Lee v Deputy Commissioner of Taxation; Silverbrook v Deputy Commissioner of Taxation

[2020] NSWCA 95

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	Lee v Deputy Commissioner of Taxation; Silverbrook v Deputy Commissioner of Taxation [2020] NSWCA 95
Hearing dates:	10 March 2020
Date of orders:	19 May 2020
Decision date:	19 May 2020
Before:	Payne JA at [1]; McCallum JA at [81]; Simpson AJA at [82].
Decision:	(1)   appeal dismissed; (2)   appellants to pay the respondent’s costs.
Catchwords:	TAXES AND DUTIES – administration of federal tax legislation – collection and recovery of taxes – PAYG tax – estimates provisions – where Notice of Estimate issued – where company did not pay the amount of the Notice of Estimate – where Director Penalty Notices issued – where appellants placed company into liquidation – whether Director Penalties were remitted pursuant to s 269-30(1) of Schedule 1 to the Taxation Administration Act 1953 – whether trial judge erred in finding that s 269-30(2) Item 2 of Schedule 1 to the Taxation Administration Act 1953 applied in respect of the Director Penalties TAXES AND DUTIES – administration of federal tax legislation – collection and recovery of taxes – PAYG tax – averments under s 255-50 of Schedule 1 to the Taxation Administration Act 1953 – where averments made as to unpaid PAYG amounts withheld – whether averments themselves sufficient evidence that the company had withheld PAYG amounts and not paid those amounts to the Commissioner
Legislation Cited:	Civil Procedure Act 2005 (NSW), ss 56-58 Income Tax Assessment Act 1936 (Cth) Income Tax Assessment Act 1997 (Cth) Schedule 1 to the Taxation Administration Act 1953 (Cth), ss 12-35, 16-25, 16-75, 16-95, 255-45, 255-50, 268-10, 268-15, 268-20, 268-25, 268-40, 269-10, 269-15, 269-20, 269-25, 269-30, 269-35, 269-40, 350-10 Superannuation Guarantee (Administration) Act 1992 (Cth), s 36 Tax Laws Amendment (2012 Measures No. 2) Act 2012 (Cth) Treasury Laws Amendment (2018 Measures No. 4) Act 2019 (Cth)
Cases Cited:	Canty v Deputy Commissioner of Taxation (2005) 63 NSWLR 152; [2005] NSWCA 84 CLK Kitchens & Joinery Pty Ltd v Commissioner of Taxation (2019) 268 FCR 166; [2019] FCA 1086 Deputy Commissioner of Taxation v Lee; Deputy Commissioner of Taxation v Silverbrook (No 1) [2019] NSWSC 346
Texts Cited:	Explanatory Memorandum to the Insolvency (Tax Priorities) Legislation Amendment Bill 1993, 19-20, 25 Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No. 2) Bill 2012 (Cth) Insolvency (Tax Priorities) Legislation Amendment Bill 1993
Category:	Principal judgment
Parties:	Proceedings 2019/251545 Janette Lee (Appellant) Deputy Commissioner of Taxation (Respondent)   Proceedings 2019/251583 Kia Silverbrook (Appellant) Deputy Commissioner of Taxation (Respondent)
Representation:	Counsel: D McGovern SC with T Cleary (Appellants) S Lloyd SC with S Foda (Respondent)   Solicitors: Gibson Howlin Lawyers (Appellants) Craddock Murray Neumann Lawyers (Respondent)
File Number(s):	2019/251545; 2019/251583
Publication restriction:	Nil
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Citation: [2019] NSWSC 954 Date of Decision: 31 July 2019 Before: Davies J File Number(s): 2015/50686; 2015/50872

HEADNOTE

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

On 6 August 2019, the appellants, Ms Lee and Mr Silverbrook, as former directors of a company, Worldwide Speciality Property Services Pty Ltd (Worldwide), were ordered by the primary judge to pay the respondent, the Deputy Commissioner of Taxation, an amount of $13,961,633.90. The amounts claimed by the Commissioner were in respect of Director Penalties imposed as a result of Worldwide’s failure to pay Pay As You Go (PAYG) amounts withheld by Worldwide; estimates pursuant to s 268-10(1) of Sch 1 to the Taxation Administration Act 1953 (Cth) of PAYG amounts withheld by Worldwide; and Worldwide’s superannuation guarantee charge amounts. It was only the second of these amounts which was ultimately in issue on the appeal.

On 31 March 2014, the Deputy Commissioner of Taxation issued Worldwide with a Notice of Estimate of Liability under s 268-15 of Sch 1 to the Taxation Administration Act in respect to PAYG amounts withheld and not paid to the Commissioner for 22 periods concluding no later than 1 June 2012. Worldwide did not pay the liabilities notified in the Notice of Estimate by the due date nor did it lodge a statutory declaration pursuant to s 268-40 of Sch 1 to the Taxation Administration Act. On 11 April 2014, Director Penalty Notices were issued by the Commissioner to the appellants for the amount of the PAYG liabilities notified in the Notice of Estimate. The amounts the subject of the Director Penalty Notices was not remitted to the Commissioner. On 16 April 2014, Worldwide went into voluntary liquidation.

The issue on appeal was whether the primary judge erred in finding that the “lockdown” provision in s 269-30(2) of Sch 1 to the Taxation Administration Act applied in respect of Director Penalties which had become payable by the appellants in respect of the Notice of Estimate issued to Worldwide such that those Penalties were not remitted under s 269-30(1) by reason of Worldwide being placed into liquidation. The essence of the appellants’ submission was that the Commissioner was required to prove the “day by which the company was obliged to pay the underlying liability to which the estimate relates”, meaning that for the “lockdown” provisions in s 269-30(2) of Sch 1 to the Taxation Administration Act to apply, the Commissioner was required to prove that an actual underlying liability existed in respect of the withholding periods referred to in the Notice of Estimate. It was submitted that the Commissioner had failed to do so. The appellants’ fallback submission was that the Treasury Laws Amendment (2018) Measures No. 4) Act 2019 (Cth) had applied a legislative fix to the interpretation advanced by them of s 269-30(2) (although, not retrospectively). This, it was submitted, was a subsequent legislative recognition that the construction they advanced was correct.

The Court held, dismissing the appeal:

Per Payne JA (McCallum JA and Simpson AJA agreeing):

1. The “day by which the company was obliged to pay the underlying liability to which the estimate relates” within the meaning of s 269-30(2) does not require proof by the Commissioner that an underlying liability to pay PAYG amounts withheld existed: [48].

2. The clear legislative intent of the estimate provisions regime is that in recovering the amount of the Notice of Estimate from the entity served with the Notice, the Commissioner does not need to prove the extent of the underlying liability to pay PAYG amounts in fact: [58], [61].

CLK Kitchens & Joinery Pty Ltd v Commissioner of Taxation (2019) 268 FCR 166; [2019] FCA 1086, applied.

3. Subsection 269-30(2) directs attention to the date when the relevant underlying liability the subject of a Notice of Estimate became due, assuming that liability to exist in the same way the estimate does: [65].

4. The introduction of s 269-10(6) in the Treasury Laws Amendment (2018 Measures No. 4) Act 2019 was intended to ensure that the directors of a company at the time of the underlying liability (rather than only those directors holding office as at the date of the Notice of Estimate) come under the obligations imposed by Div 269 for the whole period commencing on the day the underlying liabilities became due: [72].

