DB MAHAFFY & ASSOCIATES PTY LTD and COMMISSIONER OF TAXATION
[2011] AATA 796
•11 November 2011
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
) No: 2010/1225-26
Taxation Appeals Division )
Re: DB MAHAFFY & ASSOCIATES PTY LTD
Applicant
And: COMMISSIONER OF TAXATION
RespondentCORRIGENDUM
TRIBUNAL: Ms G Ettinger, Senior Member
DATE: 16 March 2012
PLACE: Sydney
The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application as follows:
The references in paragraphs 1, 3 and 32 to Mr Mahaffy being a Chartered Accountant are incorrect. It has been brought to the Tribunal’s attention that the Applicant in the matter has no such qualifications.
Accordingly the word Chartered, which precedes the Accountant in paragraphs 1, 3 and 32 of the Reasons for Decision, is deleted.
............[sgd].......................................................
Ms G Ettinger
Senior MemberAdministrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 796
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/1225-26
TAXATION APPEALS DIVISION ) Re DB MAHAFFY & ASSOCIATES
PTY LTDApplicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Ms G Ettinger, Senior Member Date11 November 2011
PlaceSydney
Decision The Tribunal affirms the decision under review. ....................[sgd]........................
Ms G Ettinger
Senior Member
CATCHWORDS
SUPERANNUATION – superannuation guarantee – whether superannuation guarantee payments were made – whether the assessments were excessive – director of the applicant has consistently resisted efforts to provide evidence by due dates in order for his application to be heard – applicant has not complied with directions of the Tribunal – at Tribunal hearing applicant gave short oral evidence before he used abusive language and hung up – applicant telephoned the Tribunal Registry to inform that he was not intending on further participating in the hearing - Tribunal decision was made on the available evidence – decision under review affirmed.
PRACTICE AND PROCEDURE – application for adjournment – Listing and Adjournment Practice Direction – adjournments only granted in exceptional circumstances – no exceptional circumstances exist – request to vacate hearing refused.
PRACTICE AND PROCEDURE – summons – request for summons to be issued – documents already provided – certain documents not within control or power of the party on who summons is requested to be issued – request for summons refused.
Administrative Appeals Tribunal Act 1975 s 2A
Superannuation Guarantee (Administration) Act 1992 ss 5, 6, 17, 19, 31, 36
Re Williams and Federal Commissioner of Taxation (2005) 58 ATR 1298; [2005] AATA 113
Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63; [1936] HCA 77
Administrative Appeals Tribunal, Listing and Adjournment Practice Direction, 19 April 2005
Taxation Ruling TR 2005/16 – Income Tax: Pay as You Go – withholding from payments to employees
Superannuation Guarantee Ruling SGR 93/1 – Superannuation guarantee: who is an employee?
Superannuation Guarantee Ruling SGR 2005/1 – Superannuation guarantee: who is an employee?
REASONS FOR DECISION
11 November 2011 Ms G Ettinger, Senior Member SUMMARY
1.Mr David Mahaffy is an accountant and registered tax agent, and is the principal of DB Mahaffy & Associates Pty Ltd (DB Mahaffy Pty Ltd) in Narrabri. In 2007, the Commissioner of Taxation (the Commissioner), carried out an audit of Mr Mahaffy’s firm in regard to payment of the Superannuation Guarantee Charge (SGC) for various employees for the years 2004 and 2005. There were five persons for whom Mr Mahaffy was found to be responsible for the payment of superannuation guarantees. Due to the Commissioner’s finding that the superannuation guarantees had not been paid, the Commissioner imposed penalties. Mr Mahaffy did not agree with the Commissioner’s decision, and has appealed to this Tribunal.
2.In the course of preparing the matter for hearing, there have been more than the usual number of directions hearings and conferences. Mr Mahaffy has been treated with respect at all times. He has been permitted more than the usual number of adjournments and extensions of time to lodge documents in relation to his appeal. Unfortunately, he has been very uncooperative, and refused to attend the hearing for which he said he would be available in person when he lodged his hearing certificate with his available dates.
3.At the last moment, and under threat of having his appeal dismissed, he attended by telephone for part of the hearing. As Mr Mahaffy frequently interrupted and used abusive language. I informed him that the language he used was not acceptable to the Tribunal and neither in regard to his status as an accountant and registered tax agent. During cross-examination, and when he no longer wished to take part in the proceedings, Mr Mahaffy uttered expletives before hanging up. The matter proceeded in his absence, was concluded, and the decision reserved. I have found from the evidence before me, that the correct or preferable decision is that the Commissioner’s decision be affirmed. My reasons follow.
ISSUES BEFORE THE TRIBUNAL
4.The issues before the Tribunal are:
1)whether the assessments of SGC and penalty assessments issued by the Commissioner in relation to the Applicant company for the quarters ended 31 March 2004, 30 June 2004, 30 September 2004, 31 March 2005, 30 June 2005 and 30 September 2005 are excessive; and
2)whether the Tribunal will exercise its discretion pursuant to section 62(3) of the SGAA to remit the Part 7 penalties imposed on the Applicant for the quarters ended 31 March 2004, 30 June 2004, 30 September 2004, 31 March 2005, 30 June 2005 and 30 September 2005.
RELEVANT LEGISLATION
5.The relevant legislation in this matter is the Superannuation Guarantee (Administration) Act 1992 (the Act).
6.Section 16 of the Act states that the SGC is imposed on any superannuation guarantee shortfall of an employer in a given quarter. Section 17 defines the shortfall, and section 19 of the Act specifies the method for calculation of the superannuation guarantee shortfall. Section 31 defines the nominal interest component. Pursuant to section 36 of the Act the Commissioner is able to raise a default SGC assessment where an employer has not lodged a superannuation guarantee statement, and the Commissioner is of the opinion that the employer is liable to pay SGC.
