Embroidery Machinery Sales & Services Pty Ltd v Deputy Commissioner of Taxation

Embroidery Machinery Sales & Services Pty Ltd (the appellant) appealed to the Full Federal Court against an order of a Master of the Federal Court which had dismissed its application to set aside a statutory demand issued by the Deputy Commissioner of Taxation (the respondent). The core of the dispute concerned whether the appellant had established a genuine dispute in relation to the debt claimed in the statutory demand, or whether there were substantial grounds to set aside the demand under section 459G of the Corporations Act 2001 (Cth).

The Full Federal Court was required to determine whether the Master had erred in finding that the appellant had failed to establish a genuine dispute about the existence of the debt or substantial grounds to set aside the statutory demand. Specifically, the court had to consider whether the appellant's grounds for disputing the debt, which related to alleged contraventions of section 26-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) and the respondent's alleged failure to consider certain information, were sufficient to meet the threshold for setting aside the demand.

The Full Federal Court allowed the appeal, setting aside the Master's order. The Court reasoned that the Master had applied an incorrect legal test in assessing whether a genuine dispute existed. The Court held that the appellant had demonstrated substantial grounds to set aside the statutory demand, particularly in light of the respondent's failure to properly consider the appellant's objections and the potential for the debt to be genuinely disputed. Consequently, the Court ordered that the statutory demand be set aside pursuant to section 459J(1)(b) of the Corporations Act 2001 (Cth). The respondent was ordered to pay the appellant's costs of the appeal and the costs incurred before the Master.