Fyna Projects Pty Ltd v Chief Commissioner of State Revenue

[2018] NSWCA 331

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Fyna Projects Pty Ltd v Chief Commissioner of State Revenue [2018] NSWCA 331
Hearing dates:	28 November 2018
Date of orders:	19 December 2018
Decision date:	19 December 2018
Before:	Beazley P at [1] Meagher JA at [2] Barrett AJA at [3]
Decision:	(1)   Appeal dismissed. (2)   The appellants pay the respondent’s costs of the appeal.
Catchwords:	DUTIES AND TAXES - payroll tax - grouping of entities - joint and several liability of members of a group where employer member does not pay tax - nature of the joint and several liability - whether jointly and severally liable group members other than the defaulting employer are liable to pay "tax" and are "taxpayers" - whether joint and several liability exists if not established by legal proceedings - power of Chief Commissioner to issue notice of assessment to person subject to joint and several liability - powers in relation to assessment generally - nature of assessment - whether notice of assessment issued to person subject to joint and several liability is conclusive evidence of liability
Legislation Cited:	Administrative Decisions Review Act 1997 (NSW) Payroll Tax Act 2007 (NSW) Taxation Administration Act 1996 (NSW)
Cases Cited:	Chief Commissioner of State Revenue v Print National Pty Ltd (2013) 83 NSWLR 555; [2013] NSWCA 96 Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184; (2017) 106 ATR 151 Clyne v Deputy Commissioner of Taxation (1982) 56 ALJR 857 Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146; [2008] HCA 32 Deputy Commissioner of Taxation v Denlay [2010] QCA 217; (2010) 80 ATR 109 Fyna Projects Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 1220 George v Federal Commissioner of Taxation (1952) 86 CLR 183; [1952] HCA 21 R v Deputy Commissioner of Taxation; ex parte Hooper (1926) 37 CLR 368; [1926] HCA 3 Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; [1988] HCA 11 Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (2011) 245 CLR 446; [2011] HCA 41 Whitney v Inland Revenue Commissioners [1926] AC 37 Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51
Category:	Principal judgment
Parties:	Fyna Projects Pty Ltd (First Appellant) Banfirn Pty Ltd (Second Appellant) Winlina Pty Ltd (Third Appellant) Wyreach Pty Ltd (Fourth Appellant) Fyna Constructions (Hire & Sales) Pty Ltd (Fifth Appellant) Powerform Equipment Pty Ltd (Sixth Appellant) Formforce (NSW) Pty Ltd (Seventh Appellant) Winlina Plant Hire Pty Ltd (Eighth Appellant) FW Resources Pty Ltd (Ninth Appellant) Walmira Pty Ltd (Tenth Appellant) Span Form Pty Ltd (Eleventh Appellant) Chief Commissioner of State Revenue (Respondent)
Representation:	Counsel: T Hale SC and S Kanagaratnam (Appellants) R Seiden SC and A Gerard (Respondent)   Solicitors: Diamond Conway (Appellants) Crown Solicitor’s Office (Respondent)
File Number(s):	CA 2018/249921
Publication restriction:	Nil
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2018] NSWSC 1220 Date of Decision: 3 August 2018 Before: Leeming JA File Number(s): SC 2018/131610

HEADNOTE

[This headnote is not to be read as part of the judgment]

The Chief Commissioner of State Revenue issued notices of assessment to two of the appellants in respect of payroll tax due by an employer within a “group” consisting of the employer and the appellants. The Chief Commissioner also took steps towards recovery of sums said to be due by those two appellants by requiring persons by whom moneys were due to them to make payment to the Chief Commissioner. The appellants sought an injunction restraining the Chief Commissioner from requiring payment by those persons. The primary judge dismissed the appellants’ claim. The appellants appealed.

The Court held, dismissing the appeal with costs

Barrett AJA; Beazley P and Meagher JA agreeing:

(1)   Where an employer and other entities together constitute a “group” for the purposes of the Payroll Tax Act 2007 (NSW), so that all members of the group are jointly and severally liable under s 81(1) of that Act for an “amount” that the employer is required to pay under the Act, the amount in question is an amount of “tax” (as defined by s 3 of the Taxation Administration Act 1996 (NSW)) so that, by operation of s 81(1), each group member other than the employer is subject to a liability to pay that “tax” and is therefore a “taxpayer” (as defined by s 3).