BACKGROUND
7.DB Mahaffy Pty Ltd was subject to an audit in 2007 with regard to the payment of the SGC for staff of DB Mahaffy Pty Ltd for the period 1 January 2004 to 30 September 2005. For convenience I shall refer to the entity and its principal as Mr Mahaffy. Mr Mahaffy objected to the assessment the Commissioner made, and on 22 December 2008, after taking into account his objections, the Commissioner provided an objection decision and his Statement of Reasons.
8.Mr Mahaffy appealed against that assessment to this Tribunal on 17 March 2010, and following the granting of an extension of time in order to lodge his appeal, the application was accepted by the Tribunal. What followed has been a lengthy process to try to obtain evidence, and have the matter listed for hearing.
CHRONOLOGY
9.The following chronology gives an indication of the progress of the Applicant’s application through the Tribunal and its representative’s disregard in complying with timetabling and Directions.
10.Chronology of events:
1)17 March 2010 - Applicant filed an application for review along with an application for extension of time to lodge an application;
2)4 April 2010 - extension of time was granted;
3)4 May 2010 – Conference Registrar holds first conference;
4)10 June 2010 - Conference Registrar holds further conference;
5)16 June 2010 - telephone directions hearing (TDH) listed for 16 June 2010 before Senior Member Frost vacated following a fax from the Applicant asking certain questions about the audit, and requesting further information be provided;
6)22 June 2010 - TDH held with Directions made by the Tribunal setting out the information to be provided by the Commissioner;
7)16 July 2010 - Commissioner responded by letter to the Tribunal’s direction;
8)27 August 2010 - TDH held before Senior Member Allen with a Direction made that the Applicant file a Statement of Facts and Contentions by 22 October 2010;
9)16 November 2010 - Respondent notified the Tribunal that the Applicant had not complied with the Direction, and requested that a TDH be held;
10)24 November 2010 - TDH listed for 24 November 2010 vacated at the request of the Applicant, and relisted for 1 December 2010;
11)1 December 2010 - Tribunal makes an Order directing that the Applicant file a Statement of Facts and Contentions by 20 January 2011, otherwise the matter would be dismissed; the Respondent to file a reply by 18 February 2011; parties to file hearing certificates by 25 February 2011;
12)17 January 2011 - Applicant granted an extension until 27 January 2011 to file his Statement of Facts and Contentions, with an extension for the hearing certificates until 4 March 2011;
13)27 January 2011 - Applicant lodged medical certificates for its representative, Mr Mahaffy. The document specified that Mr Mahaffy should not attend any court hearings for at least three months; no reasons were given.
14)1 February 2011 - TDH listed for 28 April 2011;
15)28 April 2011 – TDH vacated as the Tribunal is no longer available on that date; it is relisted for 5 May 2011;
16)5 May 2011 - at a TDH before Senior Member Allen, the Tribunal ordered that Mr Mahaffy’s witness statement would be accepted in lieu of a Statement of Facts and Contentions from the Applicant, and further ordered that the Respondent provide its Statement of Facts and Contentions; and that both parties provide hearing certificates by 2 June 2011;
17)2 June 2011 - Applicant failed to lodge his hearing certificate by 2 June 2011 and, as is the usual practice of the Tribunal in such circumstances, the Tribunal listed a hearing for a time suitable to it and to the Respondent who had lodged a hearing certificate; hearing set down for 28 July 2011 before Senior Member Ettinger;
18)1 July 2011 - Applicant requested a vacation of the hearing;
19)13 July 2011 - TDH held before Senior Member Ettinger to discuss the Applicant’s request; the Tribunal agreed to vacate the hearing listed for 28 July 2011. The Tribunal required Mr Mahaffy to lodge a hearing certificate on behalf of the Applicant by 26 July 2011, and due to his insistence that he had other commitments, to provide court listings showing when he is to appear in other courts or tribunals;
20)26 July 2011 - Applicant failed to comply with the Directions made on 13 July 2011; TDH for non-compliance listed for 15 August 2011;
21)8 August 2011 - Mr Mahaffy requested that the TDH be vacated; following a conversation between the Tribunal and Mr Mahaffy on 17 July 2011, it was rescheduled to 23 August 2011;
22)23 August 2011 - Mr Mahaffy failed to attend the scheduled TDH;
23)23 August 2011 - the Tribunal made Orders requiring the Applicant to provide a hearing certificate by 26 August 2011; otherwise the matter would be dismissed;
24)26 August 2011 - the Applicant provided a hearing certificate and the matter was listed for hearing on 12 and 13 October 2011;
25)5 October 2011 - the Applicant sent the Tribunal a letter seeking to have the hearing vacated (reproduced verbatim):
1)I have to file substantial information into Supreme Court by the 12 October for hearing in Supreme Court on 21 October 2011.
2)I have an AVO court case in Narrabri on 24 October with substantial information, affidavits and notices of motion to be filed and served by 17 October for hearing on 24 October.
3)I have been notified today of NSW Work-cover audit and investigation being started in 14 days time. Considerable information is required by them for their investigation and is required to be sent to them within 14 days.
4)I have a major client (company) requiring lodgement of two years outstanding tax returns within 2 weeks to stop legal action and consequential penalties (2 x $5000).
5)I have a specialist appointment on 14 October at Narrabri Hospital with a consultant travelling from Sydney.
6)I have spoken to Ram Pandey of the ATO and he had agreed to moving the hearing date till a later date being roughly end of November or early December.
7)I will be issuing a subpoena for information this week as ATO have not complied with supplying essential information in regards to disproving their case.
8)I have sent off today summonses for the taxation office to comply with and be issued by you.
9)I look forward to hearing date in late November or early December as long as the ATO have complied with subpoena issued.
26)6 October 2011 - Applicant requests that summons be issued on the Respondent;
27)10 October 2011 - TDH held before Senior Member Ettinger to discuss the vacation request, and the summons issue. The vacation request was not granted. Matter dealt with in more detail below.
28)12 October 2011 – hearing held with Mr Mahaffy attending by telephone.
11.Mr Mahaffy was warned at least five times by the Tribunal that his application could be dismissed for non-compliance with Tribunal Directions. He has shown disregard and the use of extreme rudeness in his dealings with Members and staff of the Tribunal, and representatives of the ATO.
