Fyna Projects Pty Ltd v Chief Commissioner of State Revenue

[2018] NSWSC 1220

Supreme Court

New South Wales

Medium Neutral Citation:	Fyna Projects Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 1220
Hearing dates:	03 August 2018
Decision date:	03 August 2018
Jurisdiction:	Equity
Before:	Leeming JA
Decision:	1. Proceedings dismissed. 2. Plaintiffs to pay the defendant’s costs.
Catchwords:	TAXES - notice of assessment - payroll tax - grouping provisions of Payroll Tax Act 2007 (NSW) - group members made jointly and severally liable to pay payroll tax payable by employer - notices of assessment issued to group members - threat to issue third party notices under Taxation Administration Act 1996 (NSW) s 46 to group members’ debtors - no challenge to validity of notices of assessment - challenge confined to whether power to issue third party notice to debtors of “taxpayer” extended to a group member - held: power existed and proceedings dismissed
Legislation Cited:	Corporations Act 2001 (Cth) Income Tax Assessment Act 1936 (Cth), s 177 Payroll Tax Act 2007 (NSW), ss 3, 4, 6, 7, 8, 9, 69, 79, 80, 81, Schedules 1 and 2 Taxation Administration Act 1996 (NSW), ss 3, 4, 7, 8, 9, 13, 14 , 16, 44, 45, 46, 47B, 47E, 72, 86, 94, 103, 103A, 119
Cases Cited:	Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 Anderson v The Commissioner of Taxes (Victoria) (1937) 57 CLR 233; [1937] HCA 24 Chief Commissioner of State Revenue (NSW) v Platinum Investment Management Ltd (2011) 80 NSWLR 240; [2011] NSWCA 48 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 Commissioner of Taxation v Prestige Motors Pty Ltd (1994) 181 CLR 1; [1994] HCA 39 Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297; [1981] HCA 26 Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146; [2008] HCA 32 Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1 Print National Australia Pty Ltd v Chief Commissioner of State Revenue [2012] NSWSC 297 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 91 ALJR 936 Western Australian Trustee Executor & Agency Co Ltd v Commissioner of State Taxation (WA) (1980) 147 CLR 119; [1980] HCA 50
Texts Cited:	Nil
Category:	Principal judgment
Parties:	Fyna Projects Pty Ltd (1st plaintiff) Banfirn Pty Ptd (2nd plaintiff) Winlina Pty Ltd (3rd plaintiff) Wyreach Pty Ltd (4th plaintiff) Fyna Constructions (Hire & Sales) Pty Ltd (5th plaintiff) Powerform Equipment Pty Ltd (6th plaintiff) Formforce (NSW) Pty Ltd (7th plaintiff) Winlina Plant Hire Pty Ltd (8th plaintiff) F.W. Resources Pty Ltd (9th plaintiff) Walmira Pty Ltd (10th plaintiff) Span Form Pty Ltd (11th plaintiff)
Representation:	Counsel: T Hale SC and S Kanagaratnam (Plaintiffs) R Seiden SC and A Gerard (Defendant)   Solicitors: Diamond Conway Lawyers (Plaintiffs) Crown Solicitor’s Office (Defendant)
File Number(s):	2018/131610
Publication restriction:	Nil

EX TEMPORE Judgment

1. HIS HONOUR: This proceeding presents a question not without importance concerning the operation of the recovery provisions in the Taxation Administration Act 1996 (NSW) when read with the Payroll Tax Act 2007 (NSW). However I have had the benefit of full written and oral submissions and the question is purely one of law. There is no question of contested fact. Further, the litigation to date has proceeded with a commendable degree of expedition, starting with an application for ex parte injunctive relief, and the parties have cooperated to enable its final determination some slightly more than three months after it was commenced. Accordingly I think it is in the best interest of all parties for me to deal with it as best I can now.

