Australia DIS Pty Ltd v Deputy Commissioner of Taxation
[2012] VSC 331
•8 August 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
S CI 2011 5032
IN THE MATTER OF AUSTRALIA DIS PTY LTD (ACN 081 006 377)
BETWEEN:
| AUSTRALIA DIS PTY LTD (ACN 081 006 377) | Plaintiff |
| v | |
| DEPUTY COMMISSIONER OF TAXATION | Defendant |
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JUDGE: | FERGUSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 July 2012 | |
DATE OF JUDGMENT: | 8 August 2012 | |
CASE MAY BE CITED AS: | Australia DIS Pty Ltd v Deputy Commissioner of Taxation | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 331 | |
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CORPORATIONS – Appeal from decision of Associate Judge refusing application to set aside statutory demand – Demand claims amount due under Running Balance Account under the Taxation Administration Act1953 – Whether there is requirement to identify constituent parts of Running Balance Account debt in schedule to the demand – Debt included amount estimated for PAYGW - Whether there is genuine dispute in respect of debt - Corporations Act2001 (Cth), ss 459G, 459J, Taxation Administration Act 1953 (Cth), Part IIB, ss 8AAZA, 8AAZH(1), Division 268, Schedule 1
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Whelen | Belleli King and Associates |
| For the Defendant | Mr S. Linden | Legal Services Branch Australian Taxation Office |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 2
Is there a misdescription of the debt such that the demand is defective?............................... 4
Is there a genuine dispute as to the existence or amount of the debt demanded?................ 7
Conclusion......................................................................................................................................... 12
HER HONOUR:
Introduction
I.E.S. Australia Pty Ltd (which is now called Australia D.I.S. Pty Ltd) (“DIS”) acted as the trustee of the Rubinstein Family Trust No. 2 and operated an electrical engineering business. The Deputy Commissioner of Taxation served a statutory demand dated 31 August 2011 on DIS for $4,582,670.50. The debt is described in the schedule to the demand to be for a Running Balance Account (“RBA”) deficit debt owing as at the date of the demand for amounts due under the BAS provisions of the Income Tax Assessment Act 1997, estimates due “under Division 268 in Schedule 1 to the Taxation Administration Act 1953 (“the TAA 1953”)/ Division 8 of Part VI of the Income Tax Assessment Act 1936,” administrative penalties due under Part 4-25 of Schedule 1 of the TAA 1953 and a general interest charge payable under s 8AAZF of the TAA 1953.
DIS applied under ss 459G and 459J of the Corporations Act2001 (Cth) for orders that the demand be set aside, alternatively that it be varied. The application was heard by an Associate Judge who made orders which included orders varying the amount of the demand to $4,045,673.45. DIS appeals from those orders. The appeal is by way of rehearing[1] although the Court will give such weight to the decision of the Associate Judge as appears proper.[2]
[1]Rule 16.5(1) Supreme Court (Corporations) Rules 2003; r 77.06(7) Supreme Court (General Civil Procedure) Rules 2005.
[2]Southern Motors Pty Ltd v Australian Guarantee Corporation Limited [1980] VR 187 at 189-190.
The Associate Judge delivered detailed written reasons which set out the evidence from the affidavit material filed.[3] I gratefully adopt his Honour’s description of the evidence and will not set it out in full again in these reasons.[4] In summary, Mr Peter Hannah, who is the financial manager of DIS, deposed that on 20 January 2011, I.D.S. Australia Pty Ltd replaced DIS as the trustee of the Rubinstein Family Trust No. 2. It seems that the Australian Taxation Office (“ATO”) was not told that there had been a change of trustee until early June 2011. However, by then, the Deputy Commissioner had already made an estimate of the amounts that DIS had not paid but was liable to pay for Pay As You Go withholding (“PAYGW”) for the period from 1 July 2009 to 29 April 2011. The written notice of the estimates given by the Deputy Commissioner to DIS is dated 12 May 2011. Having been informed that there had been a change of trustee, on 21 July 2011 the Deputy Commissioner served a notice requiring that a copy of the trust deed verifying the change be provided and that information as to the weekly PAYGW amounts and dates withheld for the financial years ended 30 June 2006 to 2011 be given.[5] That information was not forthcoming although there was correspondence from new accountants for the trust seeking further time to provide it. The information had not been provided by the time that the statutory demand was issued on 31 August 2011. As noted above, the statutory demand claimed an RBA deficit debt of $4,582,670.50 which included the estimated amounts for PAYGW.
[3]Australia D.I.S. Pty Ltd v Deputy Commissioner of Taxation [2012] VSC 281.
[4]Ibid at [3] – [25].
[5]The notice was given under s353-10, Schedule 1, TAA 1953.
Mr Hannah deposed that on 20 January 2011, DIS owed the Deputy Commissioner $1,179,365 and he estimated that with penalty interest added, the amount owed at the date of the statutory demand was no more than $1,648,710.08. DIS contended that the demand was defective and should be set aside because it did not specify the separate underlying debts that made up the total RBA deficit debt. Alternatively, DIS submitted that the demand should be varied to the amount of $1.6 million approximately that Mr Hannah says it owed at the date of the demand.
The Deputy Commissioner’s primary contention was that regardless of whether there had been a change in the trustee, there was no basis to set aside the demand or to vary it. The Deputy Commissioner submitted that the majority of the debt demanded related to the period when DIS was unarguably the trustee. In respect of the balance of the debt (which was included in the estimate), the Deputy Commissioner contends that DIS is liable because of the operation of Division 268 of Schedule 1 of the TAA 1953.[6] In broad terms that Division provides that a taxpayer must pay the amount estimated unless the estimate is revoked or varied. If those submissions failed, the Deputy Commissioner’s alternative contention was that there was no genuine dispute about the substantial part of the debt ($4,045,673.56) that related to the period before 20 January 2011.