5. Even if the Commissioner was required to establish the existence of an underlying liability of Worldwide to remit PAYG amounts the subject of the Estimate Notice, the Commissioner established that fact here: [73]. By force of s 255-50 of Sch 1 to the Taxation Administration Act, the facts averred by the Commissioner were prima facie evidence of the facts alleged: [76]. The averments were themselves sufficient evidence that Worldwide had unpaid withholding amounts for the periods in respect of which the Notice of Estimate was issued: [77].

Judgment

1. PAYNE JA: On 31 July 2019, the primary judge, Davies J, gave reasons foreshadowing orders made on 6 August 2019 that the appellants, Ms Lee and Mr Silverbrook, pay the respondent, the Deputy Commissioner of Taxation, an amount of $13,961,633.90.

2. The appellants had been directors of the company Worldwide Speciality Property Services Pty Ltd (ACN: 066 573 671), formerly known as Silverbrook Research Pty Ltd (“Worldwide”).

3. The Deputy Commissioner of Taxation, as a delegate of the Commissioner of Taxation, sought in these proceedings an amount of $10,281,534.67 plus interest from the appellants as the directors of Worldwide. The amounts claimed were in respect of Director Penalties imposed as a result of the failure of Worldwide to pay in total three amounts as follows:

1. actual Pay As You Go (PAYG) amounts withheld by Worldwide for the purposes of Div 12 of the Taxation Administration Act 1953 (Cth) and not paid to the Commissioner of $378,674.00. This amount was reduced to $282,415.00 by reason of amounts received by the Commissioner;

2. estimates pursuant to subs 268-10(1) in Sch 1 to the Taxation Administration Act of PAYG amounts withheld by Worldwide and not paid to the Commissioner in total of $9,682,860.00. This amount was reduced to $9,285,767.19 by reason of amounts received by the Commissioner; and

3. Worldwide’s superannuation guarantee charge amounts not paid to the Commissioner of $713,352.48.

4. It was only the second of these amounts which was ultimately in issue on the appeal.

Brief facts

5. Worldwide withheld amounts for the purposes of the PAYG provisions in Div 12 of Pt 2-5 Div 12 of Sch 1 to the Taxation Administration Act for the period 17 October 2012 to 23 March 2013. Worldwide did not pay by the due dates any of the amounts withheld. On 11 April 2014, Director Penalty Notices were issued by the Commissioner to the appellants for the PAYG withholding amounts. The amount the subject of the Director Penalty Notices was not remitted to the Commissioner. The primary judge entered judgment against the appellants for the amount of these Director Penalty Notices plus interest. This is no longer in issue on this appeal.

6. On 31 March 2014, the Commissioner issued Worldwide with a Notice of Estimate of Liability under s 268-15 of Sch 1 to the Taxation Administration Act in respect of PAYG amounts withheld and not paid to the Commissioner for 22 periods concluding no later than 1 June 2012. Under s 268-20 of Sch 1 to the Taxation Administration Act, the estimates contained in the Notice of Estimate became due and payable on 31 March 2014. Worldwide did not pay the liabilities notified in the Notice of Estimate by the due date nor did it lodge a statutory declaration pursuant to s 268-40 of Sch 1 to the Taxation Administration Act. The purpose of s 268-40 is to permit the recipient of a Notice of Estimate to identify in a statutory declaration that a lesser PAYG amount was in fact the amount unpaid. The statutory declaration could also be deployed to show that the estimated liability never existed.

7. On 11 April 2014, Director Penalty Notices were issued by the Commissioner to the appellants for the amount of the PAYG liabilities notified in the Notice of Estimate. The amount the subject of the Director Penalty Notices was not remitted to the Commissioner. The primary judge entered judgment against the appellants for the amount of these Director Penalty Notices plus interest. This is the subject matter of this appeal.

8. Pursuant to s 36 of the Superannuation Guarantee (Administration) Act 1992 (Cth), Worldwide was assessed for the superannuation guarantee charge amount for the quarters ending 30 June, 30 September and 31 December 2012, and 31 March and 30 June 2013. Section 350-10 of Sch 1 to the Taxation Administration Act makes the Notices of Assessment conclusive evidence in proceedings of this kind, save for circumstances not presently material. Worldwide did not remit the superannuation guarantee charge amounts on or before the due dates. On 28 March 2014, Director Penalty Notices were issued to the appellants for the superannuation guarantee charge amounts. The amount the subject of the Director Penalty Notices was not remitted to the Commissioner. The primary judge entered judgment against the appellants for the amount of these Director Penalty Notices plus interest. This is no longer in issue on this appeal.

9. Worldwide went into voluntary liquidation on 16 April 2014.

10. The hearing before the primary judge commenced on Monday 25 March 2019. Counsel for the Commissioner opened the case. The primary judge invited Ms Lee, who appeared for herself and who was granted leave also to appear on behalf of Mr Silverbrook, to outline in general terms the appellants’ defences to the claims made. Shortly after she began to do that, she received a message on her phone to say that Mr Silverbrook had been taken to hospital, or needed to be taken to hospital, because of his heart condition. She sought an adjournment of the proceedings to the following day. That adjournment was granted.

11. Later that morning, Ms Lee contacted the primary judge’s associate and said that she would be unable to appear on Tuesday 26 March because of Mr Silverbrook’s condition. The proceedings were adjourned part heard to the following Monday, 1 April 2019. On Monday 1 April 2019, Mr Lipp of counsel appeared for the appellants to apply for an adjournment of the hearing. The primary judge refused the adjournment application: Deputy Commissioner of Taxation v Lee; Deputy Commissioner of Taxation v Silverbrook (No 1) [2019] NSWSC 346. Mr Lipp withdrew and the appellants played no further part in the proceedings below. No appeal is brought from the decision to refuse the adjournment.

12. The only grounds of the amended notice of appeal which were pressed were grounds 6 and 7 which provided:

“6 The Primary Judge erred in finding that subsection 269-30(1) of the [Taxation Administration Act (the Act)] did not operate to cause the remission of any penalties that were alleged to arise under Division 268 of the Act.

7   The Primary Judge erred in finding that subsection 269-30(2), item 2 of the Act operated with respect to any penalties that were alleged to arise under Division 268 of the Act.”

13. For the reasons which follow the appeal should be dismissed.

Decision of the primary judge

14. The findings of fact made by the primary judge on the relevant issues were set out in Deputy Commissioner of Taxation v Lee; Deputy Commissioner of Taxation v Silverbrook (No 2) [2019] NSWSC 954:

“[11] On 31 March 2014 the Commissioner issued to the company a Notice of Estimate of Liability in respect of PAYG withholding under s 268-15 of Sch 1 for 22 periods commencing 10 August 2011 and concluding 1 June 2012. Under s 268-20, the estimates contained in the Notice of Estimate became due and payable on 31 March 2014.

[12] The company did not pay by the due date the liabilities notified in the Notice of Estimate nor did it lodge a statutory declaration pursuant to s 268-40. Under that section, the statutory declaration could identify facts sufficient to prove that a specified lesser amount was the amount unpaid or could show that the identified liability never existed.”