2. The essential point may be concisely stated. The plaintiffs, which are some 11 companies all (I infer) involved in the building construction industry, seek declaratory and injunctive relief in relation to the outcome of an audit and assessment and reassessment of liability under the Payroll Tax Act. The relief is confined to the Chief Commissioner’s threatened exercise of powers under s 46 of the Taxation Administration Act to various debtors of, in particular, two of the plaintiffs, Fyna Projects Pty Ltd and Banfirn Pty Ltd. Both Fyna and Banfirn have received Assessment Notices dated 12 April 2018, and are concerned that the Chief Commissioner might issue notices pursuant to s 46 of the Taxation Administration Act. They say he lacks power to do so.

Factual background

3. The essential factual background, which as I understand it is entirely uncontroversial and may be abbreviated, is as follows. In September 2015 and, separately, in February 2016, Banfirn and Fyna Projects entered into separate “Management Labour Agreements and Labour Hire & Sub-contract Agreements” with Pladmira Pty Ltd. Pladmira is not a party to this litigation. Both agreements involved promises by Fyna and Banfirn to pay Pladmira an amount ($39.00 plus GST) per square metre of formwork formed on specific or special projects or some other rate as might be agreed from time to time.

4. Between around May 2017 and February 2018, the defendant, the Chief Commissioner of State Revenue, conducted an investigation into, inter alia, the obligations of Pladmira and the plaintiffs (and perhaps others), under the Payroll Tax Act. By letter dated 28 February 2018, the Chief Commissioner expressed certain views about the relationship between Pladmira, Fyna and Banfirn, and the consequences that had for their obligations under the PayrollTax Act. The Chief Commissioner formed the view that Pladmira operated as an employment agent within the meaning of the Payroll Tax Act, found that neither Fyna Projects nor Banfirn were employers for the purposes of that Act, but that all three were in the same group.

5. Payroll Tax Assessment Notices were issued to Banfirn and Fyna Projects on that date and calculated in a way that is not presently relevant. Some weeks thereafter, notices were issued to at least three banks pursuant to s 46 of the Taxation Administration Act. However, following receipt of a letter in early April 2018, which submitted that the findings and calculations made by the Chief Commissioner were inconsistent and erroneous and requesting that the assessments be withdrawn, the Chief Commissioner withdrew both Assessment Notices. The Chief Commissioner also advised that the third party notices issued under s 46 would be withdrawn.

6. The Commissioner issued two further Payroll Tax Assessment Notices on 12 April 2018. It is these two notices which found the plaintiffs’ application for declaratory and injunctive relief in these proceedings. One is addressed to Banfirn and is in the amount of $131,534.52. The other is addressed to Fyna Projects Pty Ltd and is in the amount of $346,317.01. Each notice identifies that the amounts calculated to be payable represent the sum of tax payable, a relatively small amount of interest and penalty tax, less various amounts previously paid.

7. The notices otherwise are in almost identical form. Each advises on its second page under the heading “Important information” that “If you disagree with your assessment, you have the right to lodge an objection” and goes on to identify the need to lodge separate objections and the 60 day time period for doing so. Each notice includes a page described as “Supporting information”, which identifies under the heading “Assessment calculation”, various amounts of “NSW wages”, “Gross NSW wages”, “Interstate wages”, the applicability of a threshold, and payroll tax liability at a rate of 5.45%. At the end of each notice is a note which is in the following terms:

“This assessment has been calculated on the Total Australian wages of the following group members” [each note then identifies the relevant period of taxation, being periods ending 30 June 2016 and 30 June 2017 respectively.]

“Single Lodger details” [and then respectively Banfirn or Fyna Projects is identified.]

“Group members” [there follow four identified group members being F.W. Resources Pty Ltd, Pladmira Pty Ltd, Powerform Equipment Pty Ltd and (a) in the case of the notice to Banfirn, Fyna Projects Pty Ltd and (b) in the case of the notice for Fyna Projects, Banfirn Pty Ltd.]

8. As noted, those Assessment Notices following the reassessment that was conducted in March and early April were expressed to be payable on 26 April 2018. By letter dated 23 April 2018, the plaintiffs’ solicitors submitted that there were further errors and inconsistencies in the Assessment Notices, and requested that both be withdrawn immediately. The letter maintained that:

“on no view could Fyna and Banfirn be a taxpayer within the meaning of the Taxation Administration Act ... and therefore, the Commissioner cannot issue third party notices pursuant to section 46 of the TAA to clients (and banks) of Fyna and Banfirn.”

