Deputy Commissioner of Taxation v William Murray Robertson and Deputy Commissioner of Taxation v Stephanie Anne Robertson
[2013] NSWSC 795
•18 June 2013
Supreme Court
New South Wales
Medium Neutral Citation: Deputy Commissioner of Taxation v William Murray Robertson & Deputy Commissioner of Taxation v Stephanie Anne Robertson [2013] NSWSC 795 Hearing dates: 21 & 22 June 2012 Decision date: 18 June 2013 Jurisdiction: Common Law Before: Hidden J Decision: Summary judgment for the plaintiff
Catchwords: TAXATION - proceedings for recovery of outstanding tax payable by a partnership - defences challenging tax assessments - properly the subject of procedures under Pt IVC of Taxation Administration Act 1953 - unable to be pursued in this court Legislation Cited: Taxation Administration Act 1953
Income Tax Assessment Act 1997Cases Cited: - Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41, 237 CLR 473 Category: Principal judgment Parties: Deputy Commissioner of Taxation (plaintiff)
William Murray Robertson (defendant)
Stephanie Robertson (defendant)Representation: Counsel:
S Foda (plaintiff)
WM Robertson (in person) (defendant)
SA Robertson (in person) defendant)
Solicitors:
Lynette Pascoe (plaintiff)
File Number(s): 2011/21677 & 2011/21646
Judgment
These are related matters, which were heard together. The plaintiff, the Deputy Commissioner of Taxation, has brought separate proceedings against each of the defendants, William Robertson and Stephanie Robertson, but the pleadings in each of them, and the facts and issues raised by them, are identical.
The defendants are husband and wife, and they are partners in the Partnership of William M and Stephanie A Robertson, trading as Lasermed Australia and Lasermed Australia Property. The proceedings against them arise from their alleged failure to meet their tax liabilities in respect of the partnership. The amount claimed in each matter is in excess of $2,000,000, but it is the one debt for which they are jointly and severally liable.
I am indebted to counsel for the plaintiff, Ms Foda, for her explanation in written submissions of the nature of the proceedings and the somewhat labyrinthine legislative framework on which they are based. Her recitation of the facts is derived from the affidavit evidence of Ms Lynette Pascoe, an officer of the Australian Taxation Office.
Pursuant to s 444-30 of Sch 1 of the Taxation Administration Act 1953 ("the TAA 1953") the defendants, as partners, are jointly and severally liable to pay an amount that is payable under Sch 1 of the TAA 1953 or an indirect tax by the partnership. Section 2 of the TAA 1953 states that an indirect tax has the meaning given by the Income Tax Assessment Act 1997 ("the ITAA 1997"). Section 995-1 of the ITAA 1997 states that an indirect tax includes GST.
The plaintiff claims that the defendants failed to meet their tax liabilities under the business activity statements ("BAS") provisions as defined in subs 995-1(1) of the Income Tax Assessment Act 1997, primary tax debts payable as administrative penalties due under Pt 4-25 of Sch1 of the TAA 1953 and subsequent general interest charges. The Commissioner established running balance accounts ("RBAs") for the partnership in relation to Lasermed Australia and Lasermed Australia Property in respect of these liabilities. The Commissioner issued Notices of Assessment of Net Amount pursuant to subs 105-5(1) of Sch 1 to the TAA 1953 in relation to Lasermed Australia and Lasermed Australia Property and Notices of Assessment and Liability to Pay Penalty. The RBAs are in deficit and therefore there is a deficit debt in favour of the Commissioner pursuant to s 8AAZH of the TAA1953. The RBAs deficit debt as at 10 January 2012 was in the amount of $2,072,222.34.
Ms Foda explained, by way of background, that pursuant to s 8AAZC of the TAA 1953 the plaintiff established two RBAs, one each in respect of the primary tax debts of Lasermed Australia and Lasermed Australia Property. From time to time the balance on the RBAs was in favour of the plaintiff, and was accordingly an RBA deficit debt pursuant to s 8AAZA.
Pursuant to s 8AAZF(1) of the TAA 1953, general interest charge ("GIC") is imposed on the balance of the RBAs at the end of each day where there is a deficit debt. Pursuant to this section the balance of the RBAs are altered in favour of the plaintiff by the addition of the GIC to the respective RBA.