15. The primary judge concluded, relevantly, that:

“[32] The obligations on the part of the company and the obligations on the part of the defendants have been set out earlier. The evidence establishes that the actual PAYG withholding, the estimates PAYG withholding and the [Superannuation Guarantee Charge] were not paid by the company. Subject to a consideration of the defence available to the defendants under s 269-35, the evidence discloses that the defendants did not pay the amounts for which the company was liable.

…

[34] There are in evidence certificates by the Deputy Commissioner of Taxation in relation to each of the defendants stating that the directors have a tax-related liability being director penalties arising under s 269-20 of Sch 1 with respect to [Superannuation Guarantee Charge] amounts, PAYG withholding amounts and PAYG withholding amounts (estimates), and that the sum of $10,281,534.67 is a debt due and payable by each of the directors. Contrary to the way the defence is expressed, the certificate was not given by Fiona Hill, but by the Deputy Commissioner of Taxation. Nor was it given pursuant to [s] 255-5 of Sch 1 but pursuant to s 255-45 of Sch 1.”

16. Finally, his Honour rejected the defences advanced by the appellants in their defence:

“[59] In [Deputy Commissioner of Taxation v Saunig (2002) 55 NSWLR 722; [2002] NSWCA 390], Heydon JA said at [28]:

‘While even in a relatively small organisation like the company in this case it may not be right to require each director to take personal steps to ensure compliance with s 222AOB(1)(a), it was incumbent upon Mr Saunig to ascertain what the company’s duties in relation to tax instalments deducted from employees’ wages were and to ensure that some system was in place which would produce compliance. There was no evidence of any such system.’ (Emphasis added.)

[60] The same could be said here of Ms Lee and Mr Silverbrook. The evidence shows that despite the advice they received from external professionals, they believed or assumed that others within and outside the company would be responsible for the company’s tax obligations…”

17. On 6 August 2019, his Honour made orders that in proceedings 2015/50686 against Ms Lee:

“1. Judgment be entered against the Defendant in the amount of $13,961,633.90.

2. The Defendant pay the Plaintiff’s costs of the proceedings.”

18. In proceedings 2015/50872 against Mr Silverbrook the following orders were made:

“1. Judgment be entered against the Defendant in the amount of $13,961,633.90.

2. The Defendant pay the Plaintiff’s costs of the proceedings.”

Application to file a further amended statement of claim

19. On the morning of the hearing of the appeal, Mr McGovern SC, Senior Counsel for the appellants, sought to file in court a further amended notice of appeal containing the following additional ground:

“8 The Primary Judge erred in finding that [the] Appellants could not rely on the statutory defence available at section 269-35(2)(a)(iii) of the Act, and that this statutory defence was not made out, where the uncontested evidence was that:

a. The Plaintiff issued a Director Penalty Notice to the Defendant on 11 April 2014;

b. The Defendants caused the Company to begin to be wound up on 16 April 2014.”

20. Leave to amend was refused on that day with reasons reserved. These are my reasons for refusing leave to amend.

21. Leave to rely on the new ground was opposed by Mr Lloyd SC, Senior Counsel for the Commissioner, for the following reasons:

“LLOYD: We say that leave to raise this new point shouldn’t be permitted [for] a number of reasons. First of all, the last time this matter was set down for hearing, shortly before the hearing they raised [an] amended ground and there had to be an adjournment. We are not ready to answer this point. We can say something briefly about it by way of leave but if the Court were to grant it, we would say [we] need an adjournment because we would need to seek instructions in relation to that. It’s a whole different point. The gist of what we would say about it is even if (and we perhaps don’t deny that there might be an error in the construction of 269-30 in the context of how it applies to 269-35) however, that isn’t enough to get them to a success. What they would need to show is that they made out one of the defences and they actually tendered no evidence whatsoever, and it’s clear that under s 269-40 the obligation is on them to prove a defence. They haven’t proved a defence.

They can’t possibly be seen as having proved a defence, and in those circumstances the prospects of success of the new ground don’t merit an amendment, we would say.”

22. Those submissions should be accepted.

23. The primary judge set out the history of these proceedings in Lee (No 1). On 18 February 2015, these proceedings were commenced against each of the appellants. A notice of appearance was eventually filed on behalf of the appellants on 7 September 2015. The first defence was filed by the appellants on 10 October 2016. A further amended defence was filed on 14 November 2017. After a series of further procedural delays the matters were eventually brought on for hearing before the primary judge in March 2019, over four years after the proceedings had been commenced. His Honour’s judgment was delivered on 31 July 2019.

22. On 13 August 2019, the appellants each filed a notice of appeal. The matter was listed for hearing in this Court on 6 December 2019. On 7 November 2019, the appellants’ then solicitors filed a notice of ceasing to act. On 25 November 2019, the appellants filed notice of the appointment of new solicitors. On 27 November 2019, the week before the date fixed for the appeal hearing, the appellants filed written submissions raising substantially new issues. On 2 December 2019, the respondent filed a notice of motion seeking an order that the appeal date be vacated in order to investigate the new matters raised by the appellants. On 2 December, the 6 December hearing date was vacated and the present hearing date fixed.

23. The Commissioner’s submission that the proposed new ground of appeal is weak should be accepted. The onus of proving the s 269-35(2)(a)(iii) defence sought to be raised was a matter on which the appellants bore the onus. The appellants chose not to participate in the hearing before the primary judge in the circumstances described in Lee (No 1). Mr Lloyd SC is correct to submit that in the circumstances there described and on the basis of the evidence led the appellants “can’t possibly be seen as having proved a defence”. To permit them to attempt to do so for the first time on appeal is not a course to be encouraged.

24. The Commissioner’s submission that the proposed new ground of appeal would need properly to be investigated should also be accepted. The primary judge considered the appropriate test set out in Canty v Deputy Commissioner of Taxation (2005) 63 NSWLR 152; [2005] NSWCA 84. His Honour addressed the appellants’ pleaded defences. The present claim was not raised as a distinct issue before the primary judge. As the appellants bore the onus on that matter it needed to be squarely raised. I accept Mr Lloyd’s submission that if the amendment were allowed an adjournment would be required as the Commissioner was taken by surprise.

25. All litigation in this Court, including litigation involving the collection of tax, attracts the obligations in Pt 6 of the Civil Procedure Act 2005 (NSW). A hearing date for this appeal was previously vacated by reason of a late change in the appellants’ grounds of appeal. The appellants have had ample opportunity to formulate and present their case on appeal. Even though the proposed new ground of appeal is weak, if it were allowed the appeal would have needed to be adjourned with the consequent expense and delay to the parties. The interests of other litigants in the Court whose cases could otherwise have been heard would have been adversely affected. That outcome is antithetical to the dictates of ss 56-58 of the Civil Procedure Act. For these reasons I joined in the order refusing the application to further amend the notice of appeal.

Issue raised by this appeal

28. The only grounds of appeal pressed are those set out at [12] above. In essence, the appellants submit that by reason of Worldwide going into liquidation on 16 April 2014 the amount of the Director Penalty Notices was remitted and there was no longer a liability upon them to pay the amount of the PAYG Notice of Estimate served upon Worldwide. The acceptance of that submission would have the consequence that the “lockdown” provisions in s 269-30(2) of Sch 1 to the Taxation Administration Act relating to Director Penalty Notices were ineffective in the present circumstances.