9. The letter requested that the notices be withdrawn by close of business on 24 April 2018 and that the Chief Commissioner undertake not to issue enforcement actions without first giving seven days written notice in order that they might make appropriate application to the Supreme Court.

10. By letter dated 24 April 2018, the Chief Commissioner advised that he had considered the letter but would not be withdrawing the reassessments issued on 12 April. The letter concluded:

“Should the liability remain outstanding beyond 26/4/18 or there is no agreed repayment program recovery actions will commence without alerting your client of the nature of recovery undertaken by Revenue NSW.”

11. It was in those circumstances that, on 26 April 2018, the plaintiffs commenced proceedings in this Court and sought urgent injunctive relief ex parte. That relief was granted by the Duty Judge for a very limited period of time, until 30 April 2018. The matter has relevantly been before the Court on at least two subsequent occasions, on both occasions in the Duty Judge’s list, and, by consent, the interim injunction has been extended upon the usual undertaking having been given by the plaintiffs. The latter of those occasions resulted in an interim injunction which will expire at 5pm this afternoon (some 98 minutes away from now). At my suggestion the parties have, constructively, put in place reciprocal undertakings between themselves, after I informed them that I would decide this proceeding very promptly given its nature and urgency. The effect of the undertaking is that for a period of two business days after delivery of judgment, the Chief Commissioner undertakes not to issue any third party notice under s 46, while the plaintiffs undertake not to deal with their assets otherwise than in the ordinary course of business.

12. Before turning to the legislative regime, it is convenient to identify the issue as framed by the plaintiffs in their written submissions, which is as follows:

“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).

It will be seen that the plaintiffs expressly eschewed any submission directly attacking the notices of assessment in accordance with principles analogous to those in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146; [2008] HCA 32.

13. In order to assess and determine the question of construction, which is whether Fyna and Banfirn are “taxpayers” for the purposes of s 46 of the Taxation Administration Act, it is necessary to summarise the legislative regime, which senior counsel for both sides have helpfully taken me through.

Legislative regime

14. Section 4 of the Payroll Tax Act provides that that statute is to be read together with the Taxation Administration Act. Sections 6 to 9 within Part 2 of the Payroll Tax Act provide that payroll tax is imposed on all taxable wages, that the employer by whom taxable wages are paid or payable is liable to pay payroll tax on the wages, that the amount of payroll tax payable by an employer is to be ascertained in accordance with Schedules 1 and 2, but that (by reason of s 9), “a person who is liable to pay payroll tax on taxable wages must pay the tax” within seven days after the end of the calendar month in which those wages were paid or payable, except that, in the case of June, 21 days is provided.

15. It will be seen, as the plaintiffs emphasised, that s 7 imposes liability for payroll tax on an employer, and that the amount pursuant to s 8 is stated to be the payroll tax payable “by an employer”, but that the time, for which s 9 makes provision, for payment is expressed, more generally, in terms of “a person who is liable to pay payroll tax”. It is not necessary to address the detail of Schedule 1 of the Act which describes the way in which payroll tax is calculated. It is sufficient to say that there is a threshold, and that the Act proceeds on the basis that there may be “groups” – a matter which is of central importance to the proceedings before me.

16. The existence of a (relatively large) threshold (for the financial years commencing 1 July 2016 and 1 July 2017, it is $750,000) makes the facility of placing employers in a group, of some significance. Schedule 1 identifies two classes of groups, those with a “designated group employer” and those “with no designated group employer”. The details are not presently relevant. Briefly, groups with a designated group employer obtain the benefit of one allowance for threshold, those with no designated group employer do not. Payroll tax, after allowance is made for any threshold, is presently calculated at an ad valorem rate of 5.45%.

17. Part 5 of the Payroll Tax Act is headed “Grouping of employers”. I do not understand there to be any dispute between the parties that the identification of a “group” is effected directly by the legislation, as opposed to provision being made for determination by the Chief Commissioner. Indeed, this was a central plank of the plaintiffs’ submissions on construction.