[6]For ease of reference, the whole of the text of Division 268, Schedule 1, Taxation Administration Act 1953 (Cth) is set out in the Annexure to these reasons.
Is there a misdescription of the debt such that the demand is defective?
DIS submitted that the demand is defective within the meaning of ss 9 and 459J(1)(a) of the Corporations Act. Section 459J(1)(a) provides that the Court may set aside a statutory demand if it is satisfied that, because of a defect in the demand, substantial injustice will be caused unless the demand is set aside. “Defect” is defined in s 9 to include a misdescription of a debt.
DIS submitted that there is a misdescription of the debt in the statutory demand because only one amount is claimed but there are a number of constituent debts that make up that total. DIS contended that this is compounded because the demand did not particularise start dates in respect to the constituent parts, most significantly, whether it is a pre or post 20 January 2011 accrued liability. DIS submitted that substantial injustice would be caused to it if it were required to pay taxes relating to the trust which accrued after DIS was replaced as trustee on 20 January 2011.
In Buckland Products Pty Ltd v Deputy Commissioner of Taxation,[7] it was contended that a demand claiming two RBA deficit debts was defective. One of the RBA deficit debts related to sales tax and general interest charges and the other related to PAYE deductions and general interest charges. A separate amount was specified for each RBA deficit debt with a total then given for the two debts. Warren J (as her Honour then was) held that the demand was not defective and that the Deputy Commissioner had done all that was required by the legislation in specifying the debt owing.[8] Her Honour stated:
In Chippendale Printing Co v Deputy Commissioner of Taxation(1995) 13 ACLC 229 Lindgren J held (at 244) that a statutory demand relating to two or more debts must give a description of the individual debts specifying their amounts and also state the total of those amounts. With respect I agree. In the present case I am satisfied that the Deputy Commission[er] has met those requirements.[9]
[7][2001] VSC 286.
[8]H’Var Steel Services Pty Ltd v Deputy Commissioner of Taxation (2005) 59 ATR 5 as to the general scheme of the TAA provisions concerning running balance accounts.
[9]Ibid at [25].
DIS relied on the decision of Master Macready (as his Honour then was) in Global Network Services Pty Ltd v Commissioner of Taxation[10] as authority for the proposition that a statutory demand for an RBA deficit debt can constitute a “misdescription of a debt” and therefore be a “defect” for the purposes of ss 9 and 459J(1)(a) unless the amount demanded is broken up into its components. One of the amounts claimed in the demand in that case was for an RBA deficit debt. Master Macready stated:
20.What we are here dealing with is probably a misdescription of a debt. The debt has been described by general words rather than by more particular words to arrive at a total.
21.In the circumstances it seems to me that we are in truth dealing with a defect in the demand itself. In these circumstances as there has been no demonstration of a substantial injustice, the demand should not be set aside. [11]
[10](2004) 211 ALR 327.
[11]Ibid, [20] – [21]. His Honour’s comments in Old Kiama Wharf Co Pty Ltd v Deputy Commissioner of Taxation (2005) 55 ACSR 223 should however be noted. In that case, His Honour had to consider a different point in relation to a statutory demand served by the Deputy Commissioner. However, his Honour did observe as follows:
I hasten to point out that it is the Commissioner’s choice as to whether he proceeds to claim an underlying tax debt or by way of the running balance account. In H’Var Steel Services Pty Ltd v DCT[2005] WASCA 71 the court rejected an argument that a demand was defective because the running balance account deficit on which the demand was based did not separately identify relevant debts. The court found the running balance account system did not require the Commissioner to specify separate primary tax and interest charge debts and therefore the single debt due under the running balance account was sufficient for the demand.
In a subsequent case, H’Var Steel Services Pty Ltd v Deputy Commissioner of Taxation,[12] Commissioner Zilko SC considered whether there was a defect in a statutory demand claiming an RBA deficit debt. Commissioner Zilko held that by reason of the system of RBAs established by the TAA 1953, there was a single debt due under the RBA on which the Deputy Commissioner could rely in order to prepare the statutory demand and that it was not necessary to specify the separate primary tax debts and general interest charge to show how the single debt was arrived at.[13]
[12](2004) 184 FLR 354.
[13]Ibid at [19]. On appeal, this issue was not considered: H’Var Steel Services Pty Ltd v Deputy Commissioner of Taxation (2005) 59 ATR 5.
Part IIB of the TAA 1953 deals with running balance accounts and related matters. Under the legislation, the Commissioner is empowered to establish one or more systems of accounts for primary tax debts[14] with each account to be known as a Running Balance Account (or RBA).[15] The Commissioner is permitted to allocate a primary tax debt to an RBA.[16]
[14]Defined as “any amount due to the Commonwealth directly under a taxation law (other than, except in Division 4, the Product Grants and Benefits Administration Act 2000), including any such amount that is not yet payable: s8AAZA, TAA 1953.
[15]Sections 8AAZC (1) and (2), TAA 1953.
[16]Section 8AAZD(1), TAA 1953.
Section 8AAZA of the TAA 1953 defines “RBA deficit debt” as meaning:
[I]n relation to an RBA of an entity, means a balance in favour of the Commissioner, based on:
(a)primary tax debts that have been allocated to the RBA and that are currently payable; and
(b)payments made in respect of current or anticipated primary tax debts of the entity, and credits to which the entity is entitled under a taxation law, that have been allocated to the RBA.
Section 8AAZH(1) of the TAA 1953 provides:
If there is an RBA deficit debt on an RBA at the end of a day, the tax debtor is liable to pay to the Commonwealth the amount of the debt. The amount is due and payable at the end of that day.
