The judge accepted every word of the value the business added. It made no difference.
Your client’s cleaning company employs no cleaners. It designs the cleaning system for each site, trains the workers, runs its own portal and app, and puts everyone in a company uniform. It looks nothing like a labour hire firm.
The Supreme Court held it was an employment agent anyway. Payroll tax, penalty and interest of $2.07m over four years, all confirmed. The judge accepted every word of the value that business added. It made no difference.
Cerisewin Pty Ltd atf Mastercare Administrative Services Trust v Chief Commissioner of State Revenue [2026] NSWSC 877.
What happened
First, the basics. Under Part 3 Division 8 of the Payroll Tax Act 2007 (NSW), a person who procures a worker’s services for a client is an employment agent (s 37(1)), is taken to be the employer (s 38), and everything paid “to or in relation to” that worker is taken to be wages (s 40(1)(a)). “For a client” means in and for the client’s business (SKG Cleaning [2026] NSWCA 122 at [45]).
Mastercare cleaned for over 40 clients. One group entity held the client contracts. A second contracted the corporate contractors who supplied the cleaners, about 80 of them. Only 5 were registered for and paying payroll tax. Only those payments were excluded from the assessments [6].
The value add was accepted. It changed nothing.
The taxpayer argued its cleaners were never integrated into the clients’ businesses or under their control [95]. Hmelnitsky J held that is the wrong question. It is an error to read s 37 as principally concerned with control over the workers, or their integration into the client’s business [102].
His Honour accepted the site design, the portal, the app, the inductions and the training, and declined to diminish any of it [117-121]. All of it went to the same subject matter: “What MAPL relevantly provides to its clients is a better, more cost-effective delivery of the cleaning services” [117].
The practical takeaway
First, test the right control. What matters is the client’s ability to determine the services provided to it, not its ability to direct the workers [117]. Ask who decides what gets cleaned, how often and to what standard.
Second, the separate entity is not a shield. Had the client contracts escaped, his Honour would still have held the internal arrangement an employment agency contract, one group company the client of the other [149]. No written agreement, the fee only a book entry. “But so what?” [147]. No profit margin, common ownership, same answer [144], [148].
Third, the base is the invoice, not the wage. The contractor’s own profit margin and overheads are deemed wages too [168].
How many clients run contractor payments through a second entity for asset protection, and have never asked what that entity is for payroll tax?
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.