29. To determine the issue raised on this appeal, it is necessary to describe in a little detail the scheme of PAYG taxation, the PAYG Estimate Notice regime, the Director Penalty provisions and the “lockdown” provisions.

Consideration

30. The essential feature of PAYG taxation is that employees earning salaries and wages do not themselves (at least in the first instance) remit income tax payable on those salaries and wages to the Commissioner. Instead, entities responsible for paying salaries and wages are obliged to withhold amounts payable as income tax from employees’ salaries and wages. The withholding entity is separately required to remit the amounts so withheld to the Commissioner.

31. The obligation to withhold is contained in Div 12 of the Taxation Administration Act. The relevant obligation here, the obligation to withhold from payments of salary and wages to an employee, is contained in s 12-35. That section provides:

12-35 Payment to employee

An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity).

32. An entity must not fail to withhold an amount that is required by Div 12 to be withheld:

16-25 Failure to withhold: offence

(1) An entity must not fail to withhold an amount as required by Division 12.

Penalty: 10 penalty units.

Note 1: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

Note 2: See sections 16-30, 16-35, 16-40 and 16-43 for an alternative administrative penalty.

(2) An entity must not fail to pay to the Commissioner an amount as required by Division 13 or 14. [1]

1. As at the date the obligation to withhold arose by 1 June 2012. Subsection 16-25(2) has since been amended.

Penalty: 10 penalty units.

Note 1: See section 4AA of the Crimes Act1914 for the current value of a penalty unit.

Note 2: See sections 16-30, 16-35, 16-40 and 16-43 for an alternative administrative penalty.

(3) An offence against subsection (1) or (2) is a strict liability offence.

Note: For strict liability, see section 6.1 of the Criminal Code.

(4) If a person is convicted of an offence in relation to:

(a) a failure by that person or someone else to withhold an amount as required by Division 12; or

(b) a failure by that person or someone else to pay to the Commissioner an amount as required by Division 13 or 14; [2]

the court may order the convicted person to pay to the Commissioner an amount up to the *amount required to be withheld. The court may so order in addition to imposing a penalty on the convicted person.

2. As at the date the obligation to withhold arose by 1 June 2012. Subsection 16-25(4)(b) has since been amended.

33. Section 16-75 of Sch 1 to the Taxation Administration Act is the provision that imposes the relevant legal obligation in this case. A “large withholder” is required to pay amounts from salaries and wages withheld to the Commissioner within the time identified in the section. It is common ground that Worldwide was a large withholder. Section 16-75(1) relevantly provides:

16‑75  When amounts must be paid to Commissioner

Large withholder

(1)  A *large withholder must pay to the Commissioner as shown in the table an amount it withholds under Division 12 (other than section 12‑175 or 12‑180) during a month.    

Payments by large withholders
Item	If the amount is withheld on this day of week:	It must be paid to the Commissioner on or before:
1	Saturday or Sunday	The second Monday after that day
2	Monday or Tuesday	The first Monday after that day
3	Wednesday	The second Thursday after that day
4	Thursday or Friday	The first Thursday after that day

34. In respect of any unpaid and overdue amounts, the Commissioner may make an estimate of the unpaid and overdue amount of a liability under s 268-10 of Sch 1 to the Taxation Administration Act which provides: [3]

    3. As at the date the Notice of Estimate was given on 31 March 2014. Section 268-10 has since been amended.

268‑10  Commissioner may make estimate

Estimate

(1)  The Commissioner may estimate the unpaid and overdue amount of a liability (the underlying liability) of yours:

(a) under section 16‑70 in this Schedule (requirement to pay to the Commissioner amounts you have withheld under the Pay as you go withholding rules); or

(b) to pay superannuation guarantee charge for a *quarter under section 16 of the Superannuation Guarantee (Administration) Act 1992, to the extent the superannuation guarantee charge has not been assessed before the Commissioner makes the estimate.

(1A) For the purposes of this Division, your superannuation guarantee charge for a *quarter is treated as being payable on the day by which you must lodge a superannuation guarantee statement for the quarter under section 33 of the Superannuation Guarantee (Administration) Act 1992, even if, on that day, the charge has not been assessed under that Act.

Amount of estimate

(2)  The amount of the estimate must be what the Commissioner thinks is reasonable.

(3)  In making the estimate, the Commissioner may have regard to anything he or she thinks relevant.

Example 1: In the case of an underlying liability under section 16‑70 (requirement to pay to the Commissioner amounts you have withheld under the Pay as you go withholding rules), the Commissioner may have regard to information about amounts you withheld under the Pay as you go rules before the period in relation to which the underlying liability arose.

Example 2: In the case of an underlying liability to pay superannuation guarantee charge for a quarter, the Commissioner may have regard to information about your contributions to RSAs and complying superannuation funds for earlier quarters.

Only one estimate for each liability

(4)  While the estimate is in force, the Commissioner cannot make another estimate relating to the underlying liability.

(5)  For the purposes of subsection (4), the estimate is in force if:

(a)  the Commissioner has given you notice of the estimate; and

(b)  the estimate has not been revoked; and

(c)  your liability to pay the estimate has not been discharged.

35. An entity receiving a PAYG Notice of Estimate is obliged to pay the amount of the estimate in the Estimate Notice. Section 268-20 provides: [4]

    4. As at the date the Notice of Estimate was given on 31 March 2014. Section 268-20 has since been amended.

268‑20  Nature of liability to pay estimate

Liability to pay amount of estimate

(1)  You must pay to the Commissioner the amount of the estimate if the Commissioner gives you notice of the estimate in accordance with section 268‑15. The amount is due and payable when the Commissioner gives you the notice.

Note: The amount of the estimate may be reduced, or the estimate revoked, under Subdivision 268‑D.

Liability to pay amount of estimate is distinct from underlying liability

(2)  Your liability to pay the amount of the estimate is separate and distinct from the underlying liability. It is separate and distinct for all purposes.

Example: The Commissioner may take:

(a) proceedings to recover the unpaid amount of the estimate; or

(b) proceedings to recover the unpaid amount of the underlying liability; or

(c) proceedings of both kinds.

Discharging one liability discharges other liabilities

(3)  Despite subsection (2), if, at a particular time, one of the liabilities to which this subsection applies is discharged, to the extent of an amount, for either of the following reasons, each of the other liabilities to which this subsection applies is discharged to the extent of the same amount:

(a)  an amount is paid or applied towards discharging the liability;

(b) the liability is discharged because of section 269‑40 (Effect of director paying penalty or company discharging liability).

(4)  Subsection (3) applies to whichever of the following liabilities are in existence at the particular time:

(a)  your liability to pay the amount of the estimate;

(b)  the underlying liability;

(c)  a liability of yours under a judgment, to the extent that it is based on a liability referred to in paragraph (a) or (b).

(5)  Subsection (3) does not discharge a liability to a greater extent than the amount of the liability.

36. The accuracy of the estimate contained in the Estimate Notice is irrelevant to liability imposed on the entity to pay the amount identified in the Estimate Notice. Section 268-25 provides:

268‑25  Accuracy of estimate irrelevant to liability to pay

You are liable to pay the unpaid amount of the estimate even if:

(a)  the underlying liability never existed or has been discharged in full; or

(b)  the unpaid amount of the underlying liability is less than the unpaid amount of the estimate.

Note 1: Section 268‑40 revokes the estimate if you give the Commissioner a statutory declaration, or file an affidavit, to the effect that the underlying liability never existed.