In my view, it is clear from these provisions that an RBA deficit debt is a single debt. In particular, the provisions use the singular rather than the plural when referring to the debt: “a balance” in s 8AAZA of the TAA 1953 and “the amount of the debt” in s 8AAZH(1). There may be parallel individual primary tax debts that have been allocated to the RBA, but this does not detract from the characterisation of the RBA deficit debt as one debt once that allocation has occurred. It is therefore not necessary for the Deputy Commissioner to specify in the statutory demand the individual primary tax debts that have been allocated to the RBA if the demand is for the RBA deficit debt. There is no defect in the demand if only one amount is claimed. To the extent that a contrary view might have been taken in the Global Network case, with respect, I would not agree with his Honour.
Is there a genuine dispute as to the existence or amount of the debt demanded?
Section 459G(1) of the Corporations Act provides that a company may apply to the Court for an order setting aside a statutory demand served on the company. A demand may be set aside where there is a genuine dispute as to the existence or amount of the debt or where the company has an offsetting claim that exceeds the amount of the debt claimed.
In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[17] Dodds-Streeton JA said:[18]
The court, in the context of an application to set aside a statutory demand, must determine whether there is a genuine dispute about the existence or amount of the debt or whether the company has a genuine off-setting claim.
No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the “ultimate question” of the existence of the debt should not be compromised.
[17](2008) 66 ACSR 67.
[18]Ibid, [56]-[57] (citation omitted).
Her Honour also said:[19]
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something “between mere assertion and the proof that would be necessary in a court of law” may suffice.
[19]Ibid, [71].
As noted above, the Deputy Commissioner’s primary contention is that there can be no genuine dispute about any part of the debt, including any part of the estimated amount that relates to the period after 20 January 2011 when DIS says that it was no longer trustee. The Deputy Commissioner relied on Division 268 of Schedule 1 of the TAA 1953 which concerns estimates by the Commissioner and recovery of PAYGW liabilities. The object of the Division is to “enable the Commissioner to take prompt and effective action to recover amounts not paid as required” by the PAYGW provisions.[20]
[20]Section 268-5, Schedule 1, AA 1953.
Under the legislation, the Commissioner may estimate unpaid and overdue PAYGW amounts.[21] The Commissioner must give written notice of the estimate.[22] The recipient of such a notice must pay the amount of the estimate and the estimated amount is due and payable when the Commissioner gives the notice. [23] The liability to pay the amount of the estimate is separate and distinct from the underlying liability[24] and the recipient of the notice is liable even if the underlying liability never existed or has been discharged in full or is less than the estimate.[25]
[21]Sections 268-10(1), 16-70, Schedule 1, TAA 1953.
[22]Section 268-15, Schedule 1, TAA 1953.
[23]Section 268-20, Schedule 1, TAA 1953.
[24]Section 268-20(2), Schedule 1, TAA 1953.
[25]Section 268-25, Schedule 1, TAA 1953.
If the recipient of the notice wants to have the estimated amount reduced or revoked, then a statutory declaration or affidavit complying with and for the purposes of the legislation must be provided to the Commissioner.[26] The statutory declaration must be provided within seven days of the notice of estimate being given or such longer period as allowed by the Commissioner.[27] In the case of a company, the statutory declaration or affidavit must be made by one of its directors or secretary.[28] Section 268-90(2), Schedule 1, TAA 1953 provides in part that the statutory declaration or affidavit must verify the amounts withheld for PAYGW during the particular period in question or that the company did not withhold any such amounts and what has been done to comply with its withholding obligations. The amount of the estimate is reduced if the statutory declaration is to the effect, or the affidavit verifies facts sufficient to prove, that a specified lesser amount is the unpaid amount of the underlying liability.[29] The estimate is revoked if the statutory declaration is to the effect, or the affidavit verifies facts sufficient to prove, that the underlying liability never existed.[30] If this process is followed and as a consequence the estimate is reduced or revoked after a statutory demand has been served by the Commissioner, then the statutory demand is changed accordingly and is taken to have effect as changed from the time the demand was served.[31]
[26]Section 268-40(1), Schedule 1, TAA 1953.
[27]Ibid. In the case of an affidavit, the time permitted is within 14 days after the recipient of the notice takes a procedural step as a party to proceedings relating to the recovery of the unpaid amount of the estimate or such longer period as allowed by the court: ibid.
[28]Section 268-90(3), Schedule 1, TAA 1953.
[29]Section 268-40(2), Schedule 1, TAA 1953.
[30]Section 268-40(4), Schedule 1, TAA 1953.
[31]Section 268-65, Schedule 1, TAA 1953.
The notice of estimate that the Deputy Commissioner served on DIS included statements about how the estimate could be reduced or revoked. It drew attention to the requirement that the statutory declaration must be given within 7 days or any longer period allowed by the Commissioner and that the declaration must comply with s 268-90(2). The text of that section was set out in the body of the notice. In addition, a detailed form of statutory declaration for the purpose of seeking revocation or reduction was sent with the notice to DIS together with instructions for completion of the declaration.
DIS accepts that it did not provide the Commissioner with a statutory declaration nor an affidavit that complied with the legislative requirements for reducing or revoking the estimate. The Deputy Commissioner contended that DIS is therefore liable for the whole amount claimed because unless and until the estimate is reduced or varied, DIS was obliged to pay the estimated amount. The Deputy Commissioner submitted that this is so even if DIS was replaced as trustee of the trust in January 2011.
DIS relied on s 268-35, Schedule 1 of the TAA 1953. That section provides that the Commissioner may at any time reduce the amount of the estimate or revoke the estimate, but is not obliged to consider whether or not to do so.[32] DIS contends that faced with the affidavits that it has filed in this proceeding, the Commissioner ought to have revoked the estimates for the various periods and issued fresh estimates.
[32]Section 268-35(1), (3), Schedule 1, TAA 1953.
