Control over the cleaners wasn't the deciding factor for the tax bill
Outsourcing your cleaning won't automatically take those workers off your payroll tax base. That's the message from a new New South Wales ruling.
On June 30, 2026, the NSW Court of Appeal dismissed an appeal by two cleaning company groups - the SKG and Ezko businesses - that had been assessed for payroll tax on the subcontractors they used to clean client sites across the state.
The mechanism matters, so start there. Under section 37 of the Payroll Tax Act 2007 (NSW), some arrangements count as "employment agency contracts" - deals where one business supplies another with people to do work. When a contract fits, the law treats those workers as employees of the supplier, and the supplier pays payroll tax on what they are paid.
The cleaning companies argued their contracts sat outside the rule. Their contracts, they said, only spelled out what cleaning had to be done and when - not who did it or how. No real control over the workers, so no deemed employment.
The court didn't accept that. Control over how the work gets done, it held, is not the deciding factor. The real question is whether the services are provided "in and for" the client's business - whether the work is the kind a business would normally have its own staff do. Regular, continuous cleaning of business premises fits. Cleaning a workplace, the court noted, is "typically part of the ordinary activities of that business."
There is a narrow exit. Specialised, infrequent work a business wouldn't normally do in-house - the judgment offers cleaning the external windows of a high-rise as its example - might fall outside the rule. Ordinary office and site cleaning does not.
The court also pointed out that each of the disputed contracts still gave clients some say over who cleaned and to what standard. The standard contracts required the cleaning firms to use people of "proper character" and let clients object to a worker "with due cause at any time." One contract went further and let the client give the workers reasonable directions.
Then there's the quieter lesson, and it may be the most useful one for HR and finance teams. When the companies tried to challenge two particular contracts, the versions in evidence were incomplete - missing terms the court said were material. Under the Taxation Administration Act 1996 (NSW), the companies carried the onus of proving those contracts were not employment agency contracts. They couldn't do that with incomplete documents, so those two challenges failed on the paperwork alone.
For anyone managing outsourced labour, the practical points are clear. Calling workers subcontractors and pointing to a lack of day-to-day control does not settle payroll tax. If the work is routine, ongoing and the sort your organisation would otherwise hire staff to do, the deemed-employment rules may reach it. And if you ever want to contest an assessment, your contracts and records need to be complete and easy to produce.
The appeal was dismissed with costs.