(2) The Chief Commissioner’s power under s 45(2A) of the Taxation Administration Act to issue a notice of assessment in respect of tax for which a person is jointly and severally liable with another person under a taxation law extends to a liability imposed by s 81(1) of the Payroll Tax Act on group members other than the employer.

(3) A notice of assessment under s 45(2A) of the Taxation Administration Act may be issued on the basis of a determination made by the Chief Commissioner in exercise of the general powers of assessment conferred by that Act. It not necessary that any relevant matter be the subject of a judicial determination in advance of the issue of the notice of assessment.

(4) In any event, s 119 of the Taxation Administration Act caused each notice of assessment to be, in the proceedings determined by the primary judge and on appeal, conclusive evidence of the due making of the assessment and of the correctness of the amount and all particulars of the assessment.

Judgment

1. BEAZLEY P: I have had the advantage of reading in draft the reasons of Barrett AJA.  I agree with his Honour’s reasons and proposed orders.

2. MEAGHER JA: I agree with Barrett AJA.

3. BARRETT AJA: The Payroll Tax Act 2007 (NSW) (the “PTA”) is, according to its long title, an Act “to provide for a tax on employers in respect of certain wages”. PTA s 6 states that payroll tax “is imposed on all taxable wages”. PTA s 7 provides that an “employer by whom taxable wages are paid or payable is liable to payroll tax on the wages”. PTA s 8 declares that “the amount of tax payable by an employer is to be ascertained in accordance with Schedules 1 and 2”. An employer is not liable to payroll tax unless the wages it pays annually exceed a particular threshold.

4. PTA Part 5 is headed “Grouping of employers”. It identifies certain forms of connection or association which, if present, cause several entities to constitute a “group”. In Chief Commissioner of State Revenue v SmeatonGrange Holdings Pty Ltd [2017] NSWCA 184; (2017) 106 ATR 151 at [25], Sackville AJA observed that one purpose of the “grouping” provisions is “to prevent an employer avoiding payroll tax by splitting businesses into separate components so as to take advantage of multiple threshold amounts”. [1] This is because the taxable wages paid or payable by all group members are aggregated for threshold purposes. Another purpose of the “grouping” provisions, his Honour said, is “to make each member of a group liable for payroll tax due by another member of the group”. This appeal is concerned with the second of these purposes and, in particular, with the interpretation of PTA s 81 which is within PTA Part 5 and is headed “Joint and several liability”.

   1. Sackville AJA there paraphrased what had been said in Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (2011) 245 CLR 446; [2011] HCA 41 at [8].

5. PTA s 4 states that the PTA “is to be read together with” the Taxation Administration Act 1996 (NSW) (the “TAA”) “which provides for the administration and enforcement of” the PTA and other taxation laws. The two Acts together deal with the calculation, imposition and collection of payroll tax.

The circumstances of the case

6. The appellants (of which there are eleven) and Pladmira Pty Ltd (“Pladmira”) operate in the construction industry. Having decided that Pladmira and the appellants, including Fyna Projects Pty Ltd (“Fyna”) and Banfirn Pty Ltd (“Banfirn”), constituted a “group” for the purposes of the PTA, the Chief Commissioner of State Revenue determined that the appellants were, by operation of PTA s 81, jointly and severally liable to pay to the Chief Commissioner certain amounts that Pladmira was required to pay under the PTA but had not paid. Pladmira’s liability had arisen because it was an “employer” and had paid “wages”.

7. On 12 April 2018, the Chief Commissioner issued to each of Fyna and Banfirn a document headed “Payroll Tax Assessment Notice” commencing: “Your assessment details for the period 21-OCT-2015 to 30-JUN-2015 are”. There followed, in each case, a calculation and a concluding line: “Total amount payable”. The total amount payable was $346,317.01 for Fyna and $131,534.52 for Banfirn. These notices were purportedly issued under PTA s 81 and TAA s 45.

8. Solicitors for Fyna and Banfirn disputed the companies’ liability for these amounts. Undeterred, the Chief Commissioner stated that certain enforcement action was proposed. Specifically, the Chief Commissioner threatened to deploy statutory provisions under which third parties by whom moneys are due to a taxpayer can be required to pay what is due by the taxpayer to the Chief Commissioner. Steps were taken towards requiring payment under those provisions by customers by whom moneys were due to Fyna and Banfirn and banks with which they maintained credit balances. The relevant power of the Chief Commissioner is that conferred by TAA s 46. That section states that the Chief Commissioner may, by notice in writing, require persons in specified categories “instead of the taxpayer to pay tax that is payable but remains unpaid”. Notices of the kind contemplated by TAA s 46 were referred to in submissions as “third party notices”. That, although not a statutory term, will be used here as a convenient label for a notice given under TAA s 46.