The partnership lodged BAS on behalf of Lasermed Australia and Lasermed Australia Property. Relying upon these BAS, the plaintiff issued the partnership refunds both in relation to Lasermed Australia and Lasermed Australia Property.
The plaintiff undertook an audit of the partnership's financial affairs arising out of the BAS that had been lodged in relation to Lasermed Australia and Lasermed Australia Property. As a consequence of the audit the plaintiff prepared revised BAS in relation to Lasermed Australia and Lasermed Australia Property. Pursuant to s 8AAZD of the TAA 1953 the plaintiff allocated the revised BAS, primary tax debts to the respective RBAs.
On or about 7 September 2010 the plaintiff served the partnership with Notices of Assessment of Net Amount pursuant to s 105-5(1) of the TAA 1953 in relation to Lasermed Australia and Lasermed Australia Property.
The defendants had over-claimed credits for GST in respect of the periods 1 August 2006 to 31 July 2009 in relation to Lasermed Australia and the periods 1 August 2006 to 30 September 2009 in relation to Lasermed Australia Property. As a result of their over-claiming those credits, pursuant to s 284-75 of Sch 1 to the TAA 1953 they also became liable to pay an administrative penalty for tax shortfall in respect of those periods.
Pursuant to s 298-30 of Sch1 to the TAA 1953 the plaintiff made an assessment of the administrative penalty referable to Lasermed Australia in the amount of $418,978.95, and the administrative penalty referable to Lasermed Australia Property in the amount of $392,317.65.
The Notices of Assessment and Liability to Pay Penalty in relation to Lasermed Australia and Lasermed Australia Property were given to the defendants by way of service via pre-paid post on 16 September 2010. There is no dispute that the defendants were served with those notices.
There is no dispute that the defendants have failed to pay the GST in relation to those Notices of Assessment of Net Amount, and the penalties in relation to those Notices of Assessment and Liability to Pay Penalty.
I heard motions by the plaintiff and the defendants. The plaintiff seeks summary judgment, together with the costs of the proceedings. The defendants, who are not legally represented, seek an order striking out the statement of claim and the plaintiff's motion seeking summary judgment. Mr Robertson argued the motion at the hearing, having been authorised by his wife to represent her interest.
Each of the defendants has filed, in identical terms, a defence and a cross-claim. It is the plaintiff's case that neither document raises any matter in opposition to the claim which is capable of resolution in this court.
Put shortly, the defence raises three matters:
- 74 objections were lodged to the assessments. One was rejected and is to be the subject of an application for review. The remaining objections are yet to be lodged.
- The amounts claimed by the Notices of Assessment of Net Amount, the Notices of Assessment and Liability to Pay Penalty and the RBA's are challenged.
- Part of that challenge relates to credits said to have been wrongly withheld, and this is also the subject of the cross-claim.
As to the objections, Pt IVC of the TAA 1953 provides for taxation objections, review by the Administrative Appeals Tribunal of the Commissioner's decisions in relation to certain of those objections and, again in relation to certain objections, appeals to the Federal Court against the Commissioner's decisions. By s 14ZQ, a "taxation decision" means "the assessment, determination, notice or decision against which a taxation objection may be, or has been, made."
Ms Foda relies upon ss 14ZZM and 14ZZR. Section 14ZZM provides:
"The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending."
Section 14ZZR makes the same provision in relation to a pending appeal.
These provisions, and provisions in the Income Tax Assessments Act 1936, were considered by the High Court in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41, 237 CLR 473, in the joint judgment at [25] ff. The 1936 Act was referred to as the "Assessment Act." At [43] - [45] their Honours said:
"[43] At a time when the provision for objections and appeals was found in Pt V of the Assessment Act, Mason ACJ said in Clyne v Deputy Commissioner of Taxation [(1982) 56 ALJR 857 at 858-859]:
'I was informed that it is a somewhat unusual course for the Deputy Commissioner to commence proceedings for recovery in a court relying on a notice of assessment which is under challenge in proceedings under [the Assessment Act]. It is to be hoped that this is so. The institution of proceedings for recovery on a notice of assessment which is challenged in proceedings under [the Assessment Act] may operate oppressively and unfairly to a taxpayer ...