18. The provisions have been set out in some detail in other decisions, including that of Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184; (2017) 106 ATR 151 and need not be summarised here. Very broadly, the legislation identifies persons, companies and entities (including the trustees of trusts) which have sufficient degrees of related control or ownership – although what I have just said does not by any means do justice to the complexity of those provisions. Section 69 provides that “A group is constituted by all the persons or bodies forming a group that is not a part of any larger group”. Further, corporations constitute a group if they are related bodies corporate within the meaning the Corporations Act 2001 (Cth). Thus the Act, of its own operation, identifies as the relevant “group”, the largest collection of (broadly speaking) related companies, individuals and other entities.

19. Section 79 empowers the Chief Commissioner to exclude a person who would, but for the exercise of power, be a member of a group, rendering that person not a member of the group. There are various restrictions upon that power which is conferred upon the Chief Commissioner.

20. Section 80 permits the members of the group with the approval of the Chief Commissioner to designate a qualified member of the group to be the “designated group employer”.

21. The section of critical importance for these proceedings on which the two notices of assessment issued on 12 April 2018 were founded is s 81. That provision provides as follows:

“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.

(3) If, under this section, 2 or more persons are jointly and severally liable to pay an amount that is payable by any one of them, each person is also jointly and severally liable to pay:

(a) any amount payable to the Chief Commissioner under this or any other Act in relation to that amount, including any interest and penalty tax, and

(b) any costs and expenses incurred in relation to the recovery of that amount that the Chief Commissioner is entitled to recover from any such person.

(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.”

22. I interpolate that the grouping provisions therefore have, as Mr Hale SC who appeared with Mr Kanagaratnam for the plaintiffs emphasised, two purposes. First, the identity of the persons, companies, and other entities within a group is an essential integer of the calculations of total taxable wages which would in turn produce a liability of payroll tax. Secondly, but only after there had been a failure to pay an amount of payroll tax that a group member was required to pay, s 81 imposes a joint and several liability for that amount upon every other group member. Subsection (5) makes it plain, if any further clarity were required, that the joint and several liability imposed by s 81 in the event of a member of a group failing to pay, applies both to group members who are employers, and group members who are not employers during the relevant period.

23. When those provisions are read together with the time period in s 9 of the Payroll Tax Act it may be seen that if one group member fails to pay an amount of payroll tax that that group member is required to pay, then, either 8 or (in the case of June), 22 days thereafter, s 81 has the effect that all members of the group are jointly and severally liable to pay that amount.

24. The Payroll Tax Act is one of some 11 taxation laws identified in s 4 of the Taxation Administration Act. The latter Act has as its purpose to make “general provision” with respect to the administration and enforcement of those other taxation laws: see s 7(1).

25. Unlike the Payroll Tax Act, the Taxation Administration Act contains a definition, in s 3 of taxpayer. The definition is as follows:

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

26. Tax is defined to mean “a tax, duty, contribution, or levy under a taxation law” and includes interest and penalty tax under Part 5 and other amounts paid or payable by a taxpayer to the Chief Commissioner under a taxation law.

27. Section 8 of the Taxation Administration Act empowers the Chief Commissioner to make an “assessment” of the tax liability of a taxpayer, while s 9 empowers the Chief Commissioner to make one or more reassessments of a tax liability of a taxpayer. “Assessment” is defined in s 3 to mean “an assessment made by the Chief Commissioner under Part 3 of the tax liability of a person under a taxation law”, and includes, inter alia, a reassessment under Part 3.

26. Section 13 permits the Chief Commissioner to withdraw an assessment in respect of which a notice of assessment has been issued, as occurred in the present case. Section 14 reiterates the distinction which may be seen in s 13 between “assessment” and “notice of assessment”. Section 14 empowers the Chief Commissioner to “issue a notice of assessment (showing the amount of the assessment).”

27. Various provisions protect and restrict the ability to challenge matters contained in a notice of assessment. Section 16 provides that “the validity of an assessment is not affected because a provision of a taxation law has not been complied with”. Section 119 provides that 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 conclusive evidence of the due making of the assessment and conclusive evidence that the amount and/or particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only.