In my opinion, that contention does not give rise to a genuine dispute about the debt as the argument is hopeless and must fail. The section specifically provides that there is no obligation on the Commissioner to consider whether an estimate should be reduced or revoked. There is no reason to depart from the plain meaning of those words. Further, the legislation specifically provides that the recipient of a notice of estimate is liable even if the underlying liability never existed.[33] As noted above, the object of Division 268 is to enable the Commissioner to take prompt and effective action to recover amounts not paid as required.[34] In furtherance of that object, the legislation empowers the Commissioner to make estimates of unpaid amounts and sets down a particular process that the recipient of a notice of estimate must follow if it seeks revocation or reduction of the estimate. DIS failed to comply with that procedure. Having regard to the object and plain words of the statute, there could be no obligation on the Commissioner to act on the basis of affidavits filed in this proceeding which were not made by a director nor secretary and which fell short of what was required under the legislation to obtain a reduction in or revocation of the estimates. In this regard, the affidavits that DIS relied on principally went to two matters. First, that on 20 January 2011, DIS was replaced as trustee and, in its view, it was not liable for tax liabilities incurred after that date in relation to the trust. Second, that there was uncertainty about the amount of the tax liability for the period prior to 20 January 2011. Given that DIS was under an obligation to report its PAYGW liabilities by the date that they were due,[35] it is notable that the affidavits did not include any evidence about any amounts that DIS had withheld for PAYG before 20 January 2011, nor the actual unpaid amount of the liability for that period. Such information would have been required were the estimates to have been reduced in respect of the pre 20 January 2011 period.
[33]Section 268-25, Schedule 1, TAA 1953
[34]Section 268-5, Schedule 1, TAA 1953.
[35]Section 16-150, Schedule 1, TAA 1953.
Having so far failed to have the estimates reduced or revoked, DIS remains liable to pay the estimated amounts. However, I note that if:
· the statutory demand stands; and
· DIS does not pay the amount demanded; and
· the Deputy Commissioner applies to wind up DIS,
then DIS has a further opportunity to reduce or revoke the estimate. Under the legislation, if the Deputy Commissioner applies to wind up DIS, then it may file and serve an affidavit meeting the relevant requirements, including those matters required to be verified.[36]
[36]Section 268-40(1), Item 3 and s 268-90, Schedule 1, TAA 1953.
In view of the conclusion that I have reached, it is not necessary to determine whether DIS was replaced as trustee on 20 January 2011.
The remaining issue for determination is whether there is a genuine dispute about the amount that has been claimed in the statutory demand. The Deputy Commissioner relied on an RBA statement which showed that the liability of DIS as at the date of the demand was $4,582,670.50. The statement is prima facie evidence that that amount is correct.[37]
[37]Section 8AAZI Taxation Administration Act 1953 (Cth); reg 45 Taxation Administration Regulations 1976 (Cth).
DIS bears the onus of establishing the existence of a genuine dispute. It does not dispute that, as at the date of the demand, its liability was $1,648,710.08. In arriving at that figure, DIS relied on an Integrated Client Account report obtained through the ATO’s online Tax Agent Portal. That report only discloses transactions that had been processed up until 27 January 2011 with the total balance being shown as $1,179,364.87. As the notice of estimates (which totalled approximately $2.9 million) was not issued until 12 May 2011, the report did not include the estimated amounts.
DIS also relied on an RBA statement dated 26 March 2011 which shows a balance of approximately $1.2 million. Again, the statement includes details of transactions that have been processed during the period from 27 February to 26 March 2011 and suffers from the same issue as the Integrated Client Account report in that it does not include the estimated amounts for PAYGW.
Mr Hannah exhibited a printout from the ATO’s Tax Agent Portal of an Integrated Client Account as at 9 January 2012 with the balance shown as $560,193. Ms Lemeray, who is an officer in the Commonwealth Public Service employed in the ATO, deposed that for the purpose of the Deputy Commissioner’s secondary contention, a reconstruction of the debt owed by DIS was prepared (on the assumption that DIS was not liable for post 20 January 2011 tax liabilities). To prepare this reconstruction, the Deputy Commissioner transferred amounts relating to post 20 January 2011 tax periods from the Integrated Client Account for DIS to a separate account. Consequently, the information in the 9 January 2012 Integrated Client Account report exhibited to Mr Hannah’s affidavit is not reliable as to the amount of the debt.
None of the documents relied upon by DIS show the company’s liability as at the date of the demand and the evidence that it relies on rests on an erroneous assumption that DIS is not liable for the amounts in the estimate that relate to the period when it says it was no longer trustee. However, for the purposes of this proceeding, the RBA statement relied on by the Deputy Commissioner does evidence the amount owed at the date of the demand and should be accepted in the absence of reliable evidence to the contrary.
Conclusion
In my opinion, DIS has not satisfied the onus it bears to have the statutory demand set aside. The RBA deficit debt demanded is one debt and there is no misdescription of the debt because only one amount has been claimed without the amount of each underlying liability being specified.
DIS has not established that there is a genuine dispute about the debt. Although part of the debt demanded is an amount estimated by the Deputy Commissioner for unpaid PAYGW liabilities after the date that DIS says it was no longer acting as trustee, DIS is nevertheless liable unless and until the estimate is revoked or reduced. This is because of the operation of Division 268 of the TAA 1953.
DIS has not satisfied the onus it bears to warrant reducing the amount of the demand.
The orders made by the Associate Judge will be set aside and the application to set aside the statutory demand will be dismissed. I will hear the parties as to costs.