Note 2: Subdivision 268‑D provides ways in which you can challenge the estimate or its amount.

37. The principal means by which a recipient may dispute a PAYG Estimate Notice are described in s 268-40. Under that section, a statutory declaration may be made which may identify that a specified lesser amount was the amount unpaid or no liability to pay PAYG amounts withheld existed. Section 268-40 provides:

268‑40 How estimate may be reduced or revoked—statutory declaration or affidavit

Scope

(1) This section applies as set out in the following table:

Statutory declaration or affidavit
Item	This section applies if ...	and ...	within ...
1	the Commissioner gives you notice of the estimate	you give the Commissioner a statutory declaration for the purposes of this section	(a) 7 days after the Commissioner gives you the notice; or (b) a longer period allowed by the Commissioner.
2	you are a party to proceedings before a court that relate to the recovery of the unpaid amount of the estimate	you: (a) file an affidavit for the purposes of this section; and (b) serve a copy on the Commissioner	(a) 14 days after you first take a procedural step as a party to the proceedings; or (b) a longer period allowed by the court.
3	(a) the estimate is of the unpaid amount of a liability of a company; and (b) the Commissioner serves on the company a *statutory demand relating to the company’s liability to pay the unpaid amount of the estimate; and (c) an application is made to a court under section 234, 459P, 462 or 464 of the Corporations Act 2001 for the company to be wound up	the company: (a) files an affidavit for the purposes of this section; and (b) serves a copy on the applicant	(a) 14 days after notice of the application was served on the company; or (b) a longer period allowed by the court.

Example: For the purposes of item 2 of the table, taking a procedural step as a party to proceedings includes entering an appearance, filing a notice of intention to defend, or applying to set aside judgment entered in default of appearance.

Note 1: Section 459C of the Corporations Act 2001 creates a presumption that a company is insolvent, and may be wound up, if the company fails to comply with a statutory demand.

Note 2: See section 268‑90 for what the statutory declaration or affidavit must contain and who must make, swear or affirm it.

Reduction

(2) The amount of the estimate is reduced if the statutory declaration is to the effect, or the affidavit verifies facts sufficient to prove, that a specified lesser amount is the unpaid amount of the underlying liability.

Example: Subsection (2) will apply if the statutory declaration etc. is to the effect that the underlying liability has been discharged in full (and therefore the unpaid amount of the liability is nil).

(3) The amount of the reduction is the amount by which the unpaid amount of the estimate (just before the reduction) exceeds the amount specified.

Note: The effect of subsection (3) is to reduce the unpaid amount of the estimate to the amount specified.

Revocation

(4) The estimate is revoked if the statutory declaration is to the effect, or the affidavit verifies facts sufficient to prove, that the underlying liability never existed.

38. The estimates regime was plainly designed to ensure that those responsible for collecting and remitting PAYG amounts (including company directors) both collected and paid the amounts required by the Income Tax Assessment Acts 1936 (Cth) and 1997 (Cth). The estimates regime was designed as a statutory tool facilitating recovery of unremitted PAYG amounts. This was explained at pp 19-20 of the Explanatory Memorandum to the Insolvency (Tax Priorities) Legislation Amendment Bill 1993 (Cth) which introduced the estimate regime:

“The Commissioner is currently required to establish the precise amount of the unremitted amount [of PAYG withheld] before he [or she] can take any legal action to recover the amount. This often frustrates the efficient and timely recovery of the unremitted deductions because of the necessary delay between non-remittance and ascertainment of the unpaid amount.

…

A key feature of the new regime will enable the Commissioner to make an estimate of unremitted amounts when the time for payment has passed. He [or she] can then take action to recover that estimate if [the Commissioner] is not advised of the actual amount. As the Commissioner is only interested in collecting the actual unremitted amounts, a person will be given an opportunity to inform the Commissioner of the actual amounts deducted.” (Emphasis in original).

39. The “opportunity to inform the Commissioner of the actual amounts deducted” refers to s 268-40 set out above. It was specifically envisaged that the estimate made by the Commissioner was unlikely to identify the actual amount withheld which is required to be paid. As the Explanatory Memorandum observed at p 25:

“In practice it will be most unusual for the Commissioner to estimate precisely the actual unremitted amounts. Of course the estimate could be reduced to the actual unremitted amount when the person liable, upon being notified of the estimate by the Commissioner, declares what the actual unremitted amount was.”

40. Thus, in context, relief from the obligation to pay the estimate should be understood as based upon relevant parties taking up the “opportunity to inform the Commissioner of the actual amounts deducted”, being that:

1. an estimate given by the Commissioner is reduced or revoked if a statutory declaration or an affidavit verifies facts sufficient to prove that a specified lesser amount is the unpaid amount of the underlying liability, or that no liability existed (s 268-40(2)-(4)); and

2. it is open to a party in proceedings that relate to recovery of an unpaid estimate to file and serve an affidavit for the purposes of s 268-40(1) within the prescribed time limits which would have the effect of reducing or revoking an estimate (s 268-40(1) – Item 2).

41. In addition to the opportunity to provide a statutory declaration relating to Worldwide’s liability to pay PAYG amounts withheld, the Commissioner accepted that the appellants were both “a party to proceedings before a court that relate to the recovery of the unpaid amount of the estimate” and could have served an affidavit for the purposes of s 268-40(1) – Item 2 that would have the effect of reducing or revoking the estimate given to Worldwide. That affidavit was required to be filed 14 days after the appellants first took a procedural step as a party to the present recovery proceedings (which would have been 14 days after the appellants first filed an appearance on 7 September 2015) [5] or such longer period allowed by the Court. No affidavit was filed and no application was ever made for an extension of time to file one.

    5. Filing a notice of appearance is a procedural step in the example in 268-40(1).

42. The issue on this appeal arises in circumstances where:

1. on 31 March 2014, the Commissioner issued Worldwide with a Notice of Estimate of Liability under s 268-15. Worldwide was liable to pay the amount identified in the Notice of Estimate on 31 March 2014;

2. on 11 April 2014, Director Penalty Notices were issued by the Commissioner to the appellants for the amount of the PAYG liabilities notified in the Notice of Estimate; and

3. on 16 April 2014, Worldwide went into voluntary liquidation.

43. Section 269-15 of Sch 1 to the Taxation Administration Act provides that:

269‑15  Directors’ obligations [6]

6. Subsection 269-15(2A) was inserted after the relevant dates.

Directors’ obligations

(1) The directors (within the meaning of the Corporations Act 2001) of the company (from time to time) on or after the initial day must cause the company to comply with its obligation.

(2) The directors of the company (from time to time) continue to be under their obligation until:

(a) the company complies with its obligation; or

(b) an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or

(c) the company begins to be wound up (within the meaning of that Act).

Instalment arrangements

(3) The Commissioner must not commence, or take a procedural step as a party to, proceedings to enforce an obligation, or to recover a penalty, of a director under this Division if an *arrangement that covers the company’s obligation is in force under section 255‑15 (Commissioner’s power to permit payments by instalments).

Note 1: The arrangement may also cover other obligations of the company.

Note 2: Subsection (3) does not prevent the Commissioner from giving a director a notice about a penalty under section 269‑25.

