Karabassis v Deputy Commissioner of Taxation
[2009] FMCA 898
•11 September 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KARABASSIS v DEPUTY COMMISSIONER OF TAXATION | [2009] FMCA 898 |
| BANKRUPTCY – Proceedings in connection with sequestration – petition and sequestration order – hearing of creditor's petition and form of sequestration order – going behind judgment – taxation debt – judgement obtained on debt – AAT appeal pending with respect to relevant taxation assessment. |
| Applicant: | GEORGE KARABASSIS |
| Respondent: | DEPUTY COMMISSIONER OF TAXATION |
| File Number: | MLG 1657 of 2007 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 3 August 2009 |
| Date of Last Submission: | 21 August 2009 |
| Delivered at: | Melbourne |
| Delivered on: | 11 September 2009 |
REPRESENTATION
| The Applicant: | No appearance |
| Counsel for the Respondent: | Mr Kurt Malcolm |
| Solicitors for the Respondent: | ATO Legal Services |
ORDERS
That the application for review of the decision of the Registrar be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1657 of 2007
| GEORGE KARABASSIS |
Applicant
And
| DEPUTY COMMISSIONER OF TAXATION |
Respondent
REASONS FOR JUDGMENT
The applicant seeks to review a sequestration order made by a Registrar made on 6 April 2009. The review application was lodged on 27 April 2009. The applicant seeks to set aside the sequestration order and have the creditors’ petition adjourned to a date after the outcome of an appeal that he has pending at the Administrative Appeals Tribunal.
His affidavit in support of the review application sets out that he is the registered carer of his invalid mother, who is 84 years of age. He says that on the date of the hearing before the Registrar his mother was very sick and he attended late for the hearing. The order was issued in his absence. As an application for review is a rehearing on the merits there is little purpose to be served in inquiring further as to the applicant’s reasons for not attending on that day.
The matter was listed for hearing before me on 3 August 2009. On that date the applicant faxed a note to the court marked “Very Urgent.” He enclosed a copy of a letter to the respondent setting out that his health condition was not stable and that he seeks an extra three months, presumably, by way of an adjournment. He says that he is not stable with respect to a heart condition and that he has not yet been able to commence his rehabilitation at the cardiac rehabilitation unit at the Caulfield General Medical Centre. He also provides a list of medications. There is no medical evidence to state that he is unable to attend at the court or participate in the review of the Registrar’s decision.
I therefore proceeded to hear the submissions of the respondent on that date.
Following the 3 August hearing the applicant forwarded documents to the court dated 21 August 2009. A copy of those has been forwarded to the respondent. The documents do not alter the outcome in the decision and I have proceeded to give judgment about convening a further hearing with the respondent with respect to those additional documents.
The debt that the applicant owes to the respondent is a tax debt. As at 31 July 2009 the applicant owed the respondent $39,305.29 as referred to in the creditors’ petition, together with interest, bringing the total debt to $51,773.97 as at 6 April 2009. The debt is the subject of a judgement.
Dispute as to the debt
The debt arises from tax returns lodged by the applicant in the 2001 and 2002 financial years. The income tax liability in the 2001 financial year was $32,631.78, and in the 2002 financial year $4,823.56. In a detailed affidavit filed on 6 April 2009 a Mr Cornelio Soriano, a public servant employed in the debt section of the Australian Taxation Office, set out the circumstances of the assessments.
It appears that the applicant was involved in a business venture relating to the sale of Apple computer products. For the purposes of this venture the applicant operated a company, Varnet Pty Ltd. In his 2000/2001 tax return the applicant showed an income of $58,000 described as an allowance and $24,490 described as salary and wages. This is a total of $82,490. He has stated that this money was paid to him by Varnet Pty Ltd. The tax return of Varnet Pty Ltd for the 2000/2001 financial year shows that it paid salary and wage expenses of $82,490. In addition, the company made loans to shareholders and their associates of $46,250.