12.I have dealt with the TDH of 10 October 2011 below in order for the parties, and any other reader of these Reasons for Decision, to better understand why I did not authorise the issue of summons on the Respondent in close proximity to the hearing date. In summary, it was because the Respondent had already replied to the Applicant in relation to the 18 points again requested in the summons.
TELEPHONE DIRECTIONS HEARING OF 10 OCTOBER 2011
13.The TDH on 10 October 2011 was convened before Senior Member Ettinger to discuss Mr Mahaffy’s request that the hearing on 12 and 13 October be vacated, and for a summons to be issued.
14.After hearing the parties, the Tribunal was not satisfied that Mr Mahaffy had provided any objective proof or evidence such as medical certificates or court listings in regard to his request for an adjournment of the listed hearing.
15.The Tribunal explained to Mr Mahaffy that there is a Listing and Adjournment Practice Direction in place issued by the President of the Tribunal, which must be taken into account when considering requests for hearings to be vacated.
16.In circumstances where the Applicant seeks a vacation request close to the date of the hearing, the Listing and Adjournment Practice Direction relevantly provides:
3)Matters are fixed for hearing on the basis that the hearing will proceed on the day fixed.
4)An application for an adjournment will not be granted unless there are good reasons to justify the adjournment.
6)The consent of the other party to an adjournment is not of itself a sufficient reason for an adjournment to be granted.
7)An application for an adjournment must be made at the earliest possible opportunity. Application is to be made in writing addressed to the District Registrar. The application must set out the reasons why an adjournment is necessary, and be signed by the person or representative seeking the adjournment. The application must be accompanied by any documents that support the reasons for seeking an adjournment.
9)An application for an adjournment made less than ten working days prior to the hearing date will not be granted unless there are particular and compelling reasons for the matter to be adjourned. Applications made the day of a hearing, even when advance notice has been given, will not be granted unless there are exceptional reasons.
17.Further, section 2A of the Administrative Appeals Tribunal Act 1975, states that the Tribunal must pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick. This can only be pursued if the Tribunal hears and concludes matters expeditiously.
18.During the TDH, Mr Mahaffy repeatedly stated he would not be attending the hearing on 12 October 2011. He was warned by the Tribunal that if he did not attend, he risked his application being dismissed.
19.The Tribunal took into account what Mr Mahaffy said at the TDH, his letter outlining why the vacation should be granted (as reproduced above), the lack of supporting evidence provided, and the Listing and Adjournment Practice Direction of the Tribunal.
20.The Tribunal refused Mr Mahaffy’s request that the hearing on 12 and 13 October 2011 be vacated.
21.After the TDH, Mr Mahaffy was given the option of attending the hearing by telephone, an option of which he availed himself.
22.The hearing was held on 12 October 2011 with Mr Mahaffy attending by telephone for part of the time until he hung up and refused to proceed further.
REQUEST FOR SUMMONS
23.In the week before the hearing, Mr Mahaffy filed an application with the Tribunal for summons to be issued against the Respondent. In his request, he sought the following documents to be issued (reproduced verbatim):
1) Copy of all employment declarations for Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl for the period of the audit for DB Mahaffy & Associates Pty Ltd.
2) Copy of group tax declarations for DB Mahaffy & Associates Pty Ltd for the period of the audit.
3) Copy of all external correspondence received from Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl in relation to superannuation audit for DB Mahaffy & Associates Pty Ltd for the period of the audit.
4) Copy of all working papers in relation to superannuation audit.
5) Copy of audit worksheet.
6) Copy of audit report for DB Mahaffy & Associates Pty Ltd.
7) Date, time and place of audit of DB Mahaffy & Associates for superannuation guarantee and who was present on all occasions.
8) Copy of all correspondence sent to the ATO from DB Mahaffy & Associates Pty Ltd including workers compensation forms and amounts paid to Jeffery Mahaffy for period of audit.
9) Copy of group certificates for Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl for period of audit.
10) Copy of taxation returned lodged by Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl for period of audit.
11) Copy of all records on hand held by ATO in respect to superannuation audit of DB Mahaffy & Associates Pty Ltd for period of audit.
12) Copy of all correspondence held by ATO advising DB Mahaffy & Associates Pty Ltd of intending ATO superannuation audit of above company.
13) Copy of full audit report.
14) Copy of all correspondence given to DB Mahaffy & Associates Pty Ltd advising their legal rights in respect to ATO superannuation audit and who the report and legal rights notice was given to.
15) Copy of court find at Narrabri Local Court in Narrabri for period 1990-1994 for prosecution of alleged 13 fraud charges against DB Mahaffy & Associates Pty Ltd.
16) Copy of all correspondence to clients both written and verbal in respect to above court case.
17) Copies of all compensation paid to DB Mahaffy & Associates Pty Ltd by ATO for losing the court case.
18) Copy of all records held by ATO received from DB Mahaffy & Associates Pty Ltd in respect to ATO superannuation audit and who they were received from and when.
24.This request was discussed at the TDH on 10 October 2011. The Respondent told the Tribunal that all documents which could be produced under summons had already been provided to Mr Mahaffy on previous occasions, adding that there were other documents it could not release or simply did not have. The Tribunal directed that the Respondent provide a summary of the replies it had already given to the Applicant in regard to the 18 items in the request for summons by close of business on 11 October 2011.
THE HEARING
25.The hearing was scheduled to commence at 10.00 am on 12 October 2011. At this time it became apparent to the Tribunal that the Respondent’s replies to the request for summons had not been received by either the Tribunal or the Applicant. The Respondent provided a hard copy of the material requested to Senior Member Ettinger, and said that the material had been sent by ordinary post the previous day. The material was received at the Tribunal by post later that day.
