PAY-ROLL TAX AMENDMENT BILL (NO.2) 2005
SERIAL NO. 3

EXPLANATORY STATEMENT

GENERAL OUTLINE

The payroll tax grouping provisions (Part IVA of the Pay-roll Tax Act) cause companies to be grouped where the same person or persons have a controlling interest in the businesses carried on by those companies because they hold the majority of the voting shares in the companies or because they control the majority of votes at meetings of the directors of the companies.

However, the NSW Administrative Decisions Tribunal decision in Fanfold Business Forms Pty Ltd v Chief Commissioner of State Revenue held that the NSW grouping provisions do not apply to trustee companies as the companies are not carrying on a business in acting as the trustee of a trust.  Rather, it held that the employer for the purposes of the grouping provisions is the trust.

This is contrary to the established legal position that a trust is not a legal person.  It is a relationship in which a person holding an interest in property or funds (the trustee) assumes obligations to manage or apply the property or funds for the benefit of others (the beneficiaries). Trusts do not own property, and they do not have the capacity to enter into contracts.  The trustee is the legal actor.  It follows that it is inaccurate to say someone is “employed by a trust” – that person is employed by the trustee.

This Bill clarifies that these payroll tax grouping provisions apply to a company whether it is carrying on a business in its own right, or as the trustee of a trust by confirming that the activities of a trustee are the carrying on of a business for the purposes of the grouping provisions.

NOTES ON CLAUSES

Clause 1.	Short Title

This is a formal clause which provides for the citation of the Bill.  The Bill when passed may be cited as the Pay-roll Tax Amendment Act 2005.

Clause 2.	Commencement

This clause provides that the Bill is taken to have commenced on 1 July 2005.

Clause 3.	Principal Act amended

This clause provides that the Pay-roll Tax Act is amended by this Bill.

Clause 4.	Amendment of section 17A (Interpretation)

This clause amends section 17A of the Pay-roll Tax Act.
Subclause (1) and (2) are consequential amendments arising from subclause (3).
Subclause (3) inserts a new subsection 17A(d) into the Act that clarifies that carrying out the duties of a trustee is the carrying on of a business for the purposes of the grouping provisions.