44. Section 269-20 to Sch 1 of the Taxation Administration Act provides that:

269‑20  Penalty

Penalty for director on or before due day

(1) You are liable to pay to the Commissioner a penalty if:

(a) at the end of the due day, the directors of the company are still under an obligation under section 269‑15; and

(b) you were under that obligation at or before that time (because you were a director).

Note: Paragraph (1)(b) applies even if you stopped being a director before the end of the due day: see subsection 269‑15(2).

(2) The penalty is due and payable at the end of the due day.

Note: The Commissioner must not commence proceedings to recover the penalty until the end of 21 days after the Commissioner gives you notice of the penalty under section 269‑25.

Penalty for new director

(3) You are also liable to pay to the Commissioner a penalty if:

(a) after the due day, you became a director of the company and began to be under an obligation under section 269‑15; and

(b) 30 days later, you are still under that obligation.

(4) The penalty is due and payable at the end of that 30th day.

Note: The Commissioner must not commence proceedings to recover the penalty until the end of 21 days after the Commissioner gives you notice of the penalty under section 269‑25.

Amount of penalty

(5) The amount of a penalty under this section is equal to the unpaid amount of the company’s liability under its obligation.

Note 1: See section 269‑40 for the effect on your penalty of the company discharging its obligation, or of another director paying his or her penalty.

Note 2: See section 269‑45 for your rights of indemnity and contribution.

45. The issue on this appeal is the operation of the “lockdown” provisions contained in s 269-30(2) of Sch 1 to the Taxation Administration Act. At the relevant time they provided:

269‑30  Effect on penalty of directors’ obligation ending before end of notice period

(1) Subject to subsection (2), a penalty of yours under this Division is remitted if the directors of the company stop being under the relevant obligation under section 269‑15:

(a) before the Commissioner gives you notice of the penalty under section 269‑25; or

(b) within 21 days after the Commissioner gives you notice of the penalty under that section.

(2) The following table has effect: [7]

7. As at the dates the Notice of Estimate and Director Penalty Notices were given. Subsection 269-30(2) has since been amended.

When appointing administrator or winding up company does not affect penalty
Item	Column 1 If the company’s obligation is to pay to the Commissioner, on or before the due day …	Column 2 and, because of paragraph 269-15(2)(b) or (c) (an administrator is appointed or the company begins to be wound up), the directors stop being under the relevant obligation after the last day of the 3 months after …	Column 3 subsection (1) does not apply …
1	an amount in accordance with Subdivision 16-B (obligation to pay withheld amounts to the Commissioner),	the due day,	to the extent the company does not, on or before the last day mentioned in column 2, notify the Commissioner under section 16-150 of the amount the company is obliged to pay.
2	the amount of an estimate under Division 268 (estimates of PAYG withholding liabilities and superannuation guarantee charge),	the day by which the company was obliged to pay the underlying liability to which the estimate relates,	to any extent.
3	superannuation guarantee charge for a *quarter,	the due day,	(a) if the company, on or before the last day mentioned in column 2, lodges under section 33 of the Superannuation Guarantee (Administration) Act 1992 a superannuation guarantee statement for the quarter – the extent (if any) to which the sum mentioned in paragraph 35(1)(e) of that Act is less than the amount of the superannuation guarantee charge the company is obliged to pay for the quarter; or (b) otherwise – to any extent.

Note 1: An administrator of the company being appointed, or the company beginning to be wound up, after the last day mentioned in column 2 will, to the extent mentioned in column 3, have no effect on the penalty.

Note 2: The sum mentioned in paragraph 35(1)(e) of the Superannuation Guarantee (Administration) Act 1992 is the sum of:

(a) the total of the company’s individual superannuation guarantee shortfalls; and

(b) the company’s nominal interest component; and

(c) the company’s administration component;

specified in the superannuation guarantee statement.

(3) If you become a director of the company during or after the 3 months mentioned in column 2, treat the reference in the column to the 3 months as being a reference to the 3 months after the day you become a director of the company.

46. The relevant item of s 269-30(2) is Item 2. The question is the identification of the “day by which the company was obliged to pay the underlying liability to which the estimate relates”. The appellants contend that the trial judge erred in finding that s 269-30(2) of Sch 1 to the Taxation Administration Act applied in respect of Director Penalties which had become payable by the appellants in respect of Notices of Estimates issued to Worldwide such that those Penalties were not remitted under s 269-30(1) by reason of Worldwide being placed into liquidation.

47. The essence of the appellants’ submission is that the Commissioner was required to prove the “day by which the company was obliged to pay the underlying liability to which the estimate relates”, meaning that for the “lockdown” provisions in s 269-30(2) of Sch 1 to the Taxation Administration Act to apply, the Commissioner was required to prove that an underlying liability existed in respect of the withholding periods referred to in the Notice of Estimate. It was submitted that the Commissioner had failed to do so.

48. I reject the appellants’ submission for two reasons:

1. as a matter of construction the “day by which the company was obliged to pay the underlying liability to which the estimate relates” within the meaning of s 269-30(2) does not require proof that an underlying liability to pay PAYG amounts withheld existed; and

2. even if the Commissioner was required to prove that an underlying liability to pay PAYG amounts withheld existed, he did so here.

49. In context it is clear that s 269-30(2) directs attention to the date when the asserted underlying liability the subject of an estimate became due. Subsection 269-30(2) operates, and is plainly intended to operate, irrespective of the existence of any underlying liability in fact. The Commissioner was not in the present case under a burden to establish the existence of any underlying liability in fact.

50. As I have explained, Worldwide was a large withholder within the meaning of s 16-95. Worldwide became liable to pay to the Commissioner the amount specified in the Notice of Estimate given to Worldwide on 31 March 2014. Worldwide’s liability for the estimate given by the respondent was for periods of withholding that concluded no later than 1 June 2012. Pursuant to s 16-75 the due date for payment of the amounts the subject of the underlying withholdings the subject of the Notice of Estimate was no later than 7 June 2012.

51. On 31 March 2014, pursuant to s 269-20, the appellants became liable to a penalty in an amount equal to the unpaid amount of Worldwide’s liability under the Notice of Estimate. The amount was due and payable on 31 March 2014.

52. Worldwide was wound up on 16 April 2014, being a date prior to 21 days after the appellants were given written notice under s 269-25. By reason of s 269-15(2)(c), upon Worldwide being wound up the appellants were no longer under the obligation imposed on them by s 269-15(1) to cause Worldwide to comply with its obligation to pay the amounts specified in the Notice of Estimate. Under s 269-30(1), if it applied, the appellants would “stop being under the relevant obligation” to pay the amount of the Director Penalty Notices as Worldwide went into liquidation within 21 days after the Commissioner gave the appellants the Penalty Notices.

53. As the heading of s 269-30 indicates – “Effect on penalty of directors’ obligation ending before end of notice period” – the section is directed to the precise question here. As a Notice of Estimate is here involved, the relevant item is s 269-30(2) – Item 2 which, in the circumstances of this case, putting all elements of the table together, reads:

“If the company’s obligation is to pay the Commissioner, on or before the due day the amount of an estimate under Division 268 [being relevantly an estimate of PAYG withholding liabilities], and because of paragraph 269-15(2)(c) the company begins to be wound up, the directors stop being under the relevant obligation after the last day of the 3 months after the day by which the company was obliged to pay the underlying liability to which the estimate relates, subsection (1) does not apply to any extent.”