28. Section 103A provides that:

“Review or appeal by other courts or tribunals

(1) No court or tribunal (or other body or person) has jurisdiction or power to consider any question concerning an assessment or other decision of the Chief Commissioner under a taxation law (including the determination of an objection under Division 1) except as provided by this Part.

(2) Subsection (1) does not apply to a decision of the Chief Commissioner under Part 4, 7, 8, 9 or 11 (not being an assessment).”

31. Part 7 of the Taxation Administration Act deals with collection of tax. This provision contains the sections which are critical to the declaratory and injunctive relief sought by the plaintiffs. Section 44 provides as follows:

“Recovery of tax as a debt

If the whole or part of tax payable by a taxpayer has not been paid to the Chief Commissioner as required, the Chief Commissioner may recover the amount unpaid as a debt to the Chief Commissioner.”

32. A note to the section provides that because of the provisions of s 94, recovery action may be taken despite the fact that an objection or review concerning the tax remains unresolved. Section 45, in its current form, provides as follows:

“Joint and several liability

(1) If two or more persons are jointly or severally liable to pay an amount under a taxation law, the Chief Commissioner may recover the whole of the amount from them, or any of them, or any one of them.

(2) If under a taxation law two or more persons are jointly and severally liable to pay an amount of tax that is payable by any one of them, each person is also jointly and severally liable to pay any related charges, being:

(a) any amount payable to the Chief Commissioner under a taxation law in relation to that amount, including any interest and penalty tax under Part 5, and

(b) any costs and expenses incurred in relation to the recovery of that amount that the Chief Commissioner is entitled to recover from any such person.

(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.”

33. Section 46 provides as follows, relevantly:

“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.

(4) The amount of money required to be paid to the Chief Commissioner is:

(a) if the amount of the money so held or due or authorised to be paid does not exceed the amount payable by the taxpayer to the Chief Commissioner—all the money, or

(b) if the amount of the money exceeds the amount so payable—sufficient money to pay the amount so payable.

(5) The money must be paid to the Chief Commissioner on receipt of the notice, or when the money is held by the person and becomes due to the taxpayer, or after such period (if any) as may be specified by the Chief Commissioner, whichever is the later.

…

(9) In this section, tax includes a judgment debt and costs in respect of such an amount.”

34. It is convenient to interpolate at this stage that another strand of the plaintiffs’ submissions on construction relied upon the fact that there was a textual link between s 44 and s 46. Both of those sections refer, expressly, to “taxpayer”: in the case of s 44, to “a taxpayer” and, in the case of s 46, “the taxpayer”. In contrast, the term “taxpayer” is not to be found in s 45. This was prayed in aid of the submission that the power to collect tax from third party debtors of “the taxpayer”, mentioned in s 46, was confined to those persons “primarily” (to use the term favoured by the plaintiffs), liable to pay tax, rather than those other persons who were jointly and severally liable, by reason of some other provision of a tax law, such as, in the present case, s 81 of the Payroll Tax Act.

35. Part 10 of the Taxation Administration Act deals with objections and reviews. Section 86, with which it commences, permits a taxpayer who is dissatisfied with either (a) an assessment shown in a notice of assessment served on the taxpayer or (b) any other decision of the Chief Commissioner, under a taxation law, to lodge a written objection with the Chief Commissioner. There follow provisions dealing with exclusions from the objection right, and the identification of grounds, the onus of proof, timing and a power to extend time, and then determination by the Chief Commissioner and further review by NCAT.

36. Section 94, to which reference has already been made, provides that:

“Recovery of tax pending objection

The fact that an objection is pending does not, in the meantime, affect the assessment or decision, to which the objection relates and tax may be recovered, as if no objection were pending”.

37. Division 2 of Part 10 deals with review by NCAT and incorporates a separate facility of review by the Supreme Court. Relevantly, it too, in the form of s 103, makes similar provision as s 94.