The proceedings below

9. On 26 April 2018, the appellants commenced proceedings in the Supreme Court against the Chief Commissioner claiming declaratory and injunctive relief. They sought a declaration that third party notices addressed to customers and banks indebted to Fyna and Banfirn were “invalid and of no force or effect” and an injunction restraining the Chief Commissioner from issuing further third party notices in respect of liabilities of Fyna and Banfirn. After an interlocutory regime had been established, the proceedings came before Leeming JA for final hearing in the Equity Division on 3 August 2018. At the conclusion of the hearing, his Honour ordered that the proceedings be dismissed with costs and gave his reasons for doing so. [2]

   2. Fyna Projects Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 1220.

10. The issue for determination by the primary judge was identified by him by reference to the following passage in the appellants’ written submissions at trial:

“The issue for determination by the Court is whether the plaintiffs, who by operation of s 81 of the Payroll Tax Act are said to be jointly and severally liable for the payroll tax liability of Pladmira (the entity deemed to be an employment agent) and to whom notices of assessment have been issued under s 45(2A) of the Taxation Administration Act are the taxpayer under s 46(1) of the Taxation Administration Act ...

To be clear, the Plaintiffs do not assert that the Commissioner does not have the power to issue an assessment under s 45(2A). Further, the plaintiffs do not in these proceedings (noting that an objection to the April 2018 Assessments has been foreshadowed) assert that the April 2018 Assessments are invalid, or not conclusive evidence of the due making of an assessment. The point that the Plaintiffs take in these proceedings is that they are not the taxpayer for the purposes of s 46(1) of the Taxation Administration Act.” (original emphasis).

11. The contention of Fyna and Banfirn at trial was that neither of them was a “taxpayer” within the meaning of the TAA and that the Chief Commissioner therefore had no power under s 46 to issue third party notices to the customers and banks in respect of sums payable by them.

12. The primary judge rejected the proposition that a person who does not incur or bear liability for tax as an employer is not a “taxpayer” for the purposes of s 46. He did so for three main reasons:

1. The definition of “taxpayer” in s 3 makes the distinction between an employer bearing primary liability and someone fixed with secondary or derivative liability.

2. The liability imposed by s 81 is joint and several. Every member of a “group” is jointly and severally liable to pay a relevant amount and the section reflects no concept of primary and secondary (or derivative) liability.

3. The construction favoured by the Chief Commissioner was consistent with what was held, though not argued, in Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184; (2017) 106 ATR 151 and Chief Commissioner of State Revenue v Print National Pty Ltd (2013) 83 NSWLR 555; [2013] NSWCA 96.

Issues on appeal

13. The appellants challenge his Honour’s interpretation of the legislation. Their grounds of appeal are as follows:

“Ground 1: The Trial Judge erred in holding that the Appellants, in the circumstances and on a proper construction of s 81 of the Payroll Tax Act (NSW) were taxpayers for the purposes of s 46 of the Taxation Administration Act 1996 (NSW) .

Ground 2: The Trial Judge erred in holding that the Respondent was empowered by s 46 of the Taxation Administration Act to issue third party notices to various debtors of the First and Second Appellants.

14. The Chief Commissioner says that these grounds should not be upheld. By notice of contention, the Chief Commissioner advances a further proposition in support of the conclusion reached by the primary judge. He argues that TAA s 119 caused the notice issued to each of Fyna and Banfirn on 12 April 2018 to be conclusive evidence of the due making of an assessment and therefore caused the person to whom the notice was issued to have been “assessed as liable to pay an amount of tax” as referred to in the definition of “taxpayer” in TAA s 3.

Statutory provisions [3]

3. Some relevant statutory provisions have been amended in minor ways since the primary judge gave judgment. Because the relief sought in this Court is the grant of the declaration and injunction that the primary judge refused and the entitlement to that relief must be determined by reference to the law currently in force, reference is made only to provisions as they now stand.

15. As has been mentioned, PTA s 6 imposes tax on “all taxable wages”. “Wages” are various forms of remuneration paid or payable to an employee (PTA s 13). “Taxable wages” are wages that are “taxable in this jurisdiction” (PTA s 10). Wages are taxable in this jurisdiction if they are “paid or payable” in certain geographically defined circumstances (PTA s 11). Liability for payroll tax is created by PTA s 7 and imposed on an “employer”: [4]

:      “7 Who is liable for payroll tax

The employer by whom taxable wages are paid or payable is liable to pay payroll tax on the wages.”