54. The question on the appeal is whether the appellants ceased being under the relevant obligation “after the last day of the 3 months after the day by which the company was obliged to pay the underlying liability to which the estimate relates”. The appellants’ essential case is that:

1. without proof of the existence of an underlying liability, there can be no identification of the “day” by which Worldwide was in fact obliged to pay the underlying amounts; and

2. accordingly, in considering whether s 269-30(2) applies, without proof of the existence of an underlying liability, there is no possibility of being satisfied that the appellants ceased being under the obligation more than three months after the relevant day.

55. Some points about the differing nature of an estimate made of the amount required to be paid and the separate underlying liability to pay the PAYG amount withheld should be made.

56. The Commissioner is empowered by s 268-10(1) to estimate “the unpaid and overdue amount of a liability” in respect of withholding amounts. In doing so, the Commissioner is entitled to have regard to anything he or she thinks relevant: s 268-10(3). The clear legislative intent is that the liability to pay the amount of the estimate should be separate to the liability to pay the PAYG amount actually withheld. This can be seen in the following provisions:

1. an entity’s liability to pay the amount of an estimate is “separate and distinct from the underlying liability. It is separate and distinct for all purposes”: s 268-20(2); and

2. the entity’s liability to pay the estimate exists “even if (a) the underlying liability never existed or has been discharged in full; or (b) the unpaid amount of the underlying liability is less than the unpaid amount of the estimate”: s 268-25.

57. These provisions are designed to give effect to the “efficient and timely recovery of the unremitted deductions”, as stated in the Explanatory Memorandum to the Insolvency (Tax Priorities) Legislation Amendment Bill 1993 at p 19, by making those responsible for withholding and paying PAYG amounts liable for the full amount of the estimate, regardless of the existence of any underlying liability in fact, subject always to the opportunity to “inform the Commissioner of the actual amounts deducted” (at p 20) by statutory declaration or affidavit, by which means the liability to pay can be reduced or eliminated.

58. Where the entity in receipt of an estimate does not take advantage of the opportunity to “inform the Commissioner of the actual amounts deducted” the entity is liable for the full amount of the estimate, regardless of the actual liability, if any, to pay the PAYG amounts to the Commissioner. In recovering the amount of the Notice of Estimate from the entity served with the Notice, the Commissioner does not need to prove the extent of the underlying liability to pay PAYG amounts in fact, or even if such a liability exists. To impose such a requirement in the case of a Director Penalty Notice in the context of s 269-30(2) would be inconsistent with the statutory scheme of estimates. So much is made clear by s 268-25.

59. The words “the unpaid and overdue amount of a liability” in s 268-10(1) are not words of limitation. As was observed by Derrington J in CLK Kitchens & Joinery Pty Ltd v Federal Commissioner of Taxation (2019) 268 FCR 166; [2019] FCA 1086 at [74] :

“[74] … the mere fact of a payer having no underlying liability to withhold does not mean the Commissioner may not make an estimate under s 268-10: see eg s 268-25(a) where it expressly contemplates that no underlying liability might exist but the obligation to pay the estimate remains. The Commissioner is entitled to make estimates that are inaccurate or imperfect, subject to s 268-10(2) and (3).”

60. Derrington J also explained the legislative purpose of the estimates regime as follows at [78]-[80]:

“[78] The practical reality is that the Commissioner will not always know in advance whether there has been a non-compliance with s 12-35 or s 16-70. That is why [the Commissioner] is entitled to issue an erroneous Estimate Notice which, despite the error, gives rise to an immediate liability. It also underscores the reason the recipient of the notice must provide a sufficient factual basis in their statutory declaration to reveal the real facts (rather than assertions as to legal conclusions) so that the Commissioner has the factual basis on which to proceed. If those facts reveal the failing is under s 12-35, although the Estimate Notice might be revoked by operation of s 268-40(4), the Commissioner is then informed appropriately to pursue his remedies under s 16-30.

[79] So, through the Estimate Notice regime, the Commissioner is either paid, is informed of the fact he needs to be paid in another way, or obtains the information which shows that there has been no non-compliance at all. And [the Commissioner] gets that payment or information promptly.

[80] In understanding the above, the means of achieving the purpose of prompt and effective action to protect the revenue can be seen.”

61. Despite this being the clear legislative intention of the estimate provisions, the appellants claim that when the “lockdown” provisions in s 269-30 come to be construed, the legislature should be understood to have adopted precisely the opposite approach, and to have required the Commissioner in seeking to recover the amount of a Director Penalty Notice based on an estimate to prove the existence of an actual liability to pay a PAYG amount the subject of a Notice of Estimate. No sensible reason why that might be so was advanced by the appellants.

62. The construction of the relevant provisions I prefer is consistent with the statutory purpose of the estimates provisions. The relevant “lockdown” provision, s 269-30(2) – Item 2, should be understood as consistent with and supportive of the legislative purpose of the estimate provisions.

63. Section 269-30(2) (the lockdown provision) was first inserted in the Taxation Administration Act by the Tax Laws Amendment (2012 Measures No. 2) Act 2012 (Cth). The purposes of the amendments are set out in the Explanatory Memorandum to the Bill at [1.14] as follows:

“[1.14] These amendments protect workers’ entitlements and strengthen directors’ obligations by:

… ensuring that directors cannot discharge their director penalties by placing their company into administration or liquidation when PAYG withholding or superannuation guarantee remains unpaid and unreported three months after the due date…”

64. If the appellants’ construction is correct this clear legislative purpose has misfired spectacularly. Rather than “ensuring that directors cannot discharge their director penalties” by placing their company into liquidation when PAYG withholding remains unpaid and unreported three months after the due date, that construction would have precisely that effect unless the Commissioner was able to prove that the entity with the withholding liability based on a Notice of Estimate in fact had such an underlying liability.

65. To the contrary, s 269-30(2) – Item 2 does not require proof of an underlying liability for the subsection to apply. Instead, s 269-30(2) directs attention to the date when the relevant underlying liability the subject of a Notice of Estimate became due, assuming that liability to exist in the same way the estimate does. Section 16-75(1) is explicit as to how that date is to be ascertained for large withholders such as Worldwide. Subsection 269-30(2) – Item 2 is not concerned with establishing the quantum of the underlying liability or whether or not it exists in fact to any extent.

66. In making an estimate, the Commissioner must arrive at an amount that he or she thinks is reasonable: s 268-10(2). However, the liability to pay the estimate exists, even if the estimate is inaccurate or erroneous. Proof of the true extent of an entity’s non-compliance with its withholding obligations is not a pre-requisite to the Commissioner making a valid estimate. The essential purpose of the estimate regime is to require either a company or its directors to provide information about the correct amounts actually withheld to the Commissioner promptly, or to verify facts from which it could be concluded that the company did not fail to comply with its obligations to remit amounts withheld under Div 12.

67. The obligation that is sought to be enforced under the Director Penalty regime in respect of an estimate is the prompt reporting and payment by a company of its PAYG withholding amounts. The possibility that a director may be personally liable to pay an estimate even after placing a company into liquidation is plainly an intended consequence of the Act. The Director Penalty and lockdown provisions provide a strong incentive for a director to ensure the relevant company and the director the subject of a Director Penalty Notice provide information of the type permitted by s 268-40 promptly to the Commissioner to effect a revocation or reduction of the estimate. As I have explained, that course is also open to a director in proceedings to recover a Director Penalty based upon an estimate, and was open to the appellants here.

