An employment agency contract involves a contract between two parties where one of the parties (the employment agent) procures the services of a person for a client. The relevant test is whether the employment agent provided individuals who would comprise, or who would be added to, the workforce of the client for the conduct of the client's business.
Background
Chelsea Bonner as a sole trader and thereafter Bella Management Group Pty Ltd, of which Ms Bonner was at all relevant times the sole director, operated a business that represented models / talent (models) to the agency’s clients, or sourced models for clients, for a commission on each transaction between a client and a model.
The Commissioner claimed that the arrangements between the agency, their clients and the models were “employment agency contracts” under the Payroll Tax Act 2007 (NSW) (Act). Accordingly, the Commissioner assessed payroll tax on payments received by the agency from clients in respect to or for the models that the agency procured for its clients. The agency submitted that the payroll tax provisions did not apply as there was no continuity of work (since the models work ad hoc and on call) and there is no expectation of future or further work for the models.
Decision
The NSW Civil and Administrative Tribunal considered the continuity or regularity of models and held that the following terms of the model agreement indicate the continuity of models as staff:
A fee divided into 12 equal monthly payments, exclusivity for the 12-month period and an agreement that the model will not work for a specified list of competitors during that period; and
The agreement includes a possible extension on a 12 X 12-month basis as required by the client.
The Tribunal also observed that the agreements stipulated the role to be played by the model and required attendance at wardrobe/workshop. The agreements also required the model to perform his/her obligations in a professional manner being consistent with professional standards of the advertising industry. The Tribunal was not satisfied that the models, as service providers, were not effectively added to the workforce of the client for the conduct of the client’s business in circumstances where those models have agreed to provide services to the relevant client in accordance with agreements negotiated between the relevant model and the client.
The Tribunal also held that the penalty tax should not be remitted under the Taxation Administration Act 1996 (NSW). It considered the following factors in determining whether the applicants took reasonable care to comply with the taxation law:
Reasonable attempts to comply with the taxation law;
Reasonable professional and other inquiries to ensure compliance; and
Reliance on professional advice or on official published view of the tax law.
This case is another example of revenue authorities, such as the Victorian State Revenue Office and Revenue NSW, aggressively pursuing taxpayers in recent years in relation to their payroll tax obligations. In particular, there has been a focus on the contractor and employment agency contract provisions. It is therefore important for employers to consider when arrangements with contractors or the precuring of workers could be caught by the payroll tax regime.
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Phil Broderick
Principal
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E: pbroderick@sladen.com.au
Denise Tan
Senior Associate
T +61 3 9611 0160 | M +61 438 714 965
E: dtan@sladen.com.au
Laura Spencer
Senior Associate
T +61 3 9611 0110 | M 0436 436 718
Lucy Liang
Graduate Lawyer
E lliang@sladen.com.au
