’ s figures for FY2016, they do not allege that the identified inaccuracies are such that Mr Barry exceeds 90 days. Accordingly , I am prepared to accept AGC ’ s calculations for Mr Barry for FY2016 . Having found that the 90-day exemption is not available for AGC in relation to Mr Barry in FY2015, I must next consider AGC ’ s submission that the 2-person exemption applies. Mr Osborn ’ s unrefuted evidence in cross examination was that he knew every contractor, how profitable they were, and he knew the people who did work for each contractor. Mr Osborn recalled seeing other people arrive and leave AGC ’ s office s with Mr Barry and he knew those others to be working with Mr Barry. AGC also r elied on job sheets that noted two people worked on certain jobs. AGC did not maintain records of whether other people worked for or with its contractors. In this regard I note that it was a matter for each contractor how much labour they deployed to any particular job and the amount of labour deployed made no difference to the price paid by AGC. AGC provided “ sample ” invoices that showed more than one person working on particular jobs and Mr Osborn indicated that contractors were not required to report such matters to AGC. I am satisfied that the 2-person exemption applied to the contract between AGC and Mr Barry in FY2015 and the 90-day exemption applied in FY2016 . The Commissioner ’ s amended assessment in relation to monies paid to Nathan Barry is quashed. Todd Burrows (FY2015) AGC paid $26,202 to Todd Burrows under a relevant contract in FY 20 15. AGC submitted that Mr Burrows provided services to AGC for only 85 days in FY2015 and provided a worksheet list ing of days on which Mr Burrows provided services. Whilst the Commissioner was generally critical of AGC ’ s worksheet s, the Commissioner did not make any relevant specific criticism of AGC ’ s worksheet regarding Mr Burrows. I am content to accept AGC ’ s account of the number of days Mr Burrows provided services in FY2015. I am therefor e satisfied that the 90-day exemption applied to the contract between AGC and Mr Burrows. Accordingly, the Commissioner ’ s amended assessment in relation to monies paid to Todd Burrows is quashed. Michael Chalker (FY2016) In FY2016 AGC paid Michael Chalker $10,118. AGC maintains that Mr Chalker worked for only 30 days, being 18 days for AGC Roof Maintenance , 5 days with a related entity and a further 7 days with a different related entity. AGC provided a list of jobs with corresponding dates. T he Commissioner submitted that AGC ’ s evidence was too imprecise : the Commissioner observed that no evidence was provided from Mr Chalker himself nor were any source documents provided. The Commissioner did concede that “ in the event that the Tribunal finds Mr Chalker to have been an independent contractor of AGC for the 2016 financial year rather than a common law employee (this being denied by the Commissioner ), then the Commissioner would be willing to accept that, given the amount paid to Mr Chalker in respect of the year, the 90 Day Exemption could apply by way of a replacement method ” . This concession was properly made. AGC provided a calculation designed to satisfy the replacement method provided in the Commissioner ’ s Revenue Ruling PTA 035v2. By this replacement method, i f a principal is unable to determine the actual number of days on which the contractor rendered services and the actual amount earned by the contractor is less than or equal to the amount calculated using the formula, under this Revenue Ruling the 90-day exemption will be accepted as being applicable to that contract . AGC ’ s calculation using the formula was $20,177, which was almost double the amount paid to Mr Chalker ( i.e. the amount paid to Mr Chalker was comfortably less than the amount calculated using the formula). In light of the above, and in light of my finding that Mr Chalker was an independent contractor, the Commissioner ’ s amended assessment in relation to monies paid to Michael Chalker in FY2016 is quashed. Luisa and Patrick McManus t/a ABQ Roofing (FY2016) Patrick McManus worked for an entity related to AGC as an estimator then resigned his employment to commence work for AGC as a sub-contractor. Mr McManus, and perhaps Mrs McManus , thereafter purportedly operated a business called ABQ Roofing. Mr Osborn said he thought ABQ Roofing was a proprietary limited company and that Mr and Mrs McManus were each directors of the company. There is not, however, any evidence of ABQ Roofing being a registered corporation. AGC submits that the 90-day e xemption applies to ABQ Roofing , as well