Court Rules on Qantas Payroll Tax Appeal

A recent judgment of the NSW Supreme Court has held that defined benefit contributions in excess of the ‘adjusted normal cost’, as well as top-up defined benefit contributions (made to meet a deficit), can be apportioned between pre- and post-1 July 1996 service, with the portion attributable to pre-1 July 1996 service of NSW employees exempt from NSW payroll tax.

The case related to an appeal by Qantas against a decision of the NSW Chief Commissioner of State Revenue (Commissioner). Qantas had sought a refund of a portion of the payroll tax that related to superannuation contributions made by it to the Qantas Superannuation Plan referable to the provision of defined benefits to Qantas’ employees that were claimed to have been made in respect of service of the employees prior to 1 July 1996.

Qantas’ claim related to both normal cost and top-up contributions paid from 2006-2010. The Commissioner had initially accepted Qantas’ claim in respect of top-up contributions and denied the claim in respect of normal cost contributions. However in the case the Commissioner argued that no refund should be allowed as the Plan was not in deficit at 1 July 1996.

Qantas’ appeal was partially successful, with the judge finding that:

1. The decision of the judge in the 2006 case of CSR Ltd v Chief Commissioner of State Revenue (“CSR 2006”) – that the exemption in the Payroll Tax Act 1971 (NSW) may be available notwithstanding that a defined benefits scheme was not in deficit as at 1 July 1996 – was correct.
2. The methodology for apportioning contributions that was adopted in CSR 2006 can NOT be applied to the payments of normal cost contributions by Qantas.
3. The contributions paid by Qantas in the relevant years, to the extent they exceeded adjusted normal cost contributions, CAN be apportioned in the manner claimed.

The decision may indicate scope for other employers in similar circumstances to obtain a partial refund of past payroll tax and/or to reduce payroll tax on future defined benefit contributions. However it is unclear to what extent variations in circumstances from those applicable in this case would impact on the transportability of the outcome. 

The Superannuation Practice Committee’s (SPC) October 2009 Discussion Note: An Update on Payroll Tax provides further background and is referred to in the case.   

Have you seen the recent judgment of the NSW Supreme Court in relation to defined benefit superannuation contributions that exempts a portion from NSW payroll tax? It is unclear to what extent variations in circumstances from those applicable in this case would impact on the transportability of the outcome to other employers in similar circumstances.  If you have any experience or views on this matter, we would love to hear from you. Leave a comment below.

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