4. Under the definition in PTA s 3, the primary meaning of “employer” is “a person who pays or is liable to pay wages”.

16. By force of PTA s 9(1), a person who is liable to pay payroll tax on taxable wages “must pay the tax” within a certain time after the end of the month in which the wages were paid or payable. Section 7 thus creates a debt for “tax” and s 9(1) specifies the time at which the debt must be paid.

17. TAA s 8 empowers the Chief Commissioner to “make an assessment of the tax liability of a taxpayer”. An assessment thus made falls within the definition of “assessment” in TAA s 3. The legislation does not define “tax liability” but it is not difficult to conclude that the reference is to a liability for “tax” created by legislation.

18. The definition of “taxpayer” in TAA s 3 is:

“taxpayer means a person who has been assessed as liable to pay an amount of tax, who has paid an amount of tax or who is liable or may be liable to pay tax.”

19. The definition of “tax” in TAA s 3 is:

“tax means a tax, duty, contribution or levy under a taxation law, and includes:

(a) interest and penalty tax under Part 5, and

(b)     any other amount paid or payable by a taxpayer to the Chief Commissioner under a taxation law.”

20. By virtue of TAA s 8(3), “an assessment of tax liability is taken to have been made when the Chief Commissioner calculates the tax liability of a taxpayer”.

21. Having thus made an assessment of the tax liability of a taxpayer, the Chief Commissioner may, under TAA s 14, “issue a notice of assessment (showing the amount of the assessment)”. The scheme of the legislation is thus the familiar one under which the statute creates a liability for tax and fixes the amount of the liability, according to circumstances identified by the legislation, and a taxation official notifies, in money terms, the result that the legislation has produced. The corresponding scheme under former income tax legislation was described by Isaacs J in R v Deputy Commissioner of Taxation; ex parte Hooper (1926) 37 CLR 368; [1926] HCA 3 at CLR 373:

“An ‘assessment’ is not a piece of paper: it is an official act or operation; it is the Commissioner’s ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer. When he has completed his ascertainment of the amount, he sends by post a notification thereof called ‘a notice of assessment’.”

22. TAA s 119 provides:

“119   Evidence of assessment

Production of a notice of assessment, or of a document signed by the Chief Commissioner purporting to be a copy of a notice of assessment, is

(a)     conclusive evidence of the due making of the assessment, and

(b)     conclusive evidence that the amount and all particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only.”.

23. TAA s 43 and s 44 provide:

“43   Tax payable to the Chief Commissioner

Tax that is payable is payable to the Chief Commissioner.”

“44   Unpaid tax is debt payable to Chief Commissioner

(1)   If the whole or part of tax payable by a taxpayer is not paid to the Chief Commissioner as required by a notice of assessment, the amount unpaid is a debt payable to the Chief Commissioner by the taxpayer.

(2)   A debt payable by a taxpayer to the Chief Commissioner under this Act is a tax debt under this Act.”

24. PTA s 81, so far as relevant, is in these terms:

“81   Joint and several liability

(1)   If a member of a group fails to pay an amount that the member is required to pay under this Act in respect of any period, every member of the group is liable jointly and severally to pay that amount to the Chief Commissioner.

(2)   If 2 or more persons are jointly or severally liable to pay an amount under this section, the Chief Commissioner may recover the whole of the amount from them, or any of them, or any one of them.

. . .

(4)   A person who pays an amount in accordance with the liability imposed by this section has such rights of contribution or indemnity from the other person or persons as are just.

(5)   This section applies whether or not the person was an employer during the relevant period.”

25. Because PTA s 81(1) makes persons “liable jointly and severally to pay” an amount to the Chief Commissioner, it is relevant to set out parts of TAA s 45:

“45   Joint and several liability

(1)   If 2 or more persons are jointly and severally liable to pay an amount under a taxation law, the amount that is unpaid is a tax debt payable to the Chief Commissioner by each of them.

(2)   . . .

(2A)   The Chief Commissioner may issue a notice of assessment of the liability of a person to pay any tax and related charges for which the person is jointly and severally liable with another person under a taxation law, even if a notice of assessment has already been issued to the other person.

(3)   A person who pays an amount of tax in accordance with the liability imposed by this section has such rights of contribution or indemnity from the other person or persons as are just.”

