Glebe Administration Board v. Commissioner of Pay-roll Tax (N.S.W.).

Judges:
Rogers J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 1 December 1982.

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Rogers J.

Glebe Administration Board appeals against the disallowance by the Commissioner of Pay-roll Tax of its objections against four assessments in respect of the period 1st of September 1971 to 9th of December 1979. It is contended that the plaintiff is exempt from the obligations imposed by the Pay-roll Tax Act, 1971 (``the Tax Act''). Reliance is placed on the exemptive provisions of sec. 10(1)(b), which during the relevant period provided as follows:

``... the wages liable to pay-roll tax under this Act do not include wages paid or payable -

• ...
• (b) by a religious or public benevolent institution, or a public hospital;''

Section 10(1A), which now qualifies this exemption, only came into operation subsequently to the relevant period.

In order to determine the opposing contentions of the parties, it is necessary to refer in some little detail to the provisions of the Tax Act. Section 3 provides the following definitions:

```company' includes all bodies and associations (corporate and unincorporate) and partnerships;

...

`employer' means any person who pays or is liable to pay any wages and includes the Crown in right of the State of New South Wales;

...

`person' includes a company;

...

`taxable wages' means wages that, under section 6, are liable to pay-roll tax;

...

`wages' means any wages, salary, commission, bonuses or allowances paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to an employee as such and, without limiting the generality of the foregoing, includes -

• (a) any amount paid or payable by way of remuneration to a person holding office under the Crown in right of the State of New South Wales or in the service of the Crown in right of the State of New South Wales;
• (b) any amount paid or payable under any prescribed classes of contracts to the extent to which that payment is attributable to labour;
• (c) any amount paid or payable by a company by way of remuneration to a director or member of the governing body of that company;
• (d) any amount paid or payable by way of commission to an insurance or time-payment canvasser or collector; and
• (e) the provision by the employer of meals or sustenance or the use of premises or quarters as consideration or part consideration for the employee's services.''

(My emphasis.)

Section 6(1) provides:

``Subject to section 10, the wages liable to pay-roll tax under this Act are wages that are paid or payable by an employer after the month of August, one thousand nine hundred and seventy-one (whether in respect of services performed or rendered before, during or after that month), and -

• (a) are wages that are paid or payable in New South Wales (not being wages so paid or payable in respect of services performed or rendered wholly in one other State);
• (b) are wages that are paid or payable elsewhere than in New South Wales in

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  respect of services performed or rendered wholly in New South Wales; or
• (c) are wages that are paid or payable elsewhere than in Australia in respect of services performed or rendered mainly in New South Wales.''

Section 7 provides:

``Subject to, and in accordance with, the provisions of this Act, there shall be charged, levied, collected and paid, for credit of the Consolidated Revenue Fund in the Treasury, on all taxable wages pay-roll tax -

• (a) at the rate of three and one-half per centum in respect of such of those wages as were paid or payable during or before the month of August, one thousand nine hundred and seventy-three;
• (b) at the rate of four and one-half per centum in respect of such of those wages as were paid or payable after the month of August, one thousand nine hundred and seventy-three and before the month of September, one thousand nine hundred and seventy-four and were not liable to pay-roll tax at the rate prescribed in paragraph (a); and
• (c) at the rate of five per centum in respect of such of those wages as are paid or payable after the month of August, one thousand nine hundred and seventy-four and are not liable to pay-roll tax at the rate prescribed in paragraph (a) or (b).''

Section 8 provides:

``Pay-roll tax shall be paid by the employer by whom the taxable wages are paid or payable.''

Section 10 as it stood at the relevant time provided:

``(1) Subject to subsection (2), the wages liable to pay-roll tax under this Act do not include wages paid or payable -

• (a) by the Governor of a State;
• (b) by a religious or public benevolent institution, or a public hospital;