as the services to the public exem ption and also the 2- person exemption. AGC ’ s evidence in this regard is scarce. AGC ’ s pay records indicate that Mr McManus ’ employment finished on Friday 16 August 2015. AGC provided a worksheet of jobs performed by ABQ and submitted that ABQ provided 60 days of services in FY2016. Unlike other worksheet s for other AGC Contractors , I am unable to accept the calculations by AGC in its worksheet . AGC ’ s worksheet includes 122 separately identified jobs and records the “ start date ” and “ date completed ” for each job. The author of the worksheet counted each of the individual jobs with the same completion date as being jobs that were all performed within a single day. In some instances two or three jobs are recorded as being completed in the same day, which is within the realm of credibility. However for September 2015 the worksheet records: 7 jobs all finishing on 2 September, being jobs at Balmain, Red f ern, Leumeah, Liverpool, Prestons, Granville and Ingleburn (all counted as one single days ’ work); No jobs between Thursday 3 September and Monday 7 September; 6 jobs all completed on Tuesday 8 September, being jobs at Newtown, Punchbowl, Moorebank, Macquarie Fields, Minto and Mosman (all counted as one single days ’ work) ; 3 jobs all completed on 9 September, being jobs at Lidcombe, Blacktown and another location (all counted as one single days ’ work) ; No jobs between Thursday 10 September and Sunday 13 September; 1 job on 14 September; 2 jobs on 15 September, being jobs at Hornsby and Marrickville; 1 job on 16 September; No jobs on 17 September; 2 jobs on 18 September, being jobs at Hornsby and Epping; No jobs on the weekend of 19 and 20 September; 4 jobs on 21 September, being jobs at Wentworthville, Rockdale, Picton and another location (all counted as one single days ’ work) ; 1 job on 22 September; 4 jobs on 23 September, being jobs in Ingleburn, Melrose Park and Cabramatta (all counted as one single days ’ work) ; No jobs between Thursday 24 September and Sunday 27 September; 3 jobs on 29 September, being jobs at Redfern, Bondi and Centennial Park (all counted as one single days ’ work) ; and No jobs on 30 September. In total , AGC ’ s worksheet includes 35 jobs completed over only 12 working days in September 2015 . Similarly the worksheet records 31 jobs completed in October over only working 16 days and 23 jobs completed in November over 8 working days plus one job that took 4 days. I am not satisfied that AGC ’ s worksheet properly records the number of days in which services were provided by ABQ in FY2015. I am also conscious in this regard of Mr Osborne ’ s filed written submission , which included the following concerning the accuracy of such documents: “… the jobsheets were generic because our employee estimators, and employee tradesmen had to fill them in as a time sheet. Contractors objected to filling them in because they did not want to waste their time writing multiple dates and start and finish times, therefore many of their sheets are incomplete. You can't demand a contractor to do what he does not want to do!” and a lso: “… as stated above the dates and times can not be deemed as accurate as contractors were not willing to fill the sheets in correctly, and were under no demand to do so.” Whilst it would seem superficially inconsistent that I accept the accuracy of AGC ’ s calculation of the days worked by Mr Burrows but not the accuracy of the calculation for Mr McManus/ABQ , t he difference between the McManus material and the Burrows material is that the Commissioner did not allege that there were any particular irregularities in the worksheet relating to Mr Burrows that would have taken Mr Burrows over 90 days. There is no proper basis for me to simply disregard every worksheet prepared by AGC, and there is no specific basis for me to disregard the worksheet relating to Mr Burrow s . AGC does not call in aide the replacement method in the Commissioner ’ s Revenue Ruling PTA 035v2 . Recalling that AGC ’ s calculation using the formula in the Revenue Ruling for FY2015 was $20,177 , and assuming the amount using the formula was slightly higher in FY2016, I can note that the $53,299 paid to ABQ/Mr McManus in FY2016 is significantly larger than the formula figure. That is, even though AGC has not provided a formula calculation for FY2016, I can comfortably assume that the replacement method does not assist AGC in relation to ABQ. I find that the 90-day e xemption does not apply to ABQ/ Mr McManus. There is no evidence that ABQ actually provided services of the same kind to the public