Page 2236 - Week 08 - Wednesday, 5 June 2013
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In this regard it is worth while noting that until 1 July 2008 the commissioner was only empowered to degroup companies grouped by common employment. At the time the ACT was the only jurisdiction with such a limited degrouping provision. Subsequent changes to the Payroll Tax Act in 2008 allowed for degrouping of entities regardless of how they were grouped, with the exception of related bodies corporate. However, it has been illustrated in cases brought to the ACAT that there has been considerable contention as to whether retrospective degrouping also applies to instances prior to 1 July 2008 or from 1 July 2008 onwards.
Although the tribunal agreed with taxpayers that retrospective degrouping should apply to cases prior to 1 July 2008, the ACT is the only jurisdiction whereby the power to degroup prior to 1 July 2008 is limited to common employee groupings and companies grouped by discretionary trust provisions could not be degrouped.
It has also been noted through interactions with the local business community on application of the Payroll Tax Act that the degrouping power cannot be used to divide a larger group into smaller groups. Instead the general practice in the ACT is to maintain that only individual companies can be degrouped, and only if independent from each and every other company in the group.
The example given to me was as follows:
This would produce absurd results: if a beneficiary of the trust buys a share in Telstra, Telstra is thereby grouped with the business of the trust. If Telstra has a subsidiary company, that company also is grouped. Since the power to degroup does not extend to holdings/subsidiary company relationships, Telstra cannot be degrouped from its subsidiary. As a result of present interpretation of the grouping power, because Telstra cannot be degrouped from its subsidiary, it cannot be degrouped from any other company. Thus Telstra cannot be degrouped from the beneficiary’s company. This cannot be right.
Then we have problems with joint and several liability. Section 81 of the Payroll Tax Act provides:
If a member of a group fails to pay an amount … in relation to any period, every member of the group is liable jointly and severally …
At present there has been considerable contention as to whether this applies to grouped companies while they are grouped or, in the case of the territory’s interpretation, “at any time”. Under current application of the legislation, if, for instance, company A accrues a tax debt over, say, 10 years, up to 30 June 2012, and then grouped with company B on 1 July 2012, company B is liable for company A’s tax debt regardless of the fact that it had no association with company A when it was accruing its tax debt.
In this sense, the legislation is far-reaching both for entities in a group and for directors of these entities. Again, as a local shareholder noted:
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