NORRIS CLEANING COMPANY PTY LTD AND COMMISSIONER FOR ACT REVENUE
[2008] ACTAAT 9
•1 May 2008
AUSTRALIAN CAPITAL TERRITORY
ADMINISTRATIVE APPEALS TRIBUNAL
CITATION:NORRIS CLEANING COMPANY PTY LTD AND COMMISSIONER FOR ACT REVENUE [2008] ACTAAT 9 (1 MAY 2008)
AT07/71
Catchwords: Payroll tax – determination of penalty and interest for late payment.
Payroll Tax Act 1987, s 16
Taxation Administration Act 1999, ss 25, 26, 29, 30, 31, 37, 101, 107, 108
Tribunal:Mr M H Peedom, President
Date:1 May 2008
AUSTRALIAN CAPITAL TERRITORY )
ADMINISTRATIVE APPEALS TRIBUNAL ) NO: AT07/71
GENERAL DIVISION )
RE: NORRIS CLEANING
COMPANY PTY LTD
Applicant
AND: COMMISSIONER FOR
ACT REVENUE
Respondent
DECISION
Tribunal : Mr M H Peedom, President
Date : 1 May 2008
Decision : The decision under review is affirmed.
…………………………….
President
AUSTRALIAN CAPITAL TERRITORY )
ADMINISTRATIVE APPEALS TRIBUNAL ) NO: AT07/71
GENERAL DIVISION )
RE: NORRIS CLEANING
COMPANY PTY LTD
Applicant
AND: COMMISSIONER FOR
ACT REVENUE
Respondent
REASONS FOR DECISION
1 May 2008 Mr M H Peedom, President
The decision under review
This is an application to review a decision made by a delegate of the respondent to disallow an objection by the applicant to an assessment of taxation that required it to pay penalty tax and interest on outstanding payroll tax.
Background
2. Notice of the assessment was forwarded to the applicant by letter dated 17 August 2006. It was expressed to relate to periods between 1 November 2005 and 31 May 2006. It assessed the amount of payroll tax payable as $47,203.77, the amount of penalty payable as $23,601.88 (being 50% of the assessed payroll tax) and interest payable as $2,684.55. It gave as the reason for the assessment of the penalty and interest, the failure of the applicant to lodge payroll tax returns for the months of November 2005, February 2006 and May 2006 as required by section 16 of the Payroll Tax Act 1987 (“the Payroll Tax Act”).
3. Written advice was sent to the respondent on 14 March 2006 and 14 June 2006 that the respondent’s payroll tax returns for February 2006 and May 2006, respectively, were missing and as to the rate of interest that applied to late payments (that is, payments made more than 7 days after the end of each month during which taxable wages were paid).
4. The outstanding returns for the November 2005 and February 2006 period were lodged by the applicant on or about 31 July 2006 and the payroll tax and interest as assessed was paid at the same time. The return for May 2006 was lodged on 17 August 2006 and the payroll tax and interest as assessed was paid on the same date.
5. In a letter of objection dated 27 September 2006 to the respondent’s assessment of penalty and interest, solicitors acting on behalf of the applicant advanced as the explanation for their client’s failure to lodge the required returns and to pay the payroll tax by the due dates: financial hardship and other unforeseen events; a recent diagnosis of an owner and director of the applicant of a debilitating disease; the recent unexpected resignation of the applicant’s office administrator; confusion and confrontation to the applicant’s inexperienced staff of the respondent’s downloadable forms; the fact that the applicant’s directors were unaware of the amount owing to the respondent; and the absence of warning or deadline to settle any debts payable to the respondent. The letter stated that the applicant had a good industrial record and, for the most part, had been prompt with payment of payroll tax; that it had not defaulted in the payment of payroll tax in the past by more than two months and had not previously been fined; the payroll tax in question had been paid in full and that the penalty and interest assessed was unconscionable in the circumstances.
6. According to Ms J Martin, an officer of the respondent’s Compliance Unit who gave evidence at the hearing of the appeal, she telephoned an employee of the applicant, Ms C O’Brien, on 21 June 2006, 30 June 2006, 12 July 2006 and 31 July 2006 and drew her attention to the outstanding returns for November 2005, February 2006 and May 2006. She telephoned Ms O’Brien in relation to the May 2006 return on 31 July 2006, 2 August 2006 and 14 August 2006. She also requested another employee of the applicant to submit the May 2006 return in a phone call on 4 August 2006.
7. A number of documents from the Revenue Office payroll tax file relating to the applicant were produced in evidence at the hearing together with a schedule which summarised dealings which the respondent had had with the applicant from 24 July 1991 to 10 August 2007. Those documents showed, inter alia, that: on 29 May 1996 a delegate of the respondent allowed an objection by the applicant to the imposition of penalty tax due to the late lodgement of its March 1996 payroll tax return; on 23 July 2003 the respondent had imposed a penalty tax of 25% on the applicant and required it to pay interest for late payment of payroll tax for December 2002 and February 2003 to May 2003; on 17 October 2003 the respondent assessed the applicant to pay interest in respect of the late payment of payroll tax in respect of the period June – August 2003; on 17 May 2005 the respondent assessed the applicant to pay tax, a penalty and interest in respect of a reconciliation of the applicant’s payroll tax liability for the period 1 July 2003 to 30 June 2004; on 20 January 2006 the applicant was advised that it had not lodged an annual reconciliation in respect of payroll tax for the period 1 July 2004 to 30 June 2005 and that a failure to lodge the return may result in a requirement to pay penalties and interest.