ANNEXURE
Division 268, Schedule 1, Taxation Administration Act 1953 (Cth)
Division 268—Estimates and recovery of PAYG withholding liabilities
Table of Subdivisions
Guide to Division 268
268‑AObject
268‑BMaking estimates
268‑CLiability to pay estimates
268‑DReducing and revoking estimates
268‑ELate payment of estimates
268‑FMiscellaneous
Guide to Division 268
268‑1What this Division is about
This Division enables the Commissioner to make an estimate of amounts not paid as required by Part 2‑5 (Pay as you go (PAYG) withholding), and to recover the amount of the estimate.
If you are given an estimate, you are liable to pay the amount of the estimate. That liability is distinct from your liability to pay the amounts required by Part 2‑5. However, you can ensure that the Commissioner does not require you to pay more than the amounts not paid under that Part.
Other Divisions of this Part provide for the recovery of amounts payable under this Division.
Subdivision 268‑A—Object
Table of sections
268‑5Object of Division
268‑5Object of Division
The object of this Division is to enable the Commissioner to take prompt and effective action to recover amounts not paid as required by Part 2‑5 (Pay as you go (PAYG) withholding).
Subdivision 268‑B—Making estimates
Table of sections
268‑10Commissioner may make estimate
268‑15Notice of estimate
268‑10Commissioner may make estimate
Estimate
(1)The Commissioner may estimate the unpaid and overdue amount of a liability (the underlying liability) of yours under section 16‑70.
Note:Section 16‑70 requires you to pay to the Commissioner amounts you have withheld under the Pay as you go withholding rules.
Amount of estimate
(2)The amount of the estimate must be what the Commissioner thinks is reasonable.
(3)In making the estimate, the Commissioner may have regard to anything he or she thinks relevant.
Example:The Commissioner may have regard to information about amounts you withheld under the Pay as you go rules before the period in relation to which the underlying liability arose.
Only one estimate for each liability
(4)While the estimate is in force, the Commissioner cannot make another estimate relating to the underlying liability.
(5) For the purposes of subsection (4), the estimate is in force if:
(a)the Commissioner has given you notice of the estimate; and
(b)the estimate has not been revoked; and
(c)your liability to pay the estimate has not been discharged.
268‑15Notice of estimate
Commissioner must give notice of estimate
(1) The Commissioner must give you written notice of the estimate.
Content of notice
(2) The notice must:
(a)identify the underlying liability; and
(b)specify the date of the estimate; and
(c)set out the amount of the estimate; and
(d)state that the amount of the estimate is due and payable; and
(e)explain how you may have the amount of the estimate reduced or the estimate revoked.
(3)To avoid doubt, a single notice may relate to 2 or more estimates, but must comply with subsection (2) in relation to each of them.
When notice is given
(4)Despite section 29 of the Acts Interpretation Act 1901, a notice under subsection (1) is taken to be given at the time the Commissioner leaves or posts it.
Note:Section 28A of the Acts Interpretation Act 1901 may be relevant to giving a notice under subsection (1).
Subdivision 268‑C—Liability to pay estimates
Table of sections
268‑20Nature of liability to pay estimate
268‑25Accuracy of estimate irrelevant to liability to pay
268‑30Estimate provable in bankruptcy or winding up
268‑20Nature of liability to pay estimate
Liability to pay amount of estimate
(1)You must pay to the Commissioner the amount of the estimate if the Commissioner gives you notice of the estimate in accordance with section 268‑15. The amount is due and payable when the Commissioner gives you the notice.
Note:The amount of the estimate may be reduced, or the estimate revoked, under Subdivision 268‑D.
Liability to pay amount of estimate is distinct from underlying liability
(2)Your liability to pay the amount of the estimate is separate and distinct from the underlying liability. It is separate and distinct for all purposes.
Example:The Commissioner may take:
(a) proceedings to recover the unpaid amount of the estimate; or
(b) proceedings to recover the unpaid amount of the underlying liability; or
(c) proceedings of both kinds.
Discharging one liability discharges other liabilities
(3)Despite subsection (2), if, at a particular time, one of the liabilities to which this subsection applies is discharged, to the extent of an amount, for either of the following reasons, each of the other liabilities to which this subsection applies is discharged to the extent of the same amount:
(a)an amount is paid or applied towards discharging the liability;
(b)the liability is discharged because of section 269‑40 (Effect of director paying penalty or company discharging liability).
(4)Subsection (3) applies to whichever of the following liabilities are in existence at the particular time:
(a)your liability to pay the amount of the estimate;
(b)the underlying liability;
(c)a liability of yours under a judgment, to the extent that it is based on a liability referred to in paragraph (a) or (b).
(5)Subsection (3) does not discharge a liability to a greater extent than the amount of the liability.
268‑25Accuracy of estimate irrelevant to liability to pay
You are liable to pay the unpaid amount of the estimate even if:
(a)the underlying liability never existed or has been discharged in full; or
(b)the unpaid amount of the underlying liability is less than the unpaid amount of the estimate.
Note 1:Section 268‑40 revokes the estimate if you give the Commissioner a statutory declaration, or file an affidavit, to the effect that the underlying liability never existed.
Note 2:Subdivision 268‑D provides ways in which you can challenge the estimate or its amount.
268‑30Estimate provable in bankruptcy or winding up
(1)Your liability (the estimate liability) to pay the unpaid amount of the estimate is provable in a bankruptcy or winding up, even if the estimate was made after:
(a)the date of the bankruptcy; or
(b)the relevant date (within the meaning of the Corporations Act 2001).
(2)However, the estimate liability is provable only to the extent that the underlying liability would be provable if the unpaid amount of the underlying liability were the same as the unpaid amount of the estimate.
Example:Subsection (2) prevents proof of the estimate liability if the underlying liability could not be proved because, for example, of when it arose.
(3) Subsections (1) and (2) do not apply if:
(a)the underlying liability has already been admitted to proof; and
(b)the proof has not been set aside.