26.The Tribunal delayed the commencement of the hearing to inspect the reply, and faxed a copy to Mr Mahaffy just after 10:00 am. The Tribunal’s fax machine confirmed that the transmission was completed successfully (Exhibit T3). Mr Mahaffy claimed that only six pages were received because his fax machine jammed, and it could not be repaired that day. He refused to receive the documents by email on the basis his secretary was not present, and he does not know how to operate email.
27.The Tribunal noted the submissions of the Respondent that the documents provided had previously been provided to Mr Mahaffy, and that most of those are, in any case, in the T-documents. Mr Mahaffy stated that he could not proceed with the hearing because he had not received the documents. When I inquired what documents he had with him in his office, he said that he had no other relevant documents with him, including the T-documents.
28.Mr Mahaffy also told the Tribunal that his brother Jeffrey Mahaffy, who is currently before the courts for fraud and owes him $750,000, has his documents and will not return them. I am mindful that there are no court documents, correspondence or other documents to verify any action Mr Mahaffy has taken in regard to his brother.
29.For the sake of completeness, I have reproduced the document provided by the Respondent in response to the Tribunal’s Direction, being a response to Mr Mahaffy’s request for summons (reproduced at [23]), to be issued.
1)Copy of all employment declarations for Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl for the period of the audit for DB Mahaffy & Associates Pty Ltd
and Copy of group tax declarations for DB Mahaffy & Associates Pty Ltd for the period of the audit:
The Respondent stated that in correspondence to the Applicant dated 21 July 2010 and 25 August 2010 Mr Mahaffy was notified that all income returns lodged by the named employees were lodged electronically, except one, which had since been destroyed in accordance with the Commissioner’s record keeping policy;
2)Copy of all employment declarations for Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl for the period of the audit for DB Mahaffy & Associates Pty Ltd
:
As the Applicant failed to lodge payment summary reports for the relevant employees during the relevant income years, the Respondent did not have that information;
3)Copy of all external correspondence received from Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl in relation to superannuation audit for DB Mahaffy & Associates Pty Ltd for the period of the audit
:
The Respondent said he notified Mr Mahaffy on 21 July 2010 that the audit was commenced on the basis of income tax returns returned by the individual employees and there is no external correspondence between the Respondent and the individual employees;
4)In relation to points 4 through 14 of Mr Mahaffy’s request for a summons to be issued, the relevant documents are found in the T-Documents as follows:
(iv)Copy of all working papers in relation to superannuation audit is at T4-33 to T4-44 and the correspondence to the Applicant dated 16 July 2010 and 25 August 2010;
(v)Copy of audit worksheet is at T4-33 to T4-44 and the correspondence to the Applicant dated 16 July 2010 and 25 August 2010;
(vi)Copy of audit report for DB Mahaffy & Associates Pty Ltd is at T4-33 to T4-44;
(vii)Date, time and place of audit of DB Mahaffy & Associates for superannuation guarantee and who was present on all occasions is at T4-33 to T4-44;
(viii)Copy of all correspondence sent to the ATO from DB Mahaffy & Associates Pty Ltd including workers compensation forms and amounts paid to Jeffery Mahaffy for period of audit is at T17-86 to T17-94;
(ix)Copy of taxation returned lodged by Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl for period of audit is not available as these were provided electronically and the only hard copy version was destroyed in accordance with the Commissioner’s record keeping policy. The letter sent by the Respondent to the Applicant on 25 August 2010 does outline what the relevant employees claimed was income from the Applicant in their tax returns;
(x)Dealt with below;
(xi)Copy of all records on hand held by ATO in respect to superannuation audit of DB Mahaffy & Associates Pty Ltd for period of audit is made up by the entirety of the T-Documents as well as correspondence from the Respondent to the Applicant dated 16 July 2010 and 25 August 2010, and the Bundle of Documents (Exhibit R2) dated 10 October 2011;
(xii)Copy of all correspondence held by ATO advising DB Mahaffy & Associates Pty Ltd of intending ATO superannuation audit of above company is at T3-28 to T3-30;
(xiii)Copy of full audit report is at T4-33 to T4-44;
(xiv)Copy of all correspondence given to DB Mahaffy & Associates Pty Ltd advising their legal rights in respect to ATO superannuation audit and who the report and legal rights notice was given to is at T3-28 to T3-30, T4-32, T9-59 to T9-70, T18-94 to T18-105 and T25-122.
5)Copy of all records held by ATO received from DB Mahaffy & Associates Pty Ltd in respect to ATO superannuation audit and who they were received from and when
:
This is found throughout the T-Documents and in correspondence from the Respondent dated 16 July 2010, which provided a detailed breakdown of the audit calculations and how they were calculated.
30.It is noted that the Respondent could not respond to:
1)Copy of group certificates for Jeffery Mahaffy, Tracey Kelly, Ashley Valentine and Johanna Kahl for period of audit as the Applicant did not lodge payment summaries for the relevant employees during the relevant period;
2)Copy of court find [sic] at Narrabri Local Court in Narrabri for period 1990-1994 for prosecution of alleged 13 fraud charges against DB Mahaffy & Associates Pty Ltd as it is not something relevantly in the possession of the Respondent;
3)Copy of all correspondence to clients both written and verbal in respect to above court case and Copies of all compensation paid to DB Mahaffy & Associates Pty Ltd by ATO for losing the court case as the Respondent had no records in relation to this.
31.The Tribunal notes that those documents within the control and possession of the Respondent had all been provided to the Applicant over a year before the date of the hearing. The Tribunal accepts that the Respondent provided the T-Documents to the Applicant on at least three separate occasions.
MR MAHAFFY’S EVIDENCE AND STATEMENTS
32.Mr Mahaffy was the only witness in this matter, and attended by telephone. He gave oral evidence for approximately an hour at the hearing. On commencing his evidence, Mr Mahaffy first insulted Mr Ram Pandey, solicitor for the Commissioner. I asked him to apologise, and on behalf of the Tribunal, I apologised to Mr Pandey. I then told Mr Mahaffy that that type of language was not acceptable in the Tribunal, or indeed for him as an accountant, and registered tax agent.