generally, save for a yellow pages search result that refers to ABQ Roofing and another website that appears to be specific to ABQ. AGC has provided one job sheet that refers to “ Pat ” making a service call on Monday 19 August 20 15 and somebody recording that two pe ople attended the job. AGC insists that the “ Pat ” on this job sheet is Mr Patrick Joseph McManus. The job sheet does refer to two persons performing work, but it does not necessarily follow that both people were connected to Mr McManus or to ABQ. It is equally possible that two AGC Contractors were paired for the same job or that an employee of AGC attended the relevant site with “ Pat ” . Overall I am not satisfied that the 2-person exemption applies to ABQ. Mr McManus did not hold a roof plumber ’ s licence in FY2016 but did hold such a licence between 2005 and 2012, and again between 10 October 2017 and 9 October 2018. The licence number listed on the ABQ Roofing website belonged to Mr McManus. Mrs McManus has never held a contractor licence. In FY2016 AGC paid $53,299 to ABQ/Mr McManus. Mr McManus was not registered for GST during FY2016. Mr McManus has not lodged with the ATO BAS or tax returns reporting any sales or income in respect of FY2016. Mrs McManus is referred to on insurance documents as an insured person however, on the material provided by AGC, only Mr McManus is referred to as an insured person in the “ Personal Accident and Illness Policy ” section as a “ Licenced Tradesman ” in the occupation of “ Roof Repairer &/OR cleaners ” . Similarly, I am not satisfied that the service to the public exemption applies to monies paid to ABQ/Mr McManus. The Commissioner ’ s decision in relatio n to monies paid to ABQ Roofing/ Mr McManus is confirmed. Bell Roof and Gutter Maintenance Pty Ltd (FY2017) AGC paid $32,256 to Bell Roof and Gutter Maintenance Pty Ltd (Bell ) in FY 20 17. Mr Osborn ’ s evidence regarding Bell included the following: “Barry Cann the Director of Bell roof & gutter maintenance pty ltd has floated in and out of AGC for over 20 years. Turning up and looking for work when he needs it. Sometimes we would see this contractor for several weeks, then we would not see him for months. Bell roof & gutter did have intermittent employees that I witness seeing myself, also refer to diary extracts taken from a works diary supplied by Barry Cann whereby he notes payments for wages and the amounts to employees.” AGC ’ s submissions also include the following: “ Mr Cann was winning less contracts with AGC because of his pricing and unreasonable demands. Mr Cann by his own choice was rarely at work in 2017, my understanding was the he preferred to go fishing. During the end of his association with AGC, Mr Cann increased his rates and quoted works to compensate for the days that he did not want to work. ” Excerpts from Mr Cann ’ s 2016-2017 diary were in evidence and are consistent with Bell only working spasmodically for AGC. More important ly the diary entries record Mr Cann working with “ Darren ” and notin g payments he made to “ Darren ” . AGC submits that the services to the public exemption applies to Bell , and also the 2-person exemption. AGC included some “ random ” invoices obtained from Bell which indicate that Bell provided roofing services to the public generally at the same time that it provided services to AGC. Coupled with the references to Mr Cann working with and paying “ Darren ” , I am satisfied that AGC has made out either the services to the public exemption or the 2-person exemption. In light of the above and in light of my finding that Bell was an independent contractor, the Commissioner ’ s amended assessment in relation to monies paid to Bell in FY201 7 is quashed. Thomas Guilbot (FY2017) The Commissioner submits that AGC paid $26,282 to Thomas Guilbot under a relevant contract in FY17. Mr Guilbot was initially employed by AGC as a gutter cleaner until 24 July 2016 . After Mr Guilbot became qualified to do roof rep airs he worked as a contractor. AGC maintained that Mr Guilbot provided only 70 days of services to AGC in FY2017, and that Mr Guilbot provided the same services to the public generally. Dealing firstly with the 90-day exemption the Commissioner submitted the following regarding AGC ’ s compiled worksheet : “• the worksheet records job 59323 having been commenced on 2 September 2016, completed on 26 August 2016 and as having taken only one day. Assuming that job 59323 commenced on 26 August 2016 and was completed on 2 September 2016 it would have taken 8 days; • the worksheet records job 59475 as having commenced on 26 September 2016, completed on 5 September 