Plaintiffs’ submissions

38. I have already sought to indicate some of the bases upon which the construction for which the plaintiffs contend are said to be supported by the legislative provisions. One way in which it was put was to emphasise the distinction between the automatic operation of the legislation determining which natural persons, companies and other entities, formed part of a group, pursuant to Part 5 of the Payroll Tax Act, and to emphasise that, save for the limited case of a “degrouping” determination under s 79, that occurred by dint of law, rather than by a process of determination, by the Chief Commissioner. The plaintiffs contended that that was an indication that the factual matters as to whether or not a particular person was a member of a group, was something that was contestable, in ordinary litigation, rather than reserved, for the objection and review procedures, under Part 10 of the Taxation Administration Act.

39. Another aspect of the submissions of construction turned on the definite article in the term “the taxpayer”, in s 46, which was said naturally to be a reference to a taxpayer mentioned in s 44, in contradistinction to those persons (not expressed to be taxpayers) who were jointly and severally liable, to which reference was made in s 45.

40. A third strand involved the fact that the payroll tax legislation directly and, as it was put, primarily, imposed liability for payroll tax upon the employer (see especially ss 6, 7, 8 and Schedule 1), while that liability was extended by s 81 to other persons not described in that section as taxpayers.

41. Fourthly, reliance was placed on the provisions of Division 2 of Part 7 of the Taxation Administration Act, which involved (speaking broadly) a separate regime for the serving of compliance notices upon directors and former directors of corporate entities reliable to pay various forms of tax: see s 47B. There is some resemblance here with the joint and several liability imposed by s 81 of the Payroll Tax Act, insofar as a director or former director upon whom such a notice is served will become jointly and severally liable with the corporation to pay the corporate tax liability, in the event that that liability is not rectified before the end of the compliance period. Relevantly for the submissions on the question of construction, s 47E provides certain substantive defences to directors or former directors. That was said to indicate that the factual elements that give rise to joint and several liability, under s 81, fell within those matters which were contestable in ordinary litigation.

42. Fifthly, reliance was placed upon the strong consequences that followed upon the exercise of power under s 46, noting especially the offence that was created by the recipient of a s 46 notice (typically a bank or other financial institution), which was required to comply with the obligation to pay money to the Chief Commissioner.

43. Reliance was also placed upon conventional authorities dealing with the construction of tax legislation and, in particular, tax legislation which imposed liability, referring to Anderson v The Commissioner of Taxes (Victoria) (1937) 57 CLR 233; [1937] HCA 24, Western Australian Trustee Executor & Agency Co Ltd v Commissioner of State Taxation (WA) (1980) 147 CLR 119; [1980] HCA 50 and Chief Commissioner of State Revenue (NSW) v Platinum Investment Management Ltd (2011) 80 NSWLR 240; [2011] NSWCA 48 at [36].

44. The plaintiffs also relied upon what was uncontroversial, for the purposes of these proceedings, namely that neither Fyna nor Banfirn employed any labour. It followed that only through the operation of provisions such as s 81 might they be liable to pay any payroll tax at all.

45. In their written submissions, this point was taken up as follows:

“That joint and several liability [that imposed by s 81] is imposed regardless of whether a group member was an employer during the relevant period (s 81(5)). However, s 81 does not impose a primary liability on the member who is jointly and severally liable for the failure of another group member to pay an amount required to be paid under the PTA, the primary liability remains with the entity which is an employer and liable to pay payroll tax on taxable wages”.

46. As Ms Seiden of senior counsel, who appeared, with Mr Gerard, for the Chief Commissioner observed, the consequence of the plaintiffs’ submissions necessarily was that group members whose liability was imposed by s 81, and who were not themselves employers, were in a different category from other taxpayers. The Chief Commissioner maintained that there was a single class of taxpayer, being all of the persons falling within the broadly framed definition of taxpayer in the Taxation Administration Act. Against this, the plaintiffs submitted (in their written submissions in reply), that a person:

“cannot be a taxpayer for the purposes of s 46 of the Payroll Tax Act, by reason of being said to be a group member who is jointly and severally liable for an unpaid amount of payroll tax (incurred by an employer group member) until the anterior question of whether that person is in fact a group member is determined.

Section 6 of the Interpretation Act 1987 (NSW) is supportive of the above proposition”.