33.Mr Mahaffy then continued his oral evidence, telling me that his appeal was with regard to payment of the superannuation guarantee. His evidence was that he had paid SGC directly to ING for Elizabeth Kelaher, a full-time employee of the Applicant in 2005, to AMP for his ex-wife, Karen Mahaffy, a part-time employee of the Applicant, and for himself.
34.Mr Mahaffy also told me that his brother, Jeffrey Mahaffy, was on workers compensation payments during the relevant period, and that he did not have to pay the SGC for him. He also told me that Jeffrey Mahaffy, who he alleges is currently before the courts and owes him $750,000, has his documents and will not return them. I am satisfied that Mr Mahaffy has not provided any documents to indicate prosecutions commenced against Jeffrey Mahaffy, neither was there evidence that he had made attempts to recover the relevant documents.
35.Mr Mahaffy said that Tracey Kelly and Ashlee Valentine were not employed by the Applicant, but were employed by JRM Farming which had operated in the Wee Waa office, which ceased operating from 1 July 2005.
36.Mr Mahaffy also said that the basis on which the Commissioner made his assessments of the SGC was flawed because the figures on which the Commissioner relied had been lodged by his brother, and were not authorised by him. He said that his brother signed false documents.
37.I had before me an affidavit of Mr Mahaffy dated 3 May 2011. In it he deposed that the audit period was September 2003 to March 2005, and did not encompass 2006, although superannuation contributions for 2006 were made. He also stated that no audit was undertaken by the ATO for 2004 or 2005. In his affidavit, Mr Mahaffy also deposed:
There has been no proper audit done on my company for SCC. There is no evidence of audit by ATO but simply relying on corrupt crook ex-employee being Jeffrey Mahaffy.
38.Mr Mahaffy also deposed:
The ATO started a massive audit and eventually a major legal court case in 1992 of which they lost. The ATO staff were telling my clients that I was going to jail. The ATO owes me in excess of $5 million for legal costs, loss of clients and deformation (sic). I have never been paid and also 6 ATO were sacked for corruption. I am still waiting for my money.
39.I note that Mr Mahaffy provided a letter to the Tribunal dated 30 May 2011 in response to a conversation with an Associate of the Tribunal regarding the filing of further evidence in which he said:
I hereby advise that I will be relying on all information already supplied to the AAT. I have requested all information supplied to the Australian Taxation Office to be relied on for this case….
40.During the cross-examination when asked:
Mr Scruby: Because you’re aware, the first place, that these superannuation contributions that you say were made were never made?
Mr Mahaffy: Absolute fucking bullshit. Ending the conversation. Don’t insult
me. Fuck off. I will come down and deal with you.
41.He then hung up. When the Tribunal called back, I asked Mr Mahaffy whether the line dropped out, or whether he had hung up. He replied:
No, I cut off because I’m not putting up with that crap anymore. I am telling the truth, I’m sick of the case, I have paid – I have proved that I have paid all the super contributions.
42.He hung up again.
43.I gave the Commissioner’s representatives an adjournment to consider their position. During that time, Mr Mahaffy telephoned the Tribunal Registry. At 11:38 the Registry Officer made a file note as follows:
Mr Mahaffy rang and informed the tribunal of the following. He has no intention to attend any hearings. All involved in the hearing process can go get fucked, including Senior Member Ettinger, whom he intends to sue and make sure she loses her position.
44.I continued with the hearing after the adjournment, and Mr Scruby made closing submissions on behalf of the Respondent in which he submitted that the decision of the Commissioner should be affirmed.
CONSIDERATIONS AND CONCLUSIONS
45.In order to make the correct or preferable decision, I must take into account the evidence before me, the submissions, legislation and case law.
46.I note that the case of Re Williams and Federal Commissioner of Taxation (2005) 58 ATR 1298; [2005] AATA 113 at [4] summarises the burden of proof in tax matters:
Under s 14ZZK(a) of the TAA, the taxpayer is limited to the grounds stated in the taxation objection to which the decision relates unless this tribunal orders otherwise. Among other things, the taxpayer has the burden of proving that the assessment is excessive or that the taxation decision concerned should not have been made or and that it should have been made differently (s 14ZZK(b)). In general, the taxpayer must go further than showing the assessment is excessive or wrong and show what the correct assessment should be: Trautwein v FCT (1936) 56 CLR 63 at 87-88; 4 ATD 48 at 62-63. In the absence of evidence, the tribunal is not able to infer facts in favour of taxpayers: McCormack v FCT (1979) 143 CLR 284; 9 ATR 610; 79 ATC 4111. The scheme of the TAA, the Income Tax Assessment Act 1936 (Cth) (the ITAA 1936) and the Income Tax Assessment Act 1997 (Cth) (the ITAA 1997) does not place any onus on the respondent to show that the assessment was correctly made: Gauci v FCT (1975) 135 CLR 81 at 88-89; 5 ATR 672 at 676; 75 ATC 4257 at 4261.
47.Mr Scruby referred to Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 87; [1936] HCA 77, submitting that the Applicant had not discharged his onus because he had tendered little, if any, evidence, and refused to continue with cross-examination, and his appearance in the Tribunal.
48.I noted from Mr Mahaffy’s Statement of Facts and Contentions dated 1 June 2011 his view that the only employees of the Applicant in the period March 2004 to September 2005 were David Mahaffy, Karen Mahaffy, Elizabeth Kelaher and Jeffrey Mahaffy, the latter on workers compensation (and therefore no SGC to be paid), for the full period.
49.Mr Scruby submitted that Mr Mahaffy could easily have discharged his onus in relation to his assertions of having made payments directly to superannuation funds for Elizabeth Kelaher, Karen Mahaffy and Joanna (Hogan) Kahl by producing evidence of his payments.
50.Mr Scruby suggested that proof could have been by way of bank statements; evidence from the persons involved, or summons material from the relevant superannuation funds. He submitted that applied in relation to all the persons involved.