68. The intention of s 269-30(2) – Item 2 is to ensure that a director’s obligations in respect of estimates cannot be thwarted by putting a company into liquidation without the directors or the company advising the Commissioner of the true amount of a withholding, or that no withholding occurred. Absent such steps being taken, the director remains liable for the full amount and cannot evade liability by placing the company into liquidation.

69. The present is a stark case. Neither the appellants nor Worldwide availed themselves of the opportunity to effect a revocation or reduction of the estimate in the manner provided for in s 268-40. The periods in respect of which the estimate relates were significantly in excess of three months prior to the date that the appellants placed Worldwide into liquidation. Item 2 of s 269-30(2) operated, and was plainly intended to operate, so that the liquidation of Worldwide did not have the effect of remitting the Director Penalties.

70. The appellants’ fallback submissions contend that the Treasury Laws Amendment (2018 Measures No. 4) Act 2019 (Cth) had applied a legislative fix to the interpretation advanced by them of s 269-30(2) (although, not retrospectively). The appellants contend that by reason of the newly inserted s 269-10(6), s 269-30(2) is to be construed as if the underlying liability and the estimate liability exist to the same extent. This, it was submitted, was a subsequent legislative recognition that the construction they advance was correct.

64. The Treasury Laws Amendment (2018 Measures No. 4) Act does not have that effect. The directive in s 269-10(6) to treat the underlying amount and estimate amount as the same applies only for the purposes of determining the “initial day” (s 269-10(5)-(6)), being the date on which the directors of a company first come under an obligation (s 269-10(1)).

65. The amendments are not concerned with how s 269-30(2) applies to estimates, rather the amendments are intended to ensure that the directors of a company at the time of the underlying liability (rather than only those directors holding office as at the date of the Notice of Estimate) come under the obligations imposed by Div 269 for the whole period commencing on the day the underlying liabilities became due.

66. The second reason this appeal must be dismissed is that even if the Commissioner was required to establish the existence of an underlying liability of Worldwide to remit PAYG amounts the subject of the Estimate Notice, the Commissioner established that fact here.

67. The only evidence before the primary judge was the evidence read by the respondent without challenge or objection. The amended statement of claim averred that:

“[12] The company withheld amounts for the purposes of Division 12 in Schedule 1 to the TAA 1953, but failed to meet its obligations under Subdivision 16-B in Schedule 1 to the TAA 1953 to pay each amount withheld to the Commissioner.

[13] Pursuant to subsection 268-10(1) in Schedule 1 to the TAA 1953 the Commissioner made estimates of the unpaid and overdue amounts of the company’s liabilities under section 16-70 in Schedule 1 to the TAA 1953 to pay to the Commissioner each amount withheld. Details of the estimates are as follows:

Number of Estimate	Period of Withholding to which Estimate Relates	Amount of Estimate
First Estimate	10 August 2011 to 12 August 2011	440,130.00
Second Estimate	24 August 2011 to 26 August 2011	440,130.00
Third Estimate	7 September 2011 to 9 September 2011	440,130.00
Fourth Estimate	21 September 2011 to 23 September 2011	440,130.00
Fifth Estimate	5 October 2011 to 7 October 2011	440,130.00
Sixth Estimate	19 October 2011 to 21 October 2011	440,130.00
Seventh Estimate	2 November 2011 to 4 November 2011	440,130.00
Eighth Estimate	16 November 2011 to 18 November 2011	440,130.00
Ninth Estimate	30 November 2011 to 2 December 2011	440,130.00
Tenth Estimate	14 December 2011 to 16 December 2011	440,130.00
Eleventh Estimate	28 December 2011 to 30 December 2011	440,130.00
Twelfth Estimate	11 January 2012 to 13 January 2012	440,130.00
Thirteenth Estimate	25 January 2012 to 27 January 2012	440,130.00
Fourteenth Estimate	4 February 2012 to 7 February 2012	440,130.00
Fifteenth Estimate	22 February 2012 to 24 February 2012	440,130.00
Sixteenth Estimate	7 March 2012 to 9 March 2012	440,130.00
Seventeenth Estimate	21 March 2012 to 23 March 2012	440,130.00
Eighteenth Estimate	4 April 2012 to 6 April 2012	440,130.00
Nineteenth Estimate	18 April 2012 to 20 April 2012	440,130.00
Twentieth Estimate	2 May 2012 to 4 May 2012	440,130.00
Twenty-first Estimate	16 May 2012 to 18 May 2012	440,130.00
Twenty-second Estimate	30 May 2012 to 1 June 2012	440,130.00
Total	$9,682,860.00

75. Section 255-50 of Sch 1 to the Taxation Administration Act provides:

255‑50  Certain statements or averments

(1)  In a proceeding to recover an amount of a *tax‑related liability, a statement or averment about a matter in the plaintiff’s complaint, claim or declaration is prima facie evidence of the matter.

(2)  This section applies even if the matter is a mixed question of law and fact. However, the statement or averment is prima facie evidence of the fact only.

(3)  This section applies even if evidence is given in support or rebuttal of the matter or of any other matter.

(4)  Any evidence given in support or rebuttal of the matter stated or averred must be considered on its merits. This section does not increase or diminish the credibility or probative value of the evidence.

(5)  This section does not lessen or affect any onus of proof otherwise falling on a defendant.

76. By force of s 255-50 of Sch 1 to the Taxation Administration Act, the facts averred by the Commissioner were prima facie evidence of the facts alleged. The estimate and the period to which it related was identified. That, in the context of the legislative requirements upon large withholders, was sufficient proof of “the day by which the company was obliged to pay the underlying liability to which the estimate relates”, even on the appellants’ construction.

77. The averments were themselves sufficient evidence that Worldwide had unpaid withholding amounts for the periods identified in paragraph [13] of the statement of claim (being the periods in respect of which the Notice of Estimate was issued). In the absence of any evidence having been led by the appellants to the contrary, those averments were uncontradicted and provide sufficient proof, even on the appellants’ construction, for the purposes of s 269-30(2).

78. Additionally, an evidentiary certificate was tendered into evidence by the respondent under s 255-45 of Sch 1 to the Taxation Administration Act, which operated as prima facie evidence of the matters certified including certification that the sum claimed was a debt due and payable to the Commonwealth. I doubt that the evidentiary certificate here engaged was sufficient, of itself, to prove the Commissioner’s case on the appellants’ construction of the lockdown provision. This is because the certificate does not, in terms, address what is said by the appellants to be the critical issue. Given that the averments in the pleading provide a sufficient basis for the Commissioner to succeed, even on the appellants’ construction, there is no need to come to any final conclusion about this matter.

79. Accordingly, even if, contrary to the construction of s 269-30 I prefer, the date of the underlying liability needs be proved by the Commissioner, it was proven here.

Conclusion and proposed orders

80. For the foregoing reasons I propose the following orders:

1. appeal dismissed;

2. appellants to pay the respondent’s costs.

81. McCALLUM JA: I agree with Payne JA.

82. SIMPSON AJA: I agree with Payne JA.

**********

Endnotes

Amendments

01 February 2021 - Minor typographical amendments throughout.

Decision last updated: 01 February 2021