Beaumonde Homes has lost a battle.
Osbourne Park-based Beaumonde Homes has lost a battle with the State Tax Office, which successfully argued the builder’s sales agents were employees for payroll tax purposes.
The decision will further muddy the waters for business in that it runs against the tide of recent judgements that favoured companies with independent sales forces.
A year ago, Nedlands mortgage broker Mortgage Force beat a State Tax Office challenge when its commission-only mortgage originators were found to have operated independent businesses for their own account.
In 2005, Bridges Financial Services saved itself $496,000 in payroll tax after successfully overturning an assessment by the state government’s Office of State Revenue.
The OSR, part of the Treasury Department, had previously stated that all financial planners working for Bridges in Perth were considered employees, and therefore the firm was liable to pay payroll tax.
It has now accepted that the planners are considered to be separate businesses.
But in his recent judgement, State Administrative Tribunal president Justice Michael Barker found four consultants representing Aintree Holdings Pty Ltd, which trades as Beamounde, were employees for the sake of determining payroll tax.
Although, like in Mortgage Force, the consultants were commission only, Justice Barker found that too many other conditions of their work resembled that of an employee, undermining Beamonde’s argument that they were independent contractors.
The four all worked in display homes provided by Beaumonde and were verbally contracted to sell to the general public.
The commission earned varied considerably from as low as $44,500 per year in one case to as high as $278,000 per year in another.
Commission rates varied as well, though 3.5 to 3.75 per cent was standard, at least one agent earned 4 per cent.
Even though the commission was paid to companies, Justice Barker found that materially it was the individual behind the company contracted to provide the work and required to be present at the display homes on certain days of the week.
“Their services were the subject of invoices submitted to the applicant through corporate entities and trusts.
No doubt there are good taxation and other business reasons for those arrangements,” Justice Barker wrote in his judgement.
Among the key arguments in his judgement that Justice Barker used to differentiate the Bridges and Mortgage Force cases was the ability for the sales consultants at Beaumonde to develop their own client base as a business asset and effectively operate as a franchisee.
Unlike financial planners and mortgage originators, there was little opportunity for the Beaumonde sales agents to develop their own client base, which would have provided further weight to their argument of independence.
“It cannot be said, in this case, that the consultants were conducting their ‘own business’, as distinct from that of Beaumonde’s, in any real sense,” Justice Barker wrote.