For non-profit schools and colleges (providing education at or below, but not above, the secondary level) with health and recreational facilities available for use by students of the school or college as well as the community, the recent Supreme Court decision of Trinity College Gawler Inc. v Commissioner of State Taxation [2023] SASC 178 may be of interest.
The case concerns the College’s liability for payroll tax in respect of wages (STARplex wages) paid and payable to staff (STARplex staff) employed by the College in the conduct of their “STARplex centre” (STARplex), a health and recreational facility which includes a Swim Centre, Fitness Centre, Indoor Courts, Theatre, Shop and Creche.
The STARplex staff were employed separately from the professional teaching staff (they included sports instructors and coaches, light and sound technicians, managers, assistant managers etc), though they or some of them did engage with students of the College as part of their curricular and co-curricular activities, as well as with those members of the community who accessed and used the facilities at STARplex. The community-use aspect of STARplex was a focal point of whether the STARplex wages were exempt under the schools exemption ground as outlined in section 49 and section 10 of Division 1 of Part 3 of Schedule 2 of the Payroll Tax Act 2009 (SA) (PTA).
Trinity contended that the STARplex wages were exempt because the STARplex staff to whom they were paid and payable were exclusively engaged in work of the College of a kind ordinarily performed in connection with the conduct of schools or colleges providing education of that kind. In other words, it being contended by Trinity that the presence of the sorts of facilities at STARplex, and of staff working in those facilities, and of their use by students of the school or college and the community was commonplace amongst primary and secondary schools. Trinity also contended that the STARplex wages were exempt under the health services exemption as outlined in section 51 of the PTA.
Ultimately, Trinity succeeded in its contention that the STARplex wages paid to those staff working in the Fitness Centre, Swim Centre, Indoor Courts and Theatre were exempt under the schools exemption ground on the basis that these STARplex staff were engaged exclusively in work of the College of a kind ordinarily performed in connection with the conduct of schools or colleges providing education of that kind. The Court found that to fall within the schools exemption ground, it was not necessary that the work of the STARplex staff comprise the provision of formal, compulsory school education, as was contended on behalf of the Commissioner. Nor was it necessary for Trinity to demonstrate that such work was performed in a majority of other schools or colleges, just that such work was commonplace amongst schools and colleges providing education at or below, but not above, the secondary level. Though the Court did not find the schools exemption ground applied to those STARplex staff working in the Creche or the Shop (and in relation to the Shop, the Court not being satisfied with the evidence that the supply of giftware and other non-school items was commonplace amongst schools or colleges) or those staff working in the areas of reception or memberships, nor was it available to those staff servicing the whole of STARplex on the basis that by servicing areas within STARplex not common to schools or colleges, they were not exclusively engaged as required by the PTA.
Trinity was also successful in its contention that the wages paid and payable to those STARplex staff working in the Fitness Centre were exempt under the health services ground, the Court relevantly finding that the definition of health services under the PTA encompasses a proactive concept of a service whose purpose is to advance a person’s good health, it not being necessary for the services to be of a kind commonly provided in hospitals and other health care settings.
For non-profit primary and secondary schools and colleges with health and recreational facilities similar to those at Trinity, and who pay payroll tax on wages paid to staff working within those facilities who might initially have been considered to form part of a non-school endeavour, now could be an appropriate time to review those arrangements and take legal advice on whether an exemption under the PTA might be available.
Assessing the possibility of an exemption will depend on a variety of factors, including whether the particular staff member is exclusively engaged in the relevant work, the subject of the contended exemption, which can be tricky where staff split their time across facilities or endeavours of the school.
DW Fox Tucker Lawyers are experts in taxation law and can advise you with respect to your payroll tax obligations.