26. TAA s 46 – said by the Chief Commissioner to be the source of his power to issue third party notices in the present case – is, so far as relevant, in these terms:

“46   Collection of tax from third parties

(1)   The Chief Commissioner may require any of the following persons instead of the taxpayer to pay tax that is payable but remains unpaid:

(a)   a person by whom any money is due or accruing or may become due to the taxpayer,

(b)   a person who holds or may subsequently hold money for or on account of the taxpayer,

(c)   a person who holds or may subsequently hold money on account of some other person for payment to the taxpayer,

(d)   a person having authority from some other person to pay money to the taxpayer.

(2)   The Chief Commissioner’s requirement is to be made by notice in writing.

(3)   A copy of the notice must be served on the taxpayer.

. . .”

The appellants’ case on appeal

27. Certain matters are not in contest in this appeal. Argument proceeded on the footing that the appellants, together with Pladmira, constitute a “group” as referred to in PTA s 81; that they and Pladmira are, by virtue of PTA s 81(1), jointly and severally liable to pay to the Commissioner any “amount” that Pladmira is required to pay but has not paid; and that the Chief Commissioner may, under TAA s 46, require a designated third party, “instead of the taxpayer”, to pay “tax that is payable but remains unpaid”. But, the appellants say, PTA s 81(1) does not cause the “amount” that Fyna and Banfirn are jointly and severally liable to pay to be “tax”; nor does it make them “taxpayers”. On that basis, the appellants argue that there is no foundation for the operation of TAA s 46 in relation to Fyna and Banfirn and the Chief Commissioner is not empowered to issue third party notices to their customers and banks.

28. In support of this basic proposition, counsel for the appellants advanced seven arguments concerning the construction of the statutory provisions:

1. Under the PTA, only an “employer” incurs a liability to pay “tax”.

2. Having regard to TAA s 8, an “assessment” can only be an assessment of “tax liability”, that is, liability to “tax”, being a liability of a kind that can be incurred only by an “employer”.

3. A notice of assessment under TAA s 14 can therefore only be a notice showing the amount of the liability of an “employer” for “tax”.

4. The question of the joint and several liability of persons under PTA s 81 is not something that requires or depends on “assessment” under TAA s 8. The liability arises solely by operation of statute and can be conclusively established only by legal proceedings.

5. TAA s 45(2A) allows the Chief Commissioner to issue a notice of assessment of the liability of a person only if a court has determined that the person is jointly and severally liable with another person in the way the section describes.

6. Because there has been no judicial determination (or admission) that Fyna and Banfirn have incurred joint and several liability for tax for which Pladmira, as employer, is liable, Fyna and Banfirn cannot be recognised as “taxpayers” for the purposes of TAA s 45 and s 46.

7. Nor is either of Fyna and Banfirn a “taxpayer” as referred to in s 8 or “a person who is liable to pay tax under a taxation law” as referred to in s 10.

29. In relation to the Chief Commissioner’s notice of contention, the appellants also say that TAA s 119 applies only to a notice of assessment issued to an employer and does not extend to the notices dated 12 April 2018 issued to Fyna and Banfirn.

The Chief Commissioner’s response

30. The Chief Commissioner advances three reasons for concluding that each of Fyna and Banfirn is a “taxpayer” as contemplated by TAA s 46:

1. Each of them was, by the notice of 12 April 2018 issued to it, assessed by the Chief Commissioner as liable to pay an amount of tax and was served with a notice of assessment.

2. PTA s 81 made each of them jointly and severally liable to pay to the Chief Commissioner an “amount” that is of the same character the amount for which Pladmira became liable as an employer (that is, the character of “tax”), so that each became liable for tax and was thereby brought within the definition of “taxpayer”.

3. The liability incurred by each of Fyna and Banfirn by operation of PTA s 81 is, as referred to in the definition of “tax” in TAA s 3, a liability to pay an “amount” under a taxation law.

31. The Chief Commissioner also says that the mechanism for recovering “an amount of unpaid tax” from a person with joint and several liability under PTA s 81 is the mechanism created by TAA s 45.

The operation of PTA s 81

32. As has been seen, PTA s 7 creates an employer’s liability for payroll tax and PTA s 9(1) specifies when the employer “must pay the tax”, so that PTA s 7 creates a debt for tax and PTA s 9(1) fixes the time for payment of that debt.

33. If an employer (referred to in the present discussion, but not in the legislation, as a “defaulting employer”) does not “pay the tax” (to use the s 9(1) words) within the time fixed by s 9(1) in relation to a particular month, that employer is, as referred to in PTA s 81(1), a person who “fails to pay an amount that” the person “is required to pay under this Act in respect of any period”, being the month in question.