The law to be applied
8. No challenge was made by the applicant to the fact that the applicant was liable to submit the returns in question within 7 days after the end of the relevant months or to pay the payroll tax assessed by the respondent and had failed to do so.
9. In circumstances where there has been a failure to pay the whole or part of the tax payable by a taxpayer, a tax default occurs (see definition “tax default” Dictionary, Taxation Administration Act 1999 (“the Administration Act”).
10. Section 25 of the Administration Act provides:
25 Interest in relation to tax defaults
(1)If a tax default happens, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this division.
(2)Interest is payable under this section in relation to a tax default that consists of a failure to pay penalty tax under division 5.2 but is not payable in relation to any failure to pay interest under this division.
11. Section 26 of the Administration Act specifies a formula for the calculation of any interest rate payable pursuant to section 25. The formula includes a market rate component and a premium component of 8% per annum.
12. Section 29 of the Administration Act provides:
29 Remission of interest
(1)The commissioner may remit all or part of the market rate component or the premium component of interest, or both, if—
(a)the commissioner has determined that no penalty tax is payable under section 31 (6); or
(b)the amount of penalty tax has been reduced under section 32 or section 33; or
(c)penalty tax has been remitted in whole or in part under section 37.
(2)The commissioner must not remit the market rate component unless the commissioner is also satisfied that the circumstances are exceptional and justify the remission.
13. Section 30 of the Administration Act provides:
30 Penalty tax in relation to certain tax defaults
(1)If a tax default happens, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid.
Note A taxpayer may also be liable to pay penalty tax under the Land Tax Act 2004, s 19A (5) (Interest and penalty tax payable on land tax if no disclosure).
(2) Penalty tax imposed under this division is in addition to interest.
(3)Penalty tax is not payable in relation to a tax default that consists of a failure to pay—
(a) interest under division 5.1; or
(b) penalty tax previously imposed under this division.
14. The amount of any penalty tax payable is to be calculated in accordance with section 31 of the Administration Act which provides:
31 Amount of penalty tax
(1)The amount of penalty tax payable in relation to a tax default is 25% of the amount of tax unpaid, subject to this division.
(2)The amount of penalty tax payable in relation to a tax default is 50% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by a failure by the taxpayer (or a person acting on behalf of the taxpayer) to take reasonable care to fulfil the taxpayer’s obligations under a tax law.
(3)Subsection (2) does not apply if the tax payer satisfies the commissioner that the taxpayer (or a person acting on behalf of the taxpayer) had a reasonable excuse for the failure.
(4)Subsections (2) and (3) apply to a tax default that happened before their commencement in the same way as they apply to a tax default that happened after their commencement.
(5)The amount of penalty tax payable in relation to a tax default is 75% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a tax law.
(6)No penalty tax is payable in relation to a tax default if the commissioner is satisfied that—
(a)the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or
(b)the tax default happened solely because of circumstances beyond the taxpayer’s control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person’s or the taxpayer’s control) but not amounting to financial incapacity.
15. Section 37 of the Administration Act authorises the respondent to remit all or part of penalty tax in certain circumstances. Section 37 provides:
37 Remission of penalty tax
The commissioner may remit all or part of an amount of penalty tax payable by a person if satisfied that—
(a) either—
(i)the person has taken reasonable steps to mitigate, or to mitigate the effects of, the circumstances that resulted in the liability for penalty tax; or
(ii)the circumstances that resulted in the liability for penalty tax were exceptional; and
(b)it would be fair and reasonable to remit all or part of the penalty tax.
16. Section 101(2) of the Administration Act imposes on the taxpayer lodging an objection the burden of showing that it should be sustained.
17. Jurisdiction is conferred on the Tribunal to review a decision of the respondent in relation to an objection by section 107 of the Administration Act. On the hearing of an appeal by the Tribunal neither the applicant’s nor the respondent’s cases are limited to the grounds of the objection (see section 108(1) Administration Act).
Submissions and conclusions
18. In a submission made on behalf of the applicant at the hearing of the appeal Mr S Norris, the applicant’s general manager, asserted that Ms O’Brien, an employee of the applicant, was the only person contacted on behalf of the applicant by the respondent in relation to the missing returns and she did not have the capacity to assess the seriousness of the late lodgement of payroll tax returns. He said that the applicant apologised for its apparent lack of care in providing the returns but considered that the respondent had failed in what the applicant considered to be a duty to properly advise it of the prospect of a liability to pay a penalty or interest. Mr Norris said that the respondent also failed to allow persons in financial difficulty the option of a payment plan and that it would have paid the payroll tax if it had the money. The applicant had given priority to the payment of the wages of its employees. He criticised what he said was the lack of a clear policy to determine the circumstances in which penalty tax was payable and the amount which should be paid. He also criticised the delay in dealing with the applicant’s objection which he considered had inflated the amount of interest payable.