The business subsequently failed and the applicant disputes his tax debts arising out of the income recorded in his tax return that came from Varnet Pty Ltd.
The applicant says that a number of items of equipment were leased for the purposes of the business and that he made the lease payments. The documents that he produces indicate that the leases were taken out by Varnet Pty Ltd. The crux of his case seems to be that the payments by Varnet Pty Ltd were reimbursements for the payments that he made to the leasing companies on behalf of Varnet Pty Ltd. Why this would not have been reflected in the tax returns lodged both on his behalf and Varnet’s is not clear, although he provided a letter from his accountant which described his record-keeping as “notoriously bad.”
The debtor lodged an objection with the ATO. An objection decision was made by the Australian Taxation Office denying the objection. Prior to the objection decision being made the ATO wrote to the applicant requesting copies of statements showing repayments made to a financier and documentation showing the reimbursements from the company. These documents would ordinarily be expected to be available and demonstrate whether or not the payments were made as described by the applicant. In the objection decision the ATO rejected the applicant’s case and also noted that once a payment has been made by a company with a particular categorisation it is not possible for the company to re-categorise the nature of the payment made. On the evidence of the tax returns lodged the payments were categorised as income and not reimbursements and, therefore, the tax assessment remained.
Following the applicant lodging an appeal to the AAT the respondent again wrote to him seeking further evidence. The letter is a straightforward letter and clearly identifying the type of evidence that may be available if the applicant’s case is correct. That letter says as follows:
(1)Further to our discussion during conference on 3 December 2008 please provide the following further information to support your claim.
(2)You state that the amount of $58,000 shown as an allowance in your tax return for the year ended 30 June 2001 was a repayment of an amount previously loaned to your employer company, Varnet Pty Ltd (Varnet). Please provide evidence that supports this claim.
(3) Examples of evidence that may support your claim are:
(a)An agreement commencing prior to the end of the financial year ended 30 June 2001 (the relevant year) in which you loaned moneys to Varnet.
(b) Book entries showing that during or before the end of the financial year you had established a loan account with Varnet.
(c) Invoices and personal bank account records or other records created prior to the end of the relevant year showing that you paid your money to Varnet or Varnet’s creditors prior to the end of the relevant year.
(d) Other evidence that shows that the amount of $58,000 was paid to you as a repayment of a loan.
(4)If you wish to discuss this matter further please contact [deleted] of this office on [the phone number deleted].
It is apparent that the respondent has, for some time, been seeking appropriate source documents to show the movement of the moneys concerned that the applicant would need to prove his case. No such documents have been forthcoming.
The applicant has produced a small number of documents, however, they do not demonstrate the nature of the payments as alleged by him. The material that is produced is the tax returns showing that payments were made to him by Varnet Pty Ltd as an allowance, and the documents produced by the applicant to show that the leasing debts were in the name of Varnet Pty Ltd. There is nothing to show that he, rather than Varnet Pty Ltd actually paid the lease payments, nor that the payments from Varnet Pty Ltd were meant to be reimbursements. There is not even a copy of the Varnet Pty Ltd Profit and Loss Statement and Balance Sheet for the relevant year to show whether Varnet Pty Ltd actually recorded making any lease payments. On the material available it appears to me that the applicant has no prospects of success in his proceedings in the Administrative Appeals Tribunal.
The tax judgment was obtained on 4 December 2006. The creditors’ petition was issued on 5 December 2007. Despite the enormous amount of time that has passed the applicant has not produced documents of the nature one would expect to demonstrate his case.
On the material before me I am persuaded that the debt is owing, and that there is no defence or counter-claim. There is no issue in this case as to the debtor’s insolvency, nor any of the other matters necessary to be proved for a sequestration order. The Registrar made appropriate orders and those orders ought not be altered.
I therefore dismiss the application for review of the Registrar’s decision.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Deputy Associate: Aisling Clifford
Date: 11 September 2009
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