51.Mr Scruby submitted that the only evidence in that regard was at T17-88 (which had already been before the Commissioner at the time of giving his SGC assessments), and related to Elizabeth Kelaher. I noted that T17-88 related to the period 1 July 2008 to 30 September 2008, (outside the relevant period), and was a payment of $750.70 made directly to ING Custodians Pty Ltd for Kelaher. The evidence before me indicated that Kelaher was employed by the Applicant in the relevant period, and that accordingly further payments of superannuation should have been made.
52.Similarly in regard to Jeffrey Mahaffy; there were no documents produced, and no efforts made to indicate what his situation was, except for Mr Mahaffy’s assertions that he was on workers compensation payments only, in the relevant period, and that the SGC was accordingly, not payable.
53.Mr Mahaffy’s evidence regarding Tracy Kelly and Ashlee Valentine was that they were not employed by the Applicant, but had been employed by JRM Farming. There were no documents before me to verify his assertions in regard to JRM Farming and the persons involved.
54.In order to come to the correct or preferable decision in this matter, I have referred to all relevant material available to me.
55.I am mindful that by mid-2010, preparation for the hearing of the application had not progressed well. In order to clarify and progress matters, Senior Member Frost made a Direction dated 22 June 2010 which required the Respondent, by 17 July 2010, to provide the names of persons which the Respondent held were employees of the Applicant in the relevant period 1 January 2004 to 30 September 2005, and for whom SGC liability therefore existed. The Respondent was also directed to provide the amount of salary or wages said to have been paid to each of those persons for the relevant period, and the method of calculation and amount of SGC liability.
56.On 16 July 2010, the Commissioner responded to DB Mahaffy & Associates Pty Ltd, for the attention of Mr David B Mahaffy. He provided spreadsheets setting out the names of the persons whom he said were employees of the Applicant during the period 1 January 2004 to 30 September 2005. The spreadsheets also set out the wages and salary as returned by those individuals in their tax returns, and indicated how the SGC was calculated. The Commissioner stated that the SGC liability for the Applicant was $38,423.49, and noted that the figure included General Interest Charge. That letter and its attachments are also included in Exhibit R2.
57.In a further letter to the Applicant dated 25 August 2010, which also forms part of Exhibit R2, the Commissioner set out the figures which he calculated by taking into account the Applicant’s income tax returns with the information obtained during the SGC audit in respect of the financial years ended 30 June 2004, 2005 and 2006. Mr Mahaffy told me that the figures relied on by the Commissioner and reproduced in the letter of 25 August 2010 arose as a result of his brother Jeffrey’s fraudulent activities.
58.As there was little other information from Mr Mahaffy, I noted in a letter from DB Mahaffy & Associates Pty Ltd to the Commissioner dated 27 October 2008, that Mr Mahaffy made statements:
·which confirmed he was an employee, no super contributions were paid for David Mahaffy due to insufficient funds – embezzlement by my brother Jeffrey Mahaffy…
·which confirmed Karen Mahaffy was an employee, contributions for Karen Anita Mahaffy were made to AMP on her behalf…
·which confirmed Elizabeth Kelaher, Joanna Kahl and Karen Mahaffy were employees, I will be getting a printout from Tower and Amp (sic) for contributions for Elizabeth Kelaher, Joanna Kahl and Karen Mahaffy as soon as I can and forwarding the schedule.
59.Those statements satisfy me that the abovenamed were employees of DB Mahaffy & Associates Pty Ltd for whom SGC payments should appropriately have been made. The only document showing that a superannuation payment was made for Elizabeth Kelaher was at T17-88, and indicated that $750.70 was paid for the period 1 July 2008 to 30 September 2008 which is outside the relevant period under consideration in this matter.
60.I have set out the figures the Commissioner provided to the Applicant in the letter of 25 August 2010 because they are the latest calculations which I have before me. Mr Mahaffy has not filed any documents after that date, and has not satisfied me that I should not accept the Commissioner’s calculations.
Financial year ended 30 June 2004
61.The Commissioner has indicated to the Applicant and to me, that the 2004 income tax return lodged by DB Mahaffy and Associates Pty Ltd showed the following deductions claimed which are relevant to this matter:
Employee superannuation $ 4,125
Total salary/wage expense $ 68,376
Contractor, sub-contractor, Commission expenses $ 546
All other expenses $ 161,836
62.The following individuals declared salary/wages as paid by the Applicant in their 2004 income tax return:
David Mahaffy $26,000
Karen Mahaffy $11,160
Elizabeth Kelaher $31,197
Jeffrey Mahaffy $50,400
Tracy Kelly $17,254
63.The Commissioner has stated that, notwithstanding the Applicant maintained Jeffrey Mahaffy was on workers compensation from 12 May 2003 to 19 May 2005, the Commissioner found during the course of the audit that salary/wages declared as paid by the Applicant to Jeffrey Mahaffy exceeded the compensation payments paid. A statement of workers compensation payments from Allianz Australia Workers Compensation (NSW) Ltd for Jeffrey Mahaffy is at T17-89. The income declared as stated above exceeds the workers compensation payments.
64.I have noted the resignation of Ms Joanna Kahl effective 2 April 2004 (T17-91).
65.I accept the Commissioner’s statement that no documentary evidence has been provided to indicate that superannuation contributions were made for eligible employees in the relevant period.
Financial year ended 30 June 2005
66.The Commissioner has indicated to the Applicant and to me, that the 2005 income tax return lodged by DB Mahaffy and Associates Pty Ltd showed the following deductions claimed which are relevant to this matter:
Employee superannuation $ 2,606
Total salary/wage expense $79,850
Contractor, sub-contractor, commission expenses $ 3,339
67.The following individuals declared salary/wages as paid by the Applicant in their 2005 income tax return:
David Mahaffy $26,546
Karen Mahaffy $18,600
Elizabeth Kelaher $31,356
Jeffrey Mahaffy $43,200
Tracy Kelly $12,793
Ashlee Valentine (commenced at end of 2005) $ 7,887
68.I accept the Commissioner’s statement that no documentary evidence has been provided to indicate that SGC contributions were made for eligible employees in the relevant period.