47. It is not necessary to summarise fully the submissions of construction advanced by the Chief Commissioner. In large measure they are reflected in the analysis of the construction of the legislation which follows.

Consideration

48. The starting point is the text of the legislation: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [47]. The definition of “taxpayer”, is reproduced above. There is no distinction within that definition of primary tax payers and other tax payers, whose liability is generated by some other means. To the contrary, the definition provides a series of limbs, pursuant to which a person – even a person who contests his, her or its liability – falls within the term that is defined. The concluding words “or who is liable or may be liable to pay tax” contemplate the possibility that, contrary to the assessment and determination by a public officer, such as the Chief Commissioner, the person, as a matter of law, is not obliged to pay tax. There is good reason for a broad construction to be given to that term throughout the taxation legislation. One possibility is where a person named on a notice of assessment contends that he, she or it, is not liable, for whatever reason, to pay any tax at all. That person may well seek to avail himself, herself or itself of objection rights under Part 10 of the Taxation Administration Act, but those rights are expressed to be available to “a taxpayer who is dissatisfied with an assessment or some other decision”. In other words, the mere fact that a person is not “primarily” liable for payroll tax, pursuant to ss 6, 7 and 8 of the Payroll Tax Act, being an employer, is no good reason to exclude that person from the conspicuously wider definition of “taxpayer”.

49. Secondly, one turns to the provision which has been invoked to sustain the tax liability contained in the two Assessment Notices that have prompted this litigation, namely, s 81 of the Payroll Tax Act. The liability imposed by s 81 is liability expressed to be joint and several. That is a conventional way to describe a primary liability. The liability imposed thereby, jointly and severally upon a member of a group, is a liability to pay the same amount that the employer had failed to pay. There is no textual indication in s 81 to support a contention that in some way the liability of group members, some eight or 22 days after a failure by an employer within the group to pay an amount of payroll tax, is, in some way, secondary, to that of the employer. Indeed, if it were secondary, in the way for which the plaintiffs contend, it would be difficult to describe it as liability which is “joint and several”. I do not consider that the use of the definite article in s 46 of the TaxationAdministration Act somehow excludes from the scope of that section group members made jointly and severally liable by s 81, to which reference is made in s 45.

50. Thirdly, there is the consideration that the Taxation Administration Act is general legislation expressly stated to apply to a wide range of other State taxation laws, which impose liability in different ways. There is every reason, in those circumstances, for the term taxpayer, to receive, throughout that Act, a broad construction.

51. Fourthly, the submissions on construction advanced by the Chief Commissioner, have the attraction of being aligned to what was held – although in both cases, the matter appears not to have been argued – in Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd and Chief Commissioner of State Revenue v Print National Pty Ltd (2013) 83 NSWLR 555; [2013] NSWCA 96.

1. In the former, the question was whether a discretionary object, who had renounced his entitlement under a trust, could do so with retrospective effect, to avoid the operation of the grouping provisions including s 81. It was not argued in the case, but litigation proceeded on the basis that such a member, who could never bear what the plaintiffs described as a “primary” liability for payroll tax, was nonetheless, a taxpayer.

2. In the latter, a challenge was made to the exercise of power by the Chief Commissioner under s 72 of the Taxation Administration Act, to require information, records and attendance. The challenge was made by Print National Pty Ltd, which was concerned that it might be found to be a member of a group, thereby becoming liable under s 81. Once again, although the point was not argued, the litigation proceeded on the basis that Print National was a “taxpayer”.

52. Fifthly, in accordance with settled principles of construction and decisions such as Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297; [1981] HCA 26, the Court is entitled to have regard to the unlikeliness or capriciousness of the practical consequences of the construction for which the plaintiff contends.

53. The plaintiffs maintained that, since they were not taxpayers, they were unable to avail themselves of rights of objection under Part 10 of the Taxation Administration Act, at least until it had been determined or conceded that they were members of a group. That presents some little difficulty, given that the right of objection attracts a time period of 60 days, although that period may be extended. It is also necessary to bear in mind the position of the employer (who is “primarily” liable) and group members made liable under s 81. On any view, the employer is entitled to object and avail itself of the provisions of Part 10. According to the plaintiffs, other members of the same group, assessed by the Chief Commissioner as liable to pay exactly the same tax, are not permitted to invoke those procedures.