In the ultimate analysis the Deputy Commissioner's charter to commence recovery proceedings, notwithstanding a challenge ... to the correctness of the assessment, is to be found in s 201 of [the Assessment Act]. It provides:
'The fact that an appeal or reference is pending shall not in the meantime interfere with or affect the assessment the subject of the appeal or reference; and income tax may be recovered on the assessment as if no appeal or reference were pending.'
It is a provision which has been stringently criticized. However, it appears to be impervious to criticism for Parliament has not seen fit to amend it.'
[44] But harsh though the operation of these provisions may be, they implement a long-standing legislative policy to protect the interests of the revenue. In Deputy Commissioner of Taxation v Niblett [(1965) 83 WN (Pt 1) (NSW) 405 at 411], Asprey J struck out pleas of non-liability to a recovery action instituted by the Deputy Commissioner in the Supreme Court of New South Wales while objections were pending under what was then s 185 of the Assessment Act. His Honour observed:
'It may be thought to be a hardship that a taxpayer should have to pay the tax assessed when an objection to the assessment has not been decided upon but there are obvious financial considerations of high policy that must be weighed in the balance against cases of individual hardship with which the Commissioner through the appropriate use of his powers under [the Assessment Act] can cope ... Where the meaning of the words of a statute is clear 'it is not open to the Court to narrow or whittle down the operation of the Act by seeming considerations of hardship or of business convenience or the like' - Attorney-General v Carlton Bank [[1899] 2 QB 158 at 164].'
[45] Thereafter, Bowen CJ in Eq, when dealing with resistance by the taxpayer to the making of a winding up order, said in Deputy Federal Commissioner of Taxation v Roma Industries Pty Ltd [(1976) 6 ATR 54 at 57]:
'The next question which arises is whether the amount claimed by the Commissioner should be treated as a disputed claim, and an order be refused on this ground. In one sense, of course, the Commissioner's claim is disputed, because appeals to the Board of Review have been lodged. However, the provisions of s 201 of [the Assessment Act] require me to treat the debt as in effect undisputed. Such a statutory provision may in some cases lead to hardship on a taxpayer, particularly where he has paid the amount of tax assessed and later wins his appeal, whereupon the money is repaid to him without interest. This led Higgins J in Hickman v Federal Commissioner of Taxation [(1922) 31 CLR 232 at 245] to describe it as 'unjust and even baneful', but it remains in the [Assessment Act] It must be appreciated that from the point of view of the revenue it is a protection against that class of taxpayer who might withhold payment and use the money as the sinews of war to conduct appeals against the Commissioner and who, being finally unsuccessful, was found to be unable to meet his tax liability, having spent his money on the litigation.' (emphasis added)"
(Hickman v Federal Commissioner of Taxation was concerned with the War-time Profits Tax Assessment Act 1917-18.)
Accordingly, objections by the defendants yet to be decided remain to be dealt with under Pt IVC, and the fact that a review is pending in relation to one of them is no defence to the present recovery proceedings.
As to the Notices of Assessment of Net Amount and Notices of Assessment and Liability to Pay Penalty, a challenge to them might be made for the procedures under Pt IVC but is not a defence to the present proceedings.
Notices of Assessment of Net Amount fall within Pt 3-10 of Sch 1 to the TAA 1953. Section 105-100 of that Schedule provides:
"105-100 Production of assessment or declaration is conclusive evidence
The production of:
(a) a notice of assessment under this Part; or
(b) a declaration under:
(i) section 165-40 or subsection 165-45(3) of the GST Act; or
(ii) section 75-40 or subsection 75-45(3) of the Fuel Tax Act 2006;
is conclusive evidence:
(c) that the assessment or declaration was properly made; and
(d) except in proceedings under Pt IVC of this Act on a review or appeal relating to the assessment or declaration - that the amounts and particulars in the assessment or declaration are correct."
By s105-40 an assessment of a net amount is a "reviewable indirect tax decision", which may be the subject of an objection under Pt IVC.
Similar provision is made in relation to Notices of Assessment and Liability to Pay Penalty in s 298-30(3) and (4). Those subsections provide:
"298-30 Assessment of penalties under Division 284
...
...
(3) The production of a notice of such an assessment, or of a copy of it certified by or on behalf of the Commissioner, is conclusive evidence of the making of the assessment and of the particulars in it.
(4) Subsection (3) does not apply to proceedings under Pt IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment."