34. If the defaulting employer is a member of a group, its failure to pay the amount that it “is required to pay” has the consequence that “every member of that group” is, by PTA s 81(1), “liable jointly and severally to pay that amount to the Chief Commissioner”. PTA s 81(1) takes as its starting point the circumstance that the defaulting employer “is required to pay”, the relevant requirement being the requirement created by s PTA 9(1) to pay an amount of tax for which liability has arisen under PTA s 7. When the defaulting employer fails to pay, PTA s 81(1) brings into existence a liability of the other group members so that all members, including the defaulting employer, are jointly and severally liable to pay “that amount”, being the amount the subject of the defaulting employer’s pre-existing PTA s 7 liability and PTA s 9(1) payment obligation.

35. The defaulting employer’s failure to pay the amount that it “is required to pay” thus brings into existence a solidary liability of all members of the group, including the defaulting employer. All are jointly and severally liable to pay the amount that the defaulting employer is required to pay but has failed to pay. The liability of the defaulting employer continues to be the pre-existing PTA s 7 liability to which the pre-existing PTA s 9 payment obligation attaches. The liability of each other group member is a new liability imposed by PTA s 81(1) upon and in consequence of the defaulting employer’s failure to pay. If the defaulting employer eventually pays the relevant amount, it will do so in satisfaction of its pre-existing liability. If another group member eventually pays the relevant amount, it will do so in satisfaction of the new PTA s 81(1) liability.

36. The obligation incurred under PTA s 81(1) by group members other than the defaulting employer is, in substance, an obligation to answer for the debt of another person (the defaulting employer) who is already liable to the Chief Commissioner. [5] This is not to imply, however, that the situation is one of primary and secondary (or derivative) liabilities. There is a single liability. [6] It is a liability by which the employer is independently bound and that later becomes binding also on the other group members.

    5. In terms of the classifications explained by Mason CJ in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; [1988] HCA 11 at CLR 254 ff this is the nature of a guarantor’s obligation.

    6. This is recognised by TAA s 45(1) which states that, if two or more persons are jointly and severally liable to pay an amount under a taxation law, the amount that is unpaid is “a tax debt payable to the Chief Commissioner by each of them”.

37. Because the liability of group members other than the defaulting employer is to pay the unpaid amount that the defaulting employer is required to pay and the liability of all group members (including the defaulting employer) is joint and several, the obligation imposed on each of those other group members is an obligation to render the very performance that is already due by the defaulting employer. The defaulting employer’s liability is a liability to pay tax. If and when a group member other than the defaulting employer pays the amount for which it is jointly and severally liable, the liability to which all group members are subject jointly and severally is satisfied; and, at the same time, the defaulting employer’s pre-existing liability to pay tax is also satisfied. Because the payment effects satisfaction of the defaulting employer’s pre-existing liability to pay tax, the payment is itself a payment of an amount of tax for which the defaulting employer is liable. The payment obligation that is performed when the other group member pays can thus be seen to be an obligation to pay an “amount” of “tax”.

38. For this reason, it is correct to say that the character of the “amount” for which every member of the group has joint and several liability under PTA s 81(1) corresponds with the character given by PTA s 7 and PTA s 9 to the amount that is the subject matter of the defaulting employer’s pre-existing liability and payment obligation. It is an “amount” of “tax”.

Decision on the grounds of appeal

39. It follows from this analysis that, as the Chief Commissioner contends, every group member in respect of which PTA s 81(1) has commenced to operate by reason of an employer’s default is, as referred to in the definition of “taxpayer” in TAA s 3, “a person who . . . is liable . . . to pay tax” of the amount that the defaulting taxpayer is required to pay but has not paid. Every such group member is accordingly a “taxpayer” within that definition.

40. The appellants contend that, even if that conclusion is accepted, the Chief Commissioner had no power to issue the notices of 12 April 2018 addressed to Fyna and Banfirn (and may not issue third party notices to their customers and banks) in the absence of a judicial determination of the matters essential to the conclusion. They say that the liability of a person to pay tax for which the person is jointly and severally liable with another person under PTA s 81(1), as referred to in TAA s 45(2A), can only be a liability the existence of which has been established by judicial pronouncement. That submission cannot be accepted. If an action is brought for the recovery of a debt for money lent and judgment is given for the plaintiff, it is not correct to say that there was no liability until judgment. There was a debt liability from the time the loan was made. [7] The judgment merely confirmed the existence of the liability that, as a matter of law, arose from the objective facts of the loan transaction and subsisted thereafter.