(4)If the estimate liability has been admitted to proof at a particular amount, the underlying liability is provable only to the extent the unpaid amount of the underlying liability exceeds that particular amount.
(5)To the extent that a liability is provable because of this section, it is taken, for the purposes of the Bankruptcy Act 1966, to be provable in bankruptcy under that Act.
Subdivision 268‑D—Reducing and revoking estimates
Table of sections
268‑35How estimate may be reduced or revoked—Commissioner’s powers
268‑40How estimate may be reduced or revoked—statutory declaration or affidavit
268‑45How estimate may be reduced or revoked—rejection of proof of debt
268‑50How estimate may be reduced—amount paid or applied
268‑55When reduction or revocation takes effect
268‑60Consequences of reduction or revocation—refund
268‑65Consequences of reduction or revocation—statutory demand changed or set aside
268‑70Consequences of reduction or revocation—underlying liability
268‑35How estimate may be reduced or revoked—Commissioner’s powers
Reduction
(1)The Commissioner may at any time reduce the amount of the estimate, but is not obliged to consider whether or not to do so.
(2)If the Commissioner reduces the amount of the estimate under subsection (1), he or she must give you a written notice that:
(a)identifies the underlying liability; and
(b)sets out the reduced amount of the estimate.
Note:The estimate is taken always to have had effect as reduced: see section 268‑55.
Revocation
(3)The Commissioner may at any time revoke the estimate, but is not obliged to consider whether or not to do so.
(4)If the Commissioner revokes the estimate under subsection (3), he or she must give you a written notice that:
(a)identifies the underlying liability; and
(b)states that the estimate has been revoked.
Note:The estimate is taken never to have been made: see section 268‑55.
Matters for Commissioner to consider
(5)In exercising his or her power under this section to reduce the amount of the estimate, or to revoke the estimate, the Commissioner must have regard to:
(a)the following principles:
(i)the estimate is of the unpaid amount of the underlying liability as at a particular time;
(ii)the purpose of reducing the amount of the estimate is to bring it closer to the unpaid amount of the underlying liability as at the time the estimate was made;
(iii)reductions of the unpaid amount of the underlying liability that happen after the time the estimate was made are dealt with by section 268‑20 (Nature of liability to pay estimate) and so should not be taken into account in exercising such a power; and
(b)the effects of sections 268‑55 and 268‑70 (effect of reduction or revocation on liabilities).
268‑40How estimate may be reduced or revoked—statutory declaration or affidavit
Scope
(1)This section applies as set out in the following table:
| Statutory declaration or affidavit | |||
| Item | This section applies if ... | and ... | within ... |
| 1 | the Commissioner gives you notice of the estimate | you give the Commissioner a statutory declaration for the purposes of this section | (a) 7 days after the Commissioner gives you the notice; or (b) a longer period allowed by the Commissioner. |
| 2 | you are a party to proceedings before a court that relate to the recovery of the unpaid amount of the estimate | you: (a) file an affidavit for the purposes of this section; and (b) serve a copy on the Commissioner | (a) 14 days after you first take a procedural step as a party to the proceedings; or (b) a longer period allowed by the court. |
| 3 | (a) the estimate is of the unpaid amount of a liability of a company; and (b) the Commissioner serves on the company a *statutory demand relating to the company’s liability to pay the unpaid amount of the estimate; and (c) an application is made to a court under section 234, 459P, 462 or 464 of the Corporations Act 2001 for the company to be wound up | the company: (a) files an affidavit for the purposes of this section; and (b) serves a copy on the applicant | (a) 14 days after notice of the application was served on the company; or (b) a longer period allowed by the court. |
Example:For the purposes of item 2 of the table, taking a procedural step as a party to proceedings includes entering an appearance, filing a notice of intention to defend, or applying to set aside judgment entered in default of appearance.
Note 1:Section 459C of the Corporations Act 2001 creates a presumption that a company is insolvent, and may be wound up, if the company fails to comply with a statutory demand.
Note 2:See section 268‑90 for what the statutory declaration or affidavit must contain and who must make, swear or affirm it.
Reduction
(2)The amount of the estimate is reduced if the statutory declaration is to the effect, or the affidavit verifies facts sufficient to prove, that a specified lesser amount is the unpaid amount of the underlying liability.
Example:Subsection (2) will apply if the statutory declaration etc. is to the effect that the underlying liability has been discharged in full (and therefore the unpaid amount of the liability is nil).
(3)The amount of the reduction is the amount by which the unpaid amount of the estimate (just before the reduction) exceeds the amount specified.
Note:The effect of subsection (3) is to reduce the unpaid amount of the estimate to the amount specified.
Revocation
(4)The estimate is revoked if the statutory declaration is to the effect, or the affidavit verifies facts sufficient to prove, that the underlying liability never existed.
268‑45How estimate may be reduced or revoked—rejection of proof of debt
Scope
(1)This section applies if:
(a)the Commissioner lodges a proof of debt relating to the unpaid amount of the estimate; and
(b)section 268‑95 applies to an entity (your supervising entity) in relation to you.
Rejection of proof of debt
(2)Your supervising entity may give the Commissioner a statutory declaration to the effect that:
(a)the underlying liability has been discharged in full; or
(b)the unpaid amount of the underlying liability is a specified, lesser amount; or
(c)the underlying liability never existed.
Note:See section 268‑90 for what the statutory declaration must contain and who must make it.
(3)If your supervising entity does so, he or she may reject the proof of debt (in whole or in part) on the ground made out in the statutory declaration.
(4)If the Commissioner appeals, or applies for review of, your supervising entity’s decision to reject the proof of debt, nothing in subsection (2) or (3) prevents evidence being adduced to contradict statements in the declaration.
Note:Such evidence might also be relevant to a prosecution for an offence, such as an offence against section 11 of the Statutory Declarations Act 1959 (False declarations).