19. There is some force in Mr Norris’ criticism that the respondent should have specifically advised the applicant of its liability to the payment of a penalty in the event of a failure by it to pay the whole or part of the payroll tax payable by it by the due date. The liability of citizens to the imposition of a penalty is a matter to which attention should ordinarily be drawn in circumstances where notice is given of a default that gives rise to such a liability.
20. Be that as it may, the failure of the applicant to discharge its obligations in relation to the payroll taxation laws is not a matter, in the circumstances of this case, that can excuse the applicant’s default or provide a basis for remission of any penalty. The unchallenged evidence provided by the respondent to the Tribunal shows that prior to the defaults which occurred in this case, the applicant was specifically advised on a number of earlier occasions of its liability to the imposition of a penalty and of a requirement to pay interest in relation to its failure to meet its obligations in relation to payroll tax.
21. Information publicly available on the Revenue Office website, which the applicant’s solicitors in their letter dated 27 September 2006 described as being confusing and confronting to the applicant’s staff, quite clearly explained, not only the potential for the imposition of a penalty and the charging of interest for non-payment of payroll tax, it also advised that persons having difficulty in meeting their payroll tax obligations could contact the Revenue Office to discuss alternative payment arrangements. The letter from the Revenue Office to the applicant advising of the non-receipt of the February 2006 and May 2006 returns also advised the applicant that if it was having difficulties meeting its obligations it should contact the Revenue Office. There is no evidence that the applicant ever contacted the respondent to advise of such difficulty. I do not accept the submission made on behalf of the applicant that the respondent failed to allow persons in financial difficulty the option of a payment plan. In the absence of evidence as to the financial position of the applicant and any testing of that evidence, the Tribunal is unable to exercise the discretion available to it in a way that takes account of that position.
22. No evidence was presented to the Tribunal in support of the explanation given in the solicitors’ letter dated 27 September 2006 of the state of health at any relevant time of its owner/director or of the resignation of the applicant’s office administrator. The unchallenged evidence before the Tribunal presented by the respondent does not support a finding that prior to the tax defaults that are relevant to this appeal, the applicant had a good record of compliance with payroll tax laws.
23. The circumstances in which the market rate component of interest payable in respect of late payment of payroll tax may be remitted is prescribed by section 29 of the Administration Act. The circumstances necessary to be satisfied do not apply in this case.
24. The circumstances in which a penalty is payable for late payment of payroll tax is determined by section 31 of the Administration Act but subject to the respondent’s discretion to remit any penalty so determined pursuant to section 37 of the Administration Act. The evidence given by Ms Martin in relation to her dealings with Ms O’Brien shows that numerous reminders of the applicant’s obligations in relation to the provision of monthly returns were given by the respondent and that the explanation consistently given by Ms O’Brien was her inability to obtain the necessary information from the applicant’s accountant who held the relevant records. No evidence was presented to the Tribunal on behalf of the applicant to support Mr Norris’ assertion that Ms O’Brien lacked the capacity to assess the seriousness of the late lodgement of monthly payroll tax returns. Such an explanation does not sit comfortably with the suggestion made on behalf of the applicant at the hearing that its payroll tax obligations were not discharged because of its financial incapacity to do so.
25. Were it the case that staff of the applicant did not properly understand the extent of the applicant’s responsibilities in relation to payroll tax, it is a matter for which the applicant must take responsibility. It is a matter for the applicant to ensure that it entrusts responsibility for meeting its payroll tax obligations to employees who do have such an understanding or that it makes proper arrangement for their training or that it engages persons with the necessary expertise to discharge those obligations.
26. In my opinion, the material before the Tribunal justifies the conclusion that the applicant’s taxation default was caused wholly or partly by the failure of the applicant to take reasonable care to fulfil its obligations under the Payroll Tax Act and there is no basis for remission of the penalty or the interest assessed by the respondent.
27. I therefore conclude that the correct and preferable decision for the Tribunal to make is to affirm the decision under review.
FORM 33
PUBLICATION DETAILS
TO BE PUBLISHED
To be completed by Member's Staff
________________________________________________________________________
PART A FILE NO: AT07/71
APPLICANT: NORRIS CLEANING COMPANY PTY LTD
RESPONDENT: COMMISSIONER FOR ACT REVENUE
PARTIES JOINED: N/A
COUNSEL APPEARING: APPLICANT:
RESPONDENT: MR K ARCHER
PARTIES JOINED:
SOLICITORS: APPLICANT:
RESPONDENT: ACT GOVERNMENT
SOLICITOR
PARTIES JOINED:
OTHER:APPLICANT: MR S NORRIS
RESPONDENT:
PARTIES JOINED:
TRIBUNAL MEMBER/S: MR M H PEEDOM, PRESIDENT
DATE/S OF HEARING: 16 APRIL 2008 PLACE: CANBERRA
DATE OF DECISION: 1 MAY 2008 PLACE: CANBERRA
_______________________________________________________________________
PART B
RECOMMENDATION:
FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION (X)
COMMENT:
0
0
0