    7. See, for example, Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51.

41. The TAA recognises in several places the role of the Chief Commissioner in quantifying liabilities arising from objective facts and, to the extent necessary, determining those facts. This is seen particularly in a combination of TAA s 8(1) which empowers the Chief Commissioner “to make an assessment of the tax liability of a taxpayer”, TAA s 8(3) which states that “an assessment of tax liability is taken to have been made when the Chief Commissioner calculates the tax liability of a taxpayer” and TAA s 11(1) which says that the Chief Commissioner may make an assessment on the information that he has from any source at the time the assessment is made. The task described by these provisions is that of identifying and quantifying a liability by ascertaining a factual position already prevailing and applying statutory criteria to it. The process is of long standing in taxation legislation and was aptly described by Lord Dunedin in Whitney v Inland Revenue Commissioners  [1926] AC 37 at 52:

“Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay.” (emphasis added).

42. The Chief Commissioner is empowered by TAA s 45(2A) to issue “a notice of assessment of the liability of a person to pay any tax for which the person is jointly and severally liable with another person” under PTA s 81(1). Implied by the power to issue such a notice of assessment is a power to make the determination of liability notified by the notice by ascertaining relevant facts and making the necessary quantification by applying statutory criteria to them. Once it is recognised that, for the reasons stated, the subject matter of the joint and several liability is “tax” and that group members subjected by PTA s 81(1) to that liability are “taxpayers”, the determination of liability notified by a TAA s 45(2A) notice of assessment can be seen to be the result of a process of “assessment of the tax liability of a taxpayer” as referred to in TAA s 8(1). A judicial determination is not a prerequisite to liability.

43. The submissions advanced by the appellants in support of the grounds of appeal must be rejected. The notices of 12 April 2018 were validly issued to Fyna and Banfirn and there is no basis in the legislation for the grant of the declaratory and injunctive relief that the appellants seek in respect of issue by the Chief Commissioner of TAA s 46 third party notices to the customers and banks indebted to Fyna and Banfirn.

The notice of contention

44. The notice of contention should be addressed for the sake of completeness. The Chief Commissioner’s contention is that TAA s 119 caused the notice issued to each of Fyna and Banfirn on 12 April 2018 to be conclusive evidence of the due making of an assessment and therefore caused the person to whom the notice was directed to have been “assessed as liable to pay an amount of tax” and accordingly to be within the TAA s 3 definition of “taxpayer”. On that alternative basis, the Chief Commissioner says, there is a sound foundation for the issue of third party notices under TAA s 46 to customers and banks by which moneys are due to Fyna and Banfirn. [8]

    8. TAA s 119 was the subject of some submissions to the primary judge but his Honour (at [60]) found it unnecessary to address the matter in any detail.

45. TAA s 119 is concerned with the evidentiary status of a “notice of assessment” or “a document signed by the Chief Commissioner purporting to be a copy of a notice of assessment”. The general meaning of “notice of assessment” is derived from TAA s 14(1) which, as has been noted, empowers the Chief Commissioner to issue a notice of assessment showing the amount of the assessment, being necessarily an amount of “tax”. In the present case, each relevant “notice of assessment” issued under special provision made by TAA s 45(2A) notified the addressee’s liability to pay “tax” for which the person was jointly and severally liable because of PTA s 81(1). If, contrary to the conclusion already stated (and as the appellants argued), the “amount” for which a group member other than the defaulting employer is jointly and severally liable by operation of PTA s 81(1) is not an amount of “tax”, that amount cannot lawfully be included in a notice of assessment.

46. The argument advanced by the Commissioner is that, even if this is so, the circumstance that the Chief Commissioner has issued a notice that is described as a “notice of assessment” and notifies what is identified as an “assessment” of “tax” as against the addressee of the notice attracts the operation of s 119, with the result that

1. there exists for all purposes “conclusive evidence” of the due making of the assessment communicated by the notice and;

2. there existed for the proceedings determined by the primary judge and exists for this appeal (neither being “objection or review proceedings”) “conclusive evidence” that the amount of the notified assessment and all particulars of it “are correct”.

47. The distinction between, on the one hand, the due making of an assessment and, on the other, the amount and particulars of the assessment is the distinction between procedure and substantive quantification by the application of statutory criteria. This was explained in George v Federal Commissioner of Taxation (1952) 86 CLR 183; [1952] HCA 21 at CLR 183 in this way:

“Obviously the ‘due making of the assessment’ was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal."