Ms Foda also referred to s 255-50(1) of the TAA 1953, which provides:
"In a proceeding to recover an amount of a tax-related liability, a statement or averment about a matter in the plaintiff's complaint, claim or declaration is prima facie evidence of the matter."
She also referred to the evidence in Ms Pascoe's affidavits that on 19 June 2012 the Deputy Commissioner, pursuant to s 255-45, issued certificates attesting to service of the relevant notices of assessment and the amount outstanding. Section 105-105 provides:
"105-105 Certificate of amount payable is prima facie evidence
The presentation of a certificate signed by the Commissioner or a Deputy Commissioner certifying that, from the time specified in the certificate, an amount was payable under an indirect tax law (whether to or by the Commissioner) is prima facie evidence:
(a) that the amount is payable from that time; and
(b) that the particulars stated in the certificate are correct."
Accordingly, as Ms Foda pointed out, those certificates are prima facie evidence of the elements of the plaintiff's cause of action, as are the statements in the statement of claim. As noted above, it is not in dispute that the relevant notices of assessment were served upon the defendants, and that the amount claimed in the statement of claim has not been paid.
In relation to the RBA deficit debt, the following matters are not in dispute:
- The relevant tax liabilities are primary tax debts due under the BAS provisions, as defined in s 995-1 of the ITAA 1997, and as defined in s 8AAZA of the TAA 1953.
- The Commissioner was entitled to establish RBAs pursuant to s 8AAZC of the TAA 1953, and to allocate primary tax debts to those RBAs in accordance with s 8AAZD(1).
"RBA deficit debt" is defined in s 8AAZA:
"RBA defecit debt, in 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."
There is also no dispute that the plaintiff is entitled to claim interest pursuant to s 8AAZF(1), and that the balance of an RBA may be altered in the Commissioner's favour by the amount of the general interest charge payable: subs (2). By s 8AAZH(1) if there is an RBA deficit debt at the end of the day, the tax debtor is liable to pay the amount of that debt.
Section 8AAZG empowers the Commissioner to prepare a statement for an RBA, containing such particulars as the Commissioner determines. Section 8AAZI(1) provides that the production of an RBA statement is prima facie evidence that the RBA was duly kept and that the amounts and particulars in the statement are correct. In this context Ms Foda also referred to s 255-50(1) and the certificates evidenced in the affidavits of Ms Pascoe.
Further, she relied upon s 8AAZJ, which provides:
"8AAZJ Evidentiary certificate about RBA transactions etc.
(1) In proceedings for recovery of an RBA deficit debt, a Commissioner's certificate stating any of the following matters in respect of a specified RBA is prima facie evidence of those matters:
(a) that no tax debts (other than general interest charge on the RBA deficit debt) were allocated to the RBA after the balance date shown on a specified RBA statement for the RBA;
(b) that general interest charge is payable on the RBA deficit debt, as specified in the certificate;
(c) that payments and credits were allocated to the RBA, as specified in the certificate;
(d) that a specified amount was the RBA deficit debt on the date of the certificate.
(2) In this section:
Commissioner's certificate means a certificate signed by the Commissioner or a delegate of the Commissioner, or by a Second Commissioner or Deputy Commissioner."
Ms Pascoe's affidavits also establish the issue of certificates under that section.
I am satisfied that all the matters raised by the defendants in the defence and cross-claim are properly the subject of the procedures under Pt IVC of the TAA 1953, and are not justiciable in this court. Accordingly, the plaintiff is entitled to summary judgment. I have considered whether it would be preferable to strike out the defence and cross-claim, so that the defendants could consider whether there are other matters in answer to the plaintiff's claim which could be litigated in these proceedings. However, it is clear enough that the nature of their complaints about the assessments is set out in the current pleadings.
At the hearing the defendants also put on a motion for the matter to be referred for pro bono legal assistance. I have decided that that is not an appropriate course. At the time of the hearing the proceedings had been on foot for almost 18 months, and it appears to be beyond argument that any remedy they might have is under Pt IVC, not in this court. I might add that the defendants are not as disadvantaged as many others by their status as unrepresented litigants, because Mr Robertson is an accountant.
Accordingly, the plaintiff's motion for summary judgment is granted. Up-to-date evidence of the amount outstanding will be required before judgment can be entered. The defendants' motions are dismissed. The defendants are to pay the plaintiff's costs of the proceedings, including these motions.
**********
Decision last updated: 18 June 2013
0
1
2