69.I note also the Commissioner’s statement that:
·Adjustments were made in the amended SGC assessments that issued for 2005 quarters 1- 4 to reflect Ashlee Valentine’s part year employment with the Applicant, and the reduction in the earnings base used for Jeffrey Mahaffy;
·I have further noted in a letter from DB Mahaffy & Associates Pty Ltd to the Commissioner dated 27 October 2008, that he stated Jeffrey Mahaffy was on workers compensation payments from 12 May 2003 to 19 May 2005, and that accordingly, superannuation payments were not required. That cannot have been correct given Jeffrey Mahaffy has been shown to have earned $50,400 in salary/wages from the Applicant for the year ended 30 June 2004, and $32,200 in salary/wages from the Applicant for the year ended 30 June 2005.
·I have noted also that the records included a letter of resignation of Ms Hogan (Kahl);
·I have noted in a letter from DB Mahaffy & Associates Pty Ltd to the Commissioner dated 27 October 2008, he stated that Tracey Kelly was an employee of Jeffrey Mahaffy, and not the Applicant. I am satisfied that the figures provided in tax returns as noted above indicate otherwise. I prefer the data from the tax returns because there is an onus on persons lodging tax returns to be accurate and honest in doing so. There is no indication here to satisfy me that those persons were other than honest in lodging their tax returns.
Financial year ended 30 June 2006
70.The Commissioner has indicated to the Applicant and to me, that the 2005 income tax return lodged by DB Mahaffy and Associates Pty Ltd showed the following deductions claimed which are relevant to this matter:
Employee superannuation $ 3,181
Total salary/wage expense $95,674
Contractor, sub-contractor & commission expenses $ 2,697
71.I accept the Commissioner’s statement that no documentary evidence has been provided to indicate that SGC contributions were made for eligible employees in the relevant period.
72.The following individuals declared salary/wages as paid by the Applicant in their 2006 income tax return:
David Mahaffy $43,474
Karen Mahaffy $17,400
Elizabeth Kelaher $32,460
73.The Commissioner has stated that the SGC assessment for the first quarter of 2006 reflects the individual SGC shortfalls in respect of the above named employees.
74.In coming to a decision, I note that there are times when it is necessary in the context of SGC matters to decide whether individuals are employees in an entity. This could occur in consideration of the case law, the Superannuation Guarantee Ruling SGR 93/1, the Superannuation Guarantee Ruling SGR 2005/1, and the Taxation Ruling TR 2005/16, and in context of the following indicia, while taking into account the totality of the relationship between the parties. Considerations which may be relevant are: Control, Integration, Results Test, Delegation, Terms of Engagement, and Risk.
75.In this case there has been a paucity of evidence and of data given by the Applicant, even though he has been given every opportunity to provide relevant information. I have taken into account what has been before me from both parties, including the information from tax returns provided to the Commissioner by the Applicant’s employees.
76.In the Appendix below, I have reproduced the Commissioner’s tables showing calculations of SGC which he holds should have been paid by the Applicant in the relevant period. I am satisfied from the evidence before me that the Applicant has not discharged his onus of proving that the SGC assessment is excessive, incorrect, or that the assessment should not have been made, or that it should have been made differently. Accordingly, I accept the calculations as made by the Commissioner.
77.There is no basis for the Tribunal to exercise its discretion pursuant to section 62(3) of the SGAA to remit the Part 7 penalties imposed on the Applicant for the quarters ended 31 March 2004, 30 June 2004, 30 September 2004, 31 March 2005, 30 June 2005 and 30 September 2005.
78.The correct or preferable decision is to affirm the decision under review.
DECISION
79.The Tribunal affirms the decision under review.
I certify that the 79 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member.
Signed: .......[sgd].........................................................................
C. Taylor, AssociateDate/s of Hearing 12 October 2011
Date of Decision 11 November 2011
Appearance for the Applicant Self-Represented
Counsel for the Respondent Mr R Scruby
Solicitor for the Respondent Mr R Pandey
APPENDIX I:
2004 – Quarter 3
Employee Surname Employee Name Earnings Base Charge % Required Contribution Contribution Paid % Paid Shortfall % Salary & Wage Effective Shortfall KELAHER ELIZABETH H $7,756.63 9 $698.10 $0.00 0.000 9.000 $7,756.63 $698.10 MAHAFFY DAVID B $6,464.48 9 $581.80 $0.00 0.000 9.000 $6,464.48 $581.80 MAHAFFY KAREN A $2,774.75 9 $249.73 $0.00 0.000 9.000 $2,774.75 $249.73 MAHAFFY JEFFREY R $4,530.90 9 $407.78 $0.00 0.000 9.000 $4,530.90 $407.78 HOGAN (KAHL) JOANNA L $8,675.55 9 $780.80 $0.00 0.000 9.000 $8,675.55 $780.80 KELLY TRACY J $4,289.92 9 $386.09 $0.00 0.000 9.000 $4,289.92 $386.09 $3104.30 Total individual SG shortfalls: $3104.30
