BSA Ltd v Chief Commissioner of State Revenue [2023] NSWCATAP 159
Introduction
The appellant, BSA Ltd (‘BSA”), in the year ended 30 June 2017, had contracts with Foxtel Management Pty Ltd (Foxtel) and Optus Networks Pty Ltd (Optus) to supply and install pay TV and broadband equipment, and to provide service calls to Foxtel and Optus customers. BSA subcontracted with technicians or their companies for the technicians to service the Foxtel and Optus customers (the subcontracts).
The Chief Commissioner of State Revenue (CCSR) imposed payroll tax on payments made by BSA to its subcontractors on the basis that those payments were made under “relevant contracts” within s.32 of the Payroll Tax Act 2007 (PT Act).
First instance Decision
At first instance, the New South Wales Civil and Administrative Tribunal upheld the assessment of payroll tax issued to BSA. The Tribunal’s key consideration was the application of s. 32(2B) of the PT Act to BSA’s subcontracts. Section 32(2) and (2B) relevantly provided:
- 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—
- 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
- is supplied with services solely for or ancillary to the conveyance of goods by means of a vehicle provided by the person conveying them.
- 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.
It was common ground that s 32(1)(b) of the PT Act applied to the subcontracts. The parties also agreed that s 32(2)(a) and/or (d) of the PT Act had a prima facie application, because at least some of the services provided by the technicians under the subcontracts were ancillary services.
The main dispute before the Tribunal was whether s 32(2B) also applied, thereby meaning s 32(2)(a) and (d) did not apply.
The Chief Commissioner contended that BSA’s subcontractors provided “additional services” within the meaning of s 32(2B) of the PT Act, consisting of service calls where no new equipment was supplied or conveyed, and outlet change orders. A “change order” involved adding or upgrading a set top box for an existing customer.
BSA argued that all services supplied under the subcontracts were ancillary to the supply or conveyance of goods and were not “additional services” within s 32(2B) of the PT Act.
The Tribunal found that for both Foxtel and Optus services, the evidence was that service calls could occur years after the original installation of equipment and the technician performing a service call was not always the same technician who had installed the equipment. Therefore “additional services” were supplied under the subcontracts, within the meaning of s 32(2B) of the PT Act, and the subcontracts were therefore “relevant contracts.”
Issues on appeal
BSA raised three main grounds of appeal:
- Service calls by different subcontractor: the Tribunal erred in finding that services provided by a different subcontractor from the original subcontractor who supplied or conveyed the goods, and were not “ancillary to the supply of goods” within s 32(2)(a) of the PT Act or “ancillary to the conveyance of goods” within s 32(2)(d) of the PT Act.
- Outlet change orders: the Tribunal erred in not concluding that the subcontracts under which change orders involving new goods were installed were not within ss 32(2)(a) and (d) and were “additional services” within s 32(2B).
- Error in treatment of second reading speech: the Tribunal erred in concluding that it was not entitled to take into account the second reading speech for the State Revenue Legislation Further Amendment Bill 2014 (NSW) when construing s 32 of the PT Act.
Appeal Panel’s decision
Ground 1: Service calls by different subcontractors
The Appeal Panel found no error in the Tribunal’s first instance decision and made the following observations:
- The question of whether services are ancillary to the supply or conveyance of goods is a question of fact and degree. It was open to the Tribunal to find that services supplied at a later point in time than the original supply or conveyance of goods, by a different sub-contractor, were not ancillary to the supply or conveyance of goods in this context. Such services could reasonably be regarded as not being “supplementary or auxiliary or accessory” to the initial supply of goods. For example, disconnection services are not properly characterised as being “supplementary or auxiliary or accessory” to the supply or conveyance of a set-top box.1
- However, the Tribunal did not consider every situation in which this might occur and did not purport to lay down a rule of universal application, that the terms of s 32(2)(a) and (d) “mandate” that the subsequent service be performed by the same person who supplied or conveyed the goods.2
- The Appeal Panel did not accept the Chief Commissioner’s submission that the proper approach is to look at the “kind” of services in question at a broad level of generality (in this case, service calls to fix the relevant equipment) and to consider whether that kind of service generally is covered by one of the paragraphs in s 32(2). Instead, the Appeal Panel considered that the words “of a kind not covered by the relevant paragraph” in s 32(2B) of the PT Act are intended to mean services or work not captured by paragraphs 32(2)(a), (b), (c) and (d).3
- Are later repairs ancillary services? Service calls which could occur years after the installation of a set top box did not involve the supply of services ancillary to the initial supply or conveyance of goods.4 Such services need not be supplied at the same time as the original services, but the more time which has passed since goods were supplied, the less likely it is that the supply of those later services will be “supplementary or auxiliary or accessory” to the supply of those goods.5
- Services not involving the supply of goods: It was open to the Tribunal at first instance to make the factual finding that goods were not supplied on every occasion on which a service was supplied; this was a second basis upon which the Tribunal found that that s. 32(2B) applied, and that the contracts were therefore relevant contracts.
Ground 2: Outlet change orders
The Appeal Panel found no error in the Tribunal’s decision that some outlet change orders resulted in the provision of additional services within the meaning of s.32(2B), making the following observations:
- Where the change orders involve new goods being supplied or conveyed by a technician who uses those goods to install an additional outlet, the Tribunal at first instance correctly found that no “additional services” attracting s.32(2B), and of a kind not covered by s. 32(2) (a), (b), (c) or (d) were supplied under the contract.7
- However, change orders which merely relocated goods, originally located in accordance with the initial installation agreement, could be, but were not necessarily, ancillary services. Where such change orders were not ancillary services, they were additional services under s. 32(2B).8
Ground 3: Error in the treatment of second reading speech
The Appeal Panel found the Tribunal was not in error. The Tribunal did not state that it was not entitled to take the second reading speech into account. Rather, it said that, having regard to the guidance given by their Honours in Harrison v Melhem , it had decided to “focus on the wording of the PT Act, rather than the text of the Minister’s speech”. Such a focus on the text is consistent with the approach to statutory interpretation currently endorsed by the High Court (see, for example, R v A2 (2019) 269 CLR 507; [2019] HCA 35 at [35]).10
The Appeal Panel added that, even if the Tribunal had erred in the way the appellant claimed, it did not consider that the second reading speech supported the appellant’s case.11 This is because the “mischief” identified by the Minister was that the courts had interpreted the exemption in s 32(2)(d) as extending to contracts providing for the supply of services which were not services ancillary to the conveyance of goods. In other words, Parliament was legislating to reverse the effect of the Smith’s Snackfood appeal, where the Court found that the exemption could apply where some services supplied under a contract were not ancillary to the supply of goods, but were of a de minimis character. Services such as disconnecting a pay TV service could reasonably be considered to be in the same de minimis category. It was therefore open to the Tribunal to find that some of the services supplied under the subcontracts were not ancillary to the supply of goods.12
Orders
- Appeal dismissed.
Decision
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