2016 and as having taken only one day. Assuming that job 59475 commenced on 26 August 2016 and was completed on 5 September 2016 it would have taken 11 days; • the worksheet records job 61015 as having commenced on 26 June 2017, completed on 29 June 2017 and as having only taken one day. This should have been recorded as 4 days; • amending for the above additional days would increase the total days shown by the worksheet by 21, meaning the total days would exceed 90 ” ( Emphasis added; footnotes omitted.) I have already considered in this decision the Commissioner ’ s general and specific concerns about the worksheet s prepared by AGC. If I accept the Commissioner ’ s submission above in relation to the worksheet for Mr Guilbot then AGC ’ s reliance upon the 90-day exemption is defeated. I will deal in turn with each of the Commissioner ’ s submissions however the first thing to note is that when I compare the first and the second submission reproduced above it is readily apparent that the Commissioner has double counted the days from 26 August to 2 September. Both submissions assume that job # 59323 and # 59475 each commenced on 26 August and carried on through to 2 September (and # 59475 continuing to 5 September). As such, at least 8 of the additional 21 days relied upon by the Commissioner must fall away. More so, j ob # 59323 relates to a property at 242-244 Old South Head R oa d , Bellevue Hill. The Commissioner submits that th is job should count as eight days rather than one . A GC provided a transaction ledger report of payments made to Mr Guilbot in FY2017 . The ledger refers to payments made to Mr Guilbot attributed to the date of 26 August 2016 and then the next payment in the sequence is attributed to the date 5 September 2016. I have interpreted the dates in the transaction ledger report to be references to the dates on which work was performed rather than dates on which payments were made, though I do not see any material consequence if this assumption is not correct. The ledger refers to property addresses and so can be readily compared to AGC ’ s job worksheet for Mr Guilbot. Importantly, AGC only appears to have paid $189 to Mr Guilbot in relation to the job at 242-244 Old South Head Road, Bellevue Hill ( i.e. job # 59323 on AGC ’ s worksheet) , which is the same amount AGC seems to have pa id for other single- day jobs. Taking these things into account I am satisfied that job # 59323 was only a 1-day job and not an 8-day job as the Commissioner submits – which means that 7 of the additional days claimed by the Commissioner fall away. S imilarly Mr Guilbot does not appear to have received any payment at all for job # 59475, being a job at 54 Robertson St reet, Kogarah . The transaction ledger report contains 2 relevant entries for this address: a profit share amount of $436.80 and a second entry for the same address on the same day negativing the first entry (i.e. an entry of -$ 436.80 ) . Based on this ledger entry I could not properly attribute 11 days of work to job #59475 as urged by the Commissioner . Eleven more additional days claimed by the Commissioner therefore also fall away. Job #61015 pertains to a property at 10 Karrabee Ave nue , Huntleys Cove. On AGC ’ s transaction ledger no payments made in FY20 17 correspond to this property – which is not surprising if the job in fact finished on 29 June 2017. I am prepared to accept that job #61015 commenced on 26 June and finished on 29 June and took 4 days. In light of the above findings this only adds 3 additional days to the total in AGC ’ s worksheet, thereby increasing the total from 70 days to 73. Overall I am satisfied that the 90-day exemption applies to Mr Guilbot for FY2017. In light of the above and in light of my finding that Mr Guilbot was an independent contractor, the Commissioner ’ s amended assessment in relation to monies paid to Bell in FY2017 is quashed . Conclusion and Orders I make the following orders: The respondent ’ s amended assessment s relating to payments made to the following persons in the nominated financial years are affirmed: O'Haras Roofing Pty Ltd (FY2014) ; Glenn Vazey (FY2014, FY2015, FY2016, FY2017) ; and Luisa and Patrick McManus t/a ABQ Roofing (FY2016) . The respondent ’ s amended assessment s relating to payments made to the following persons in the nominated financial years are quashed: PHN Roofit Pty Ltd (FY2014) ; Nathan Barry (FY2015, FY2016) ; Todd Burrows (FY2015) ; Michael Chalker (FY2016) ; Bell Roof and Gutter Maintenance Pty Ltd (FY2017) ; and Thomas Guilbot (FY2017) . ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 July 2021