48. The Chief Commissioner’s contention is that, however misguided he may have been in determining the supposed tax liability of Fyna and Banfirn notified by the notices of 12 April 2018 and however erroneous the determinations thereby notified may be, the evidentiary consequence of production of the notices is that any argument that Fyna and Banfirn are not in truth liable to pay “tax” and are not “taxpayers” can only be advanced and resolved in a forum in which the notices constitute merely prima facie evidence, that is, in “objection or review proceedings”.

49. TAA Part 10 deals with objections and reviews. A taxpayer [9] who is dissatisfied with an assessment shown in a notice of assessment may lodge a written objection. The objector has the onus of proving the objector’s case. The Chief Commissioner must allow an objection in whole or in part or disallow it. A taxpayer who is dissatisfied with the decision on an objection may apply to the Civil and Administrative Tribunal under the Administrative Decisions Review Act 1997 (NSW) (or, in certain circumstances, to the Supreme Court) for a review of the Chief Commissioner’s decision on an objection. The applicant has the onus of proving the applicant’s case in an application for review; and that position pertains also upon subsequent appeals.

    9. A person to whom a notice of assessment has been issued and who claims not to be liable for the tax assessed is, for these purposes a “taxpayer” who is dissatisfied. The person is within the part of the definition of “taxpayer” in TAA s 3 that refers to a person “who has been assessed as liable to pay tax”.

50. There is no need to decide the precise scope of the expression “objection or review proceedings” in TAA s 119. It is sufficient to say that such “objection or review proceedings” are identified as the sole forum in which the correctness of a determination of tax liability made by the Chief Commissioner and communicated by notice of assessment can be debated and that, as I have said, the present proceedings are not “objection or review proceedings”.

51. Each notice of 12 April 2018 is, at the least, “a document signed by the Chief Commissioner purporting to be a copy of a notice of assessment”. Each is headed “Payroll Tax Assessment Notice”, contains “Your assessment details” for a specified period and states a “Total amount payable” together with particulars of calculation. Each also carries, in printed form, the signature of the Chief Commissioner and a certification. The appellants do not contend that either document is not of the description in TAA s 119.

52. In these circumstances, s 119 does, as the Chief Commissioner contends, make conclusive, as against the appellants in these proceedings, the correctness of the amount and particulars in the notices of 12 April 2018; and this is so whether or not the Chief Commissioner was correct in the views he took as to the status of Fyna and Banfirn as “taxpayers” and the status of the amounts payable by them because of PTA s 81(1) as “tax”. [10]

    10. There is no suggestion in this case that the Chief Commissioner applied the legislation to facts that were known to be untrue, acted in bad faith or fell into jurisdictional error so that there was, as discussed in Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146; [2008] HCA 32, “conscious maladministration of the assessment process” and therefore no process of “assessment” at all.

48. The matters raised by the Chief Commissioner’s notice of contention provide an additional reason for dismissing the appeal.

Conclusion

54. The payroll tax legislation indicates clearly that disputes about liability for tax should, in the ordinary course, be dealt with under the objection, review and appeal procedures established by the legislation itself. One feature of those procedures is that, while they afford ample opportunity for a person challenging an assessment made by the Chief Commissioner to present a case with a view to discharging the onus that the person bears, pendency of an objection or review does not, in the meantime, affect the assessment, with the result tax may be recovered as if no objection or review were pending. [11]

    11. See TAA s 94 and s 104. Provisions of this kind were described in Clyne v Deputy Commissioner of Taxation (1982) 56 ALJR 857 at 859 as the revenue’s “charter to commence recovery proceedings, notwithstanding a challenge”. The legislation does, however, recognise that a court may impose a stay. Relevant principles concerning such stays were discussed in Deputy Commissioner of Taxation v Denlay [2010] QCA 217; (2010) 80 ATR 109.

55. The primary judge correctly said, referring to Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd (above) and Chief Commissioner of State Revenue v Print National Pty Ltd (above), that the policy of the TAA is that amounts stated in notices of assessment to be payable are to be paid, notwithstanding exercise of rights of objection and review, on the basis that, if the taxpayer is found to be right, the amounts will be refunded with interest.

56. I propose orders as follows:

1. Appeal dismissed.

2. The appellants pay the respondent’s costs of the appeal.

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Endnotes

Decision last updated: 19 December 2018