• (c) by a hospital which is carried on by a society or association otherwise than for the purpose of profit or gain to the individual members of the society or association;
• (d) by a school or college (other than a technical school or a technical college) which -
  • (i) is carried on by a body corporate, society or association otherwise than for the purpose of profit or gain to the individual members of the body corporate, society or association and is not carried on by or on behalf of the State of New South Wales; and
  • (ii) provides education at or below, but not above, the secondary level of education;
• (e) by a council, except to the extent that those wages are paid or payable -
  • (i) for or in connection with; or
  • (ii) for or in connection with the construction of any buildings or the construction of any works or the installation of plant, machinery or equipment for use in or in connection with,

    the supply of electricity or gas, water supply, sewerage, the conduct of abattoirs, of public food markets, of parking stations, of cemeteries, of crematoriums or of hostels or of any other activity that is a trading undertaking within the meaning of Part XVII of the Local Government Act, 1919, or is a prescribed activity;

• (f) to members of his official staff by -
  • (i) a consular or other representative (other than a diplomatic representative) in Australia of the Government of any other part of Her Majesty's dominions or of any other country; or
  • (ii) a Trade Commissioner representing in Australia any other part of Her Majesty's dominions;
• (g) by the Commonwealth War Graves Commission;
• (h) by the Australian-American Educational Foundation;

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• (i) to a person who is a member of the Defence Force of the Commonwealth or of the armed force of any part of Her Majesty's dominions, being wages paid or payable by the employer from whose employment the person is on leave by reason of his being such a member;
• (j) by a charity within the meaning of the Charitable Collections Act, 1934, which is registered or which is exempted from registration under that Act (other than a school or college or a statutory body);
• (k) by a society or an institution (other than a school or college or a statutory body) which -
  • (i) is, in the opinion of the Commissioner, a charitable society or institution; and
  • (ii) is for the time being approved by the Commissioner for the purposes of this paragraph; or
• (l) by a statutory body which -
  • (i) is, in the opinion of the Minister, a charitable statutory body; and
  • (ii) is for the time being approved by the Minister for the purposes of this paragraph.''

The defendant relies simply on the words of the Tax Act, read without any gloss. The Commissioner submits that the Tax Act has with some care and definition designated the criteria of liability to tax as being:

• (a) an employer;
• (b) who is not exempted from liability by sec. 10, and
• (c) who pays or is liable to pay wages;
• (d) to an employee.

These criteria are all enshrined in sec. 8 whereby pay-roll tax is payable by ``the employer by whom the taxable wages are paid or payable''. In addition to the provisions I have already cited the defendant can point to numerous other sections which impose liabilities, such as the obligation to make returns, uniformly based on the fact that the entity coming under the obligation is an employer.

As the next step in its argument the defendant submits that the evidence clearly demonstrates that at all relevant times:

• (a) the plaintiff was an employer, in that there were contracts of employment in existence between the plaintiff and the persons performing work for it;
• (b) that the plaintiff was not exempted from liability by sec. 10, in that it was not a religious or public benevolent institution; and
• (c) that the plaintiff paid wages to its employees as such.

These lastmentioned submissions of the defendant rest on facts which are conceded by the plaintiff. The plaintiff, rightly, did not contend that it was by itself a religious or public benevolent institution.

The defendant's final submission is that under the Tax Act it is neither necessary, nor indeed permissible, to look further than the factual matrix I have set out in order to determine the question of liability.

For the plaintiff the fundamental submission is that the Tax Act calls for a determination of the real entity out of whose funds wages are paid or payable. Whilst conceding that the contracts of employment, between the plaintiff and the persons performing tasks for it, called for wages to be paid by the plaintiff, it is submitted that on closer analysis the wages were ``paid or payable'' out of funds the property of either the Church of England or the Diocese of Sydney. This submission is founded on the relationship said to exist between the plaintiff and the Church. There were three alternative contentions by the plaintiff, any one of which is said to be sufficient to satisfy the primary submission that the entity which was in truth paying the wages was the Church or the Diocese. These alternatives are:

• (a) that the plaintiff holds all of its assets upon trust for the Church or the Diocese, and therefore when any payment is made out of the plaintiff's funds, such payment is, in final analysis, a payment by the Church or the Diocese;
• (b) that by analogy to statutory corporations held to be an arm of the Crown, in a corporate guise, the plaintiff is an alter ego of the Church or the

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  Diocese, or an agent for the Church or the Diocese;
• (c) that there is a statutory direction in sec. 9(4) and 9(5) of the Church of England (Bodies Corporate) Act, 1938 (``the Corporate Act'') requiring the corporate veil of the plaintiff to be thrust aside.

Counsel for the plaintiff has forcefully drawn my attention to the consequences of failure to adopt one or other of the alternatives posed by him. The primary and preferred submission is that the wages are paid by the Church because the plaintiff is merely a trustee for it and therefore the funds from which payment is drawn are truly Church funds. The plaintiff points to the surprising consequences which would follow if this was insufficient to bring the payment within the exemption provided for by sec. 10(1)(b). Because churches in Australia generally stand in the same position as the Church of England which has been held to be merely a voluntary association of persons (cf.
Solicitor General v. Wylde (1946) 46 S.R. (N.S.W.) 83 at p. 95 et seq.) they cannot as churches enter into contracts of employment. They can never be directly liable for payment of wages. They cannot in a strict legal sense make any payment of wages. Even at the ordinary parish level, contracts of employment will be entered into with members of the parish council or church wardens. The plaintiff submitted that it would be contrary to the evident intention of the legislation if, say, a contract for the cleaning of a church were not within the exemption. That, it is said, would be the consequence of accepting the defendant's approach to the Tax Act.

The defendant did not trouble to challenge the accuracy of these submissions, but it seems to me that in any event there are a number of answers to the plaintiff's submissions. It would be equally contrary to the intention of the legislation if the Commissioner were to be required to work out, in individual cases, who was the ultimate payer of wages and the beneficial owner of the moneys out of which payment was made. The Tax Act manifests an intention to avoid the need for such investigation. For example, sec. 42(1)(d) and (g) confer an indemnity on anyone who pays the relevant tax as agent or trustee. Again, where the Tax Act is concerned with questions of trusts it deals with them specifically (cf. sec. 16D(6) and 16G).

In any event, it seems to me that the Tax Act is quite clear in its formulation and there is no room for ambiguity which would allow for one or other of the approaches contended for by the plaintiff. This is so, even assuming that it is still open to a single Judge to hold that the Tax Act looks past the requirement for a contract of employment at common law. If necessary I would hold that it is too late in the day for a single Judge so to hold.

The New South Wales Act and indeed the pay-roll tax legislation in other States all have a common ancestor in the Pay-roll Tax Assessment Act 1941 (Cth.). In
Narich Pty. Ltd. v. Commr. of Pay-roll Tax (N.S.W.) 82 ATC 4359 Woodward J. made a careful analysis of relevant decisions with a view to determining whether or not a contract of employment at common law was required in order to satisfy the call of the Tax Act. As his Honour said at p. 4376:

``It is relevant to determine whether the Act requires the existence of the relationship of employer and employee between the plaintiff and the recipients of the moneys referred to. The title of the Act states that its purpose is to impose a tax upon employers in respect of certain wages. Although employer and wages are defined by sec. 3 of the Act, no definition is given of employee and the only relevant appearance of that word is in the definition of wages when it refers to certain payments being paid or payable `to an employee as such'. An employer means any person who pays or is liable to pay any wages. Wages is defined to mean `any wages, salary, commission, bonuses or allowances paid or payable... to an employee as such'. The definition is then extended without limiting the generality of the foregoing, to include five categories.