Administration Component: $ 120.00
Nominal Interest: $1108.19
SGC: $4332.49Part 7 Penalty@15% $ 649.87
2004 – Quarter 4
Employee Surname Employee Name Earnings Base Charge % Required Contribution Contribution Paid % Paid Shortfall % Salary & Wage Effective Shortfall KELAHER ELIZABETH H $7,756.65 9 $698.10 $0.00 0.000 9.000 $7,756.65 $698.10 MAHAFFY DAVID B $6,464.50 9 $581.81 $0.00 0.000 9.000 $6,464.50 $581.81 MAHAFFY KAREN A $2,774.77 9 $249.73 $0.00 0.000 9.000 $2,774.77 $249.73 MAHAFFY JEFFREY R $9,321.16 9 $838.90 $0.00 0.000 9.000 $9,321.16 $838.90 HOGAN (KAHL) JOANNA L $0.00 9 $0.00 $0.00 0.000 0.000 $0.00 $0.00 KELLY TRACY J $4,289.94 9 $386.09 $0.00 0.000 9.000 $4,289.94 $386.09 $2754.63 Total individual SG shortfalls: $2754.63
Administration Component: $ 100.00
Nominal Interest: $ 914.86
SGC $3769.49Part 7 Penalty@15% $ 565.42
2005 – Quarter 1
Employee Surname Employee Name Earnings Base Charge % Required Contribution Contribution Paid % Paid Shortfall % Salary & Wage Effective Shortfall KELAHER ELIZABETH H $7,903.43 9 $711.31 $0.00 0.000 9.000 $7,903.43 $711.31 MAHAFFY DAVID B $6,691.04 9 $602.19 $0.00 0.000 9.000 $6,691.04 $602.19 MAHAFFY KAREN A $4,688.21 9 $421.94 $0.00 0.000 9.000 $4,688.21 $421.94 MAHAFFY JEFFREY R $9,008.56 9 $810.77 $0.00 0.000 9.000 $9,008.56 $810.77 KELLY TRACY J $3,224.53 9 $290.21 $0.00 0.000 9.000 $3,224.53 $290.21 VALENTINE ASHLEE J $0.00 9 $0.00 $0.00 0.000 0.000 $0.00 $0.00 $2836.42 Total individual SG shortfalls: $2836.42
Administration Component: $ 100.00
Nominal Interest: $ 871.50
SGC $3807.92Part 7 Penalty@15% $ 571.18
2005 – Quarter 2
Employee Surname Employee Name Earnings Base Charge % Required Contribution Contribution Paid % Paid Shortfall % Salary & Wage Effective Shortfall KELAHER ELIZABETH H $7,903.43 9 $711.31 $0.00 0.000 9.000 $7,903.43 $711.31 MAHAFFY DAVID B $6,691.04 9 $602.19 $0.00 0.000 9.000 $6,691.04 $602.19 MAHAFFY KAREN A $4,688.21 9 $421.94 $0.00 0.000 9.000 $4,688.21 $421.94 MAHAFFY JEFFREY R $6,284.16 9 $565.57 $0.00 0.000 9.000 $6,284.16 $565.57 KELLY TRACY J $3,224.53 9 $290.21 $0.00 0.000 9.000 $3,224.53 $290.21 VALENTINE ASHLEE J $0.00 9 $0.00 $0.00 0.000 0.000 $0.00 $0.00 $2591.22 Total individual SG shortfalls: $2591.22
Administration Component: $ 100.00
Nominal Interest: $ 731.03
SGC $3422.25Part 7 Penalty@15% $ 513.33
2005 – Quarter 3
Employee Surname Employee Name Earnings Base Charge % Required Contribution Contribution Paid % Paid Shortfall % Salary & Wage Effective Shortfall KELAHER ELIZABETH H $7,731.61 9 $695.84 $0.00 0.000 9.000 $7,731.61 $695.84 MAHAFFY DAVID B $6,545.58 9 $589.10 $0.00 0.000 9.000 $6,545.58 $589.10 MAHAFFY KAREN A $4,586.30 9 $412.77 $0.00 0.000 9.000 $4,586.30 $412.77 MAHAFFY JEFFREY R $7,034.15 9 $633.07 $0.00 0.000 9.000 $7,034.15 $633.07 KELLY TRACY J $3,154.43 9 $283.90 $0.00 0.000 9.000 $3,154.43 $283.90 VALENTINE ASHLEE J $3,226.50 9 $290.39 $0.00 0.000 9.000 $3,226.50 $290.39 $2905.07 Total individual SG shortfalls: $2905.07
Administration Component: $ 120.00
Nominal Interest: $ 746.54
SGC $3771.61Part 7 Penalty@15% $ 565.74
2005 – Quarter 4
Employee Surname Employee Name Earnings Base Charge % Required Contribution Contribution Paid % Paid Shortfall % Salary & Wage Effective Shortfall KELAHER ELIZABETH H $7,817.53 9 $703.58 $0.00 0.000 9.000 $7,817.53 $703.58 MAHAFFY DAVID B $6,618.34 9 $595.65 $0.00 0.000 9.000 $6,618.34 $595.65 MAHAFFY KAREN A $4,637.28 9 $417.36 $0.00 0.000 9.000 $4,637.28 $417.36 MAHAFFY JEFFREY R $8,117.23 9 $730.55 $0.00 0.000 9.000 $8,117.23 $730.55 KELLY TRACY J $3,189.51 9 $287.06 $0.00 0.000 9.000 $3,189.51 $287.06 VALENTINE ASHLEE J $4,660.50 9 $419.45 $0.00 0.000 9.000 $4,660.50 $419.45 $3153.65 Total individual SG shortfalls: $3153.65
Administration Component: $ 120.00
Nominal Interest: $ 732.67
SGC $4006.32Part 7 Penalty@15% $ 600.26 (based on original SGC assessment)
2006 – Quarter 1
Employee Surname Employee Name Earnings Base Charge % Required Contribution Contribution Paid % Paid Shortfall % Salary & Wage Effective Shortfall KELAHER ELIZABETH H $7,903.43 9 $711.31 $0.00 0.000 9.000 $7,903.43 $711.31 MAHAFFY DAVID B $6,691.04 9 $602.19 $0.00 0.000 9.000 $6,691.04 $602.19 MAHAFFY KAREN A $4,688.21 9 $421.94 $0.00 0.000 9.000 $4,688.21 $421.94 MAHAFFY JEFFREY R $0.00 9 $0.00 $0.00 0.000 0.000 $0.00 $0.00 KELLY TRACY J $0.00 9 $0.00 $0.00 0.000 0.000 $0.00 $0.00 VALENTINE ASHLEE J $0.00 9 $0.00 $0.00 0.000 0.000 $0.00 $0.00 $1735.44 Total individual SG shortfalls: $1735.44
Administration Component: $ 60.00
Nominal Interest: $ 359.91
SGC $2155.35Part 7 Penalty@15% $ 323.30
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