Revocation or reduction of estimate
(5)The following table applies in relation to the outcome following all (if any) appeals from, and applications for review of, your supervising entity’s decision to reject the proof of debt. (If there are no appeals or applications for review, the outcome is your supervising entity’s decision as originally made.)
| Rejecting proof of debt | ||
| Item | If the outcome is that ... | then ... |
| 1 | the proof is rejected in whole on the ground that the estimate has been discharged in full | the amount of the estimate is reduced by the unpaid amount of the estimate (just before the reduction). |
| 2 | the proof is rejected in part | the amount of the estimate is reduced by so much of the unpaid amount of the estimate (just before the reduction) as is rejected. |
| 3 | the proof is rejected in whole on the ground that the underlying liability never existed | the estimate is revoked. |
Note 1:The effect of item 1 of the table is to reduce the unpaid amount of the estimate to nil.
Note 2:The effect of item 2 of the table is to reduce the unpaid amount of the estimate to the amount admitted to proof.
268‑50How estimate may be reduced—amount paid or applied
(1) This section applies if:
(a)an amount is paid or applied towards discharging your liability to pay the amount of the estimate; and
(b)the amount paid or applied exceeds the unpaid amount of the underlying liability as at the time just before the payment or application.
(2)The amount of the estimate is reduced so that it does not exceed the unpaid amount, at the time mentioned in paragraph (1)(b), of the underlying liability.
268‑55When reduction or revocation takes effect
Scope
(1) This section applies for the purposes of the following:
(a)Subdivision 268‑C (Liability to pay estimates);
(b)section 268‑60 (refund of overpayments);
(c)Subdivision 268‑E (Late payment of estimates);
(d)Division 269 (Penalties for directors of non‑complying companies).
When reduction or revocation takes effect
(2)If the amount of the estimate is reduced, the estimate has effect, and is taken always to have had effect, as if the original amount of the estimate had been the reduced amount.
(3)If the estimate is revoked, the estimate is taken never to have been made.
268‑60Consequences of reduction or revocation—refund
(1)This section applies if:
(a)an amount is paid or applied towards discharging your liability to pay the amount of the estimate; and
(b)the amount paid or applied exceeds the unpaid amount of the estimate as at the time just before the payment or application.
Example:You pay an amount towards discharging the estimate and the estimate is later reduced to a lesser amount.
Note:Section 268‑50 provides for the reduction of the amount of the estimate in the case of overpayment.
(2)The Commissioner must pay you the excess.
Note:See Division 3A of Part IIB of this Act for the rules about how the Commissioner must pay you. Division 3 of that Part allows the Commissioner to apply the amount owing as a credit against tax debts that you owe the Commonwealth.
268‑65Consequences of reduction or revocation—statutory demand changed or set aside
Scope
(1)This section applies if:
(a)the estimate is of the unpaid amount of a liability of a company; and
(b)the Commissioner has served a *statutory demand on the company relating to the company’s liability to pay the unpaid amount of the estimate; and
(c)the amount of the estimate is later reduced, or the estimate is revoked.
Statutory demand changed
(2)The *statutory demand is changed accordingly.
(3)The *statutory demand is taken to have had effect (as so changed) from the time the Commissioner served it on the company.
Statutory demand set aside
(4)The *statutory demand is set aside if subsection (2) reduces the amount of the debt (or the total of the amounts of the debts) below the statutory minimum (within the meaning of the Corporations Act 2001).
268‑70Consequences of reduction or revocation—underlying liability
Reduction of the amount of the estimate, or revocation of the estimate, does not affect the Commissioner’s rights or remedies in relation to the underlying liability (except to the extent that this Division expressly provides otherwise).
Subdivision 268‑E—Late payment of estimates
Table of sections
268‑75Liability to pay the general interest charge
268‑80Effect of paying the general interest charge
268‑75Liability to pay the general interest charge
(1)This section applies if your liability to pay the amount of the estimate remains undischarged at the end of 7 days after the Commissioner gives you notice of the estimate.
(2)You are liable to pay the *general interest charge on the unpaid amount of the estimate for each day in the period that:
(a)started at the beginning of the day by which the underlying liability was due to be paid; and
(b)finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:
(i)the amount of the estimate;
(ii)general interest charge on any of the amount of the estimate.
Note:The general interest charge is worked out under Part IIA of this Act.
268‑80Effect of paying the general interest charge
Scope
(1)If you are liable to pay the *general interest charge under section 268‑75 in relation to the estimate, this section applies to the following liabilities:
(a)your liability to pay the general interest charge;
(b)a liability of yours to pay a general interest charge, under a corresponding provision of Subdivision 16‑B, because the underlying liability remains undischarged;
(c)liability under a judgment, to the extent that it is based on a liability referred to in paragraph (a) or (b);
(d)a liability of yours to pay interest carried by a judgment debt, to the extent that the judgment debt is based on:
(i)the liability to pay the estimate; or
(ii)the liability to pay the general interest charge under section 268‑75 on an unpaid amount of the estimate.
Discharging one liability discharges other liabilities
(2)If, at a particular time, an amount is paid or applied towards discharging one of the liabilities, each of the other liabilities that is in existence at that time is discharged to the extent of the same amount.
(3)However, this section does not discharge a liability to a greater extent than the amount of the liability.
(4)If, because a judgment debt carries interest, section 8AAH of this Act reduces the amount of a *general interest charge payable as mentioned in paragraph (1)(b) of this section, the amount of the reduction is taken, for the purposes of subsection (2) of this section, to have been applied towards discharging your liability to the charge.