An early difficulty is confronted in determining the significance of the use of the word `employer'. It has on occasions been contended that in order to render a person liable to pay-roll tax under the Act, there must exist between him and the person in respect of whom the tax is

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chargeable a relationship of master and servant or as it is now more commonly known employer and employee.''

His Honour then went on to cite from the decision of the High Court in
F.C. of T. v. J. Walter Thompson (Australia) Pty. Ltd. (1944) 69 C.L.R. 227 where the then Chief Justice at p. 229 said:

``The application of the Act depends upon the existence of an employer-employee relation - a relation which I am unable to distinguish from that of master and servant.''

Needless to say, his Honour was addressing himself to the Commonwealth Act. His Honour adopted the same view in
Queensland Stations Pty. Ltd. v. F.C. of T. (1945) 70 C.L.R. 539. The same question was the subject of examination by Mr. Justice Stephen in
F.C. of T. v. Barrett & Ors. 73 ATC 4147; (1973) 129 C.L.R. 395. At ATC p. 4150; C.L.R. p. 403 his Honour said:

``The Act is entitled `An Act relating to the imposition, assessment and collection of a tax upon the payment of wages' and central to its operation is the selection of an `employer' as the person liable to tax and of `all wages paid or payable' as the subject matter of the tax. `Employer' is defined in terms of he who pays wages and `wages' are in turn defined as various types of payments paid `to any employee as such'.''

Whilst in
Murdoch & Ors. v. Commr. of Pay-roll Tax (Vic.) (1980) 54 A.L.J.R. 502, the present Chief Justice expressed some doubt as to the need for the relationship of employer and employee in accordance with common law principles (cf. p. 503), the members of the Court who participated in the joint judgment appear to have entertained no such doubts. Their Honours said at p. 507:

``In our opinion, the solution to the problem is to be found in the application of the provisions of the Act to the particular circumstances of the case. In our opinion, such legal character of the payments as may be deduced from the terms of the will are not determinative. In other words, the Act, like all taxing statutes, takes a pragmatic line. So understood, in order to attract the tax the payments must satisfy three requirements: they must be paid by the employer; they must answer the description of `wages' as defined; and they must be paid to employees as such. Mr. Meralls drew attention to the definition in the Act of `employer' as tending to denude the term of any significance beyond the fact that it refers to any person by whom wages are paid. On the other hand, the concept of `wages' would seem necessarily to ground the relationship of payor and payee in that of master and servant. In any event, we find the first requirement to be satisfied. The appellants were in fact the employers of those who received the payments, and it is not to the point that in doing so they may have acted in obedience to a trust.''

In
Commr. of Pay-roll Tax (N.S.W.) v. General Accident Fire & Life Assurance Corporation Ltd. 81 ATC 4011; (1980) 2 N.S.W.L.R. 898, Reynolds J.A., who delivered a dissenting judgment, adopted the observations of Mr. Justice Gibbs in Murdoch's case. The other two members of the Court did not address themselves to this question in any detail. When the matter went to the Privy Council (82 ATC 4407), their Lordships said that ``the point did not bulk largely in the argument before this Board'' and did not address the question.

The matter was considered by the Full Court of the Supreme Court of Victoria in
Commr. of Pay-roll Tax (Vic.) v. Mary Kay Cosmetics Pty. Ltd. 82 ATC 4444. The judgment of the Court was delivered by Mr. Justice Gray who, at p. 4446, expressed the view that the Victorian Act required a contract of service before a payment of money could be payment to an ``employee as such''.

Consideration of the authorities satisfies me that what the Tax Act looks to is the payment of ``wages'' by an entity which is an ``employer'' to an ``employee as such'' within the meaning of the Tax Act. The only entity which satisfies the definition of ``employer'' is the plaintiff. Whether it uses moneys owned by it beneficially or trust funds, it is the entity by whom the wages are paid or payable pursuant to the contractual

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arrangements which it makes with its employees.

The appeal is dismissed and the assessments confirmed. I order the plaintiff to pay the defendant's costs. Exhibits may be retained for 28 days and if no notice of appeal is filed in the meantime may be dealt with in accordance with the Rules of Court.