54. The outcome on this construction would appear to be parallel proceedings, one in NCAT, another in a court, involving the same issue, namely, whether or not persons, companies or other entities are members of the same group. It is to be remembered that it may not merely be in the interest of a group member to have it determined that he, she or it, is not a member of the group. The employer may be concerned to achieve a finding that other persons, companies or entities, are not in the same group – because to that extent, the employer’s own payroll tax liability will be reduced.

55. The impracticality and risk of inconsistency, not to mention delay, of parallel proceedings involving the same litigious controversy, is a further matter which tells against the plaintiffs’ construction.

56. Sixthly, the Chief Commissioner’s construction, which permits a person made liable under s 81 to be a taxpayer who can take advantage of the objection provisions in Part 10, is consistent with the approach reflected in s 103A. There is a minor point of construction that arose in the litigation concerning the operation of 103A, and in particular, the qualification in subs (2). It concerns the power, pursuant to which the Chief Commissioner issued the Assessment Notices on 12 April 2018.

57. A relatively recent addition to s 45 (in around 2010), is subs (2A). On one view, the power exercised by the Chief Commissioner was conferred by that section, which was within Part 7. On another view, the power was still that of making a reassessment and issuing a notice of assessment under Part 3. I do not think it is necessary to resolve (or even given the time, which is now 4.15pm) fully to record the parties’ submissions, because on any view, the qualification in subs (2) (“not being an assessment”) means that s 103A(1) applies.

58. The effect of s 103A, is (subject to the inalienable jurisdiction identified in Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1) to subtract from courts’ jurisdiction and power, to consider questions concerning relevantly assessments by the Chief Commissioner.

59. The assessment reflected in the two Assessment Notices dated 12 April 2018, included, necessarily – as an integer in the calculations leading to the total amounts payable – the identities of the group members identified on the assessment. It seems to me that the contention for which the plaintiffs contend, namely, that whether or not they are members of the group, is something that can be litigated in recovery proceedings under s 45, is contrary to what is said in s 103A.

52. Submissions were also made by the Chief Commissioner, based upon the conclusiveness attached to not merely the amounts of the Payroll Tax Assessment Notices but also “all particulars of the assessment”, by virtue of s 119(b). It is not necessary for me to express a view on whether s 119 applies to the identities of the group members stated on Notices of Assessment, which is to say it is not necessary to say whether they are “particulars” of the assessment. In any event, as noted in Commissioner of Taxation v Prestige Motors Pty Ltd (1994) 181 CLR 1; [1994] HCA 39, s 177 of the Income Tax Assessment Act 1936 (Cth) which was the counterpart of s 119 is merely an evidentiary position.

53. Finally, I have regard to purpose, consistently with what has been said in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 and SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 91 ALJR 936. In Print National Australia Pty Ltd v Chief Commissioner of State Revenue [2012] NSWSC 297 at [22], White J referred to the “policy of the Taxation Administration Act”, being “a matter to which great weight must be attached”, which was that amounts stated to be payable on Assessment Notices, were to be paid, notwithstanding the exercise of rights of objection and review, on the basis that, in the event the taxpayer was found to be right, the amounts will be refunded together with interest. Similar statements have been made in a series of cases, directed to the protection of the revenue, including in Smeaton Grange [22] and [139].

54. For those reasons, I do not accept the construction propounded by the plaintiffs. It follows that it is not appropriate to give declaratory or injunctive relief in the terms formulated by them.

55. A deal of the parties’ submissions were directed to the role of various provisions in the events that recovery proceedings, pursuant to s 45 of the Taxation Administration Act were commenced by the Chief Commissioner against either or both of Fyna and Banfirn. Such proceedings have not been commenced, and may never be commenced. I do not think it is desirable to express any views on the competing submissions made, in relation to s 45. As I have said, this litigation is directed squarely and narrowly to the availability of the power under s 46.

56. I make the following orders:

1. Proceedings dismissed.

2. Plaintiffs to pay the defendant’s costs.

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Decision last updated: 07 August 2018