Subdivision 268‑F—Miscellaneous
Table of sections
268‑85Effect of judgment on liability on which it is based
268‑90Requirements for statutory declaration or affidavit
268‑95Liquidators, receivers and trustees in bankruptcy
268‑100Division not to limit or exclude Corporations or Bankruptcy Act
268‑85Effect of judgment on liability on which it is based
Estimate payable despite judgment
(1)The unpaid amount of the estimate, or of the underlying liability, does not stop being payable merely because a judgment has been given by, or entered in, a court.
Division applies to liability under judgment
(2)This Division applies in relation to liability under a judgment, to the extent that it is based on your liability to pay the amount of the estimate, in the same way as this Division applies to that estimate liability.
(3)This Division applies in relation to liability under a judgment, to the extent that it is based on the underlying liability, in the same way as this Division applies to the underlying liability.
(4)Subsections (2) and (3) do not apply for the purposes of the following:
(a)section 268‑20 (Nature of liability to pay estimate);
(b)section 268‑30 (Estimate provable in bankruptcy or winding up);
(c)section 268‑45 (rejection of proof of debt).
Judgment conclusive as to amount of liability
(5)Nothing in this Division affects the conclusiveness of a judgment as to the amount of a liability on which it is based.
268‑90Requirements for statutory declaration or affidavit
Scope
(1)This section applies to a statutory declaration given, or an affidavit filed, for the purposes of section 268‑40 or 268‑45 in relation to the estimate.
Content
(2) The statutory declaration or affidavit must verify the following facts:
(a)whichever of the following are applicable:
(i)the sum of all amounts you withheld under Division 12 during the relevant period, or the fact that you did not withhold any such amounts during the period;
(ii)the sum of all amounts you were required to pay under Division 13 (Alienated personal services payments) during the relevant period, or the fact that you were not required to pay any such amounts during the period;
(iii)the sum of all amounts you were required to pay under Division 14 (non‑cash benefits and accruing gains) during the relevant period, or the fact that you were not required to pay any such amounts during the period;
(b)what has been done to comply with Division 16 (Payer’s obligations and rights) in relation to the amounts referred to in paragraph (a).
Maker or deponent
(3) The statutory declaration or affidavit must be made, sworn or affirmed by:
(a)an individual specified in the following table; or
(b)your liquidator, receiver or trustee in bankruptcy (if and as applicable).
| Who must make the statutory declaration or swear or affirm the affidavit | ||
| Item | A statutory declaration or affidavit in relation to an estimate of a liability of ... | must be made, sworn or affirmed by ... |
| 1 | an individual | that individual. |
| 2 | a body corporate | (a) in the case of a company that has a director or a company secretary (within the meaning of the Corporations Act 2001)—a director of the company or the company secretary; or (b) in the case of an *Australian government agency—an individual prescribed by the regulations; or (c) in any case—the public officer of the body corporate (for the purposes of the Income Tax Assessment Act 1936). |
| 3 | a body politic | an individual prescribed by the regulations. |
| 4 | a partnership | a partner of the partnership. |
| 5 | any other unincorporated association or body of persons | (a) a member of the association’s or body’s committee of management; or (b) the public officer of the association or body (for the purposes of the Income Tax Assessment Act 1936). |
| 6 | a trust | (a) the trustee of the trust; or (b) the public officer of the trust (for the purposes of the Income Tax Assessment Act 1936). |
| 7 | a *superannuation fund or an *approved deposit fund | (a) the trustee of the fund; or (b) if the fund does not have a trustee—the entity managing the fund. |
(4)If the entity specified in the table in subsection (3) is not an individual, the table is taken to specify the individual who, under that subsection, would be eligible to make a statutory declaration in relation to an estimate of a liability of that entity.
268‑95Liquidators, receivers and trustees in bankruptcy
Scope
(1) This section applies to an entity (your supervising entity), in relation to you, if:
(a)the entity is your liquidator, receiver, trustee in bankruptcy or administrator, or the administrator of a deed of company arrangement executed by you; or
(b)your property is vested in the entity, or the entity has control of your property.
(2)For the purposes of this Division, this section applies to an entity in relation to a partnership if it applies to the entity in relation to a partner of the partnership.
Notices from the Commissioner
(3)For the purposes of this Division, a notice given by the Commissioner to your supervising entity is taken to have been given to you.
(4)You must give your supervising entity a copy of any notice given to you by the Commissioner under this Division. You must do so as soon as practicable, and in any event within 7 days, after:
(a)if the Commissioner gave you the notice before the day when your property vested in, or control of your property passed to, the supervising entity—that day; or
(b)if subsection (2) applies and the Commissioner gave you the notice before the day when the relevant partner’s property vested in, or control of the relevant partner’s property passed to, the supervising entity—that day; or
(c)otherwise—the day when the Commissioner gave you the notice.
(5)If the Commissioner gives you and your supervising entity a notice at different times, each notice is taken to have been given at the later of those times.
Action taken by your supervising entity
(6)For the purposes of this Division, a statutory declaration given to the Commissioner by your supervising entity is taken to have been given by you.
(7)For the purposes of this Division, an affidavit filed by your supervising entity is taken to have been filed by you.
(8)For the purposes of item 2 in the table in subsection 268‑40(1) (recovery proceedings), a procedural step taken by your supervising entity is taken to have been taken by you.
Multiple supervising entities
(9)If you have 2 or more supervising entities, anything this Division provides for to be done by or in relation to your supervising entity may be done by or in relation to any of them.
268‑100Division not to limit or exclude Corporations or Bankruptcy Act
This Division is not intended to limit or exclude the operation of Chapter 5 of the Corporations Act 2001 (External administration), or the Bankruptcy Act 1966, to the extent that Chapter or Act can operate concurrently with this Division.
Note:Section 268‑30 and Subdivision 268‑D affect the operation of Chapter 5 of the Corporations Act 2001 and the Bankruptcy Act 1966.
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