CaseWare reseller in court with Australian tax office

CaseWare's local reseller, Task Technology, will be back in court in a dispute with the taxman.

In February, Task Technology took the tax commissioner to court to claw back taxes that it claims it did not have to pay, but this application for "declaratory relief" was refused.

The company, which now trades as CaseWare Australia & New Zealand, has appealed the ruling handed down by the Victorian Federal Court.

The dispute rests on payments that Task Technology made to Canada-based CaseWare between 2007-2011.

The disagreement centres on the use of the CaseWare software code and how it relates to a trade agreement between Canada and Australia, the "Australia-Canada Double Tax Agreement".

The tax commissioner claimed the payments were "royalties" and 10 percent should have been withheld as tax.

CaseWare ANZ did not withhold tax to pay the ATO; according to court documents, it argued that the payments were exempt from local taxes.

"It is a withholding tax definitional thing," said CaseWare chief executive Craig Waldon. "When we remit money to Canada, we had advice – which the tax office has challenged – that we did not have to deduct withholding tax, but in the end the courts say we do."

Chairman Solly Lew told CRN that it was not accurate to call it a fine. "When you don't pay withholding tax and the tax department decide you have to pay it, the only way they can get you to pay is with a penalty notice, which makes you pay the amount of tax, plus interest."

He stressed that Task Technology always paid its taxes. The company has already paid the sum at the centre of this dispute, and is in court to get the money back.

"Task Technology paid the default notice immediately when it was due – as we do with all our taxes – even though we dispute its legitimacy," said Lew.

Waldon suggested any other resellers representing Canadian software firms should check if they are on the right side of the tax agreement.

Other leading Canadian IT vendors include unified comms firm Mitel, CRM provider Maximizer Software, OpenText Corporation and BlackBerry.

"We certainly have to review how we do everything in light of this so we don't get caught out," added Waldon.

CaseWare Australia & New Zealand, which has 20 staff, sells direct to customers, mostly accounting firms and large corporates.

According to its website, "CaseWare Australia & New Zealand has been the authorised distributor for CaseWare International in Australia, New Zealand and PNG since 1996."