Payroll tax (NSW): modeling agency subject to payroll tax under employment agency rules

Operators of a modeling agency business found liable for payroll tax stemming from arrangements involving their clients and models have failed to appeal to the NSW Supreme Court.

The taxpayers acted as agents for individuals seeking to work as models in advertising and entered into contracts with clients to provide the modeling services. The arrangements were characterized as “employment agency contracts” within the meaning of s. 37 (within Div 8) of the Payroll Tax Act 2007 (NSW) by the Commissioner. On this basis, taxpayers were subject to payroll tax.

The ratepayers challenged the assessments and sought reviews unsuccessfully before the NSW Civil and Administrative Court and its Appeal Panel. The Appeal Panel rejected the taxpayers’ arguments that the Tribunal made factual errors when it concluded that the models worked “on-site” at the clients’ premises, were regularly employed by the clients and were akin to their staff .

The ratepayers appealed to the Supreme Court of New South Wales, which dismissed the appeal. The court said there was no error of law arising from the appeal panel’s decision. The trial decisions were both heard on the agreed basis that the relevant test of the scope of s. 37 was whether the contracts procured the services of another person “in and for the conduct of the business” of the client. As such, the taxpayer’s assertion in court that the placement agency provisions in Div 8 did not apply because the models were independent, retained to provide a result for the client and not integrated with the client’s business, was unsuccessful.

Source: Bonner & Anor c. Chief Commissioner of State Revenue (NSW), 2022 ATC ¶20-826, [2022] NSWSC 441April 13, 2022.