Pullman v Australian Taxation Office - [2017] SASC 44

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Criminal)
PULLMAN v AUSTRALIAN TAXATION OFFICE
[2017] SASC 44
Judgment of The Honourable Justice Kelly
31 March 2017
CRIMINAL LAW - APPEAL AND NEW TRIAL - APPEAL AGAINST SENTENCE - GROUNDS FOR INTERFERENCE - SENTENCE MANIFESTLY EXCESSIVE OR INADEQUATE
CRIMINAL LAW - APPEAL AND NEW TRIAL - INTERFERENCE WITH DISCRETION OR FINDING OF JUDGE
TAXES AND DUTIES - INCOME TAX AND RELATED LEGISLATION - INCOME - GENERALLY
TAXES AND DUTIES - INCOME TAX AND RELATED LEGISLATION - RETURNS AND ASSESSMENTS - RETURNS AND REQUIREMENT TO LODGE
Appeal against sentence. The appellant pleaded guilty in the Adelaide Magistrates Court to a total of 34 offences of failing to furnish the Commissioner of Taxation with documents required by taxation law. Of those 34 offences, 22 related to failing to lodge Goods and Service Tax returns contrary to s 8C(1)(a) of the Taxation Administration Act 1953 (Cth) and as required under Division 31 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). The other 12 offences related to failing to lodge income tax returns contrary to s 8C(1)(a) of the Taxation Administration Act 1953 (Cth) and as required by s 162 of the Income Tax Assessment Act 1936 (Cth). The Magistrate imposed one fine of $25,000 for the offences.
The appellant appeals on two grounds. Firstly, the appellant complains that the sentence was manifestly excessive in all of the circumstances, and secondly, the appellant complains that the Magistrate failed to have regard to s 16C of the Crimes Act 1914 (Cth).
Held (allowing the appeal):
1. The sentence imposed by the Magistrate was manifestly excessive in all of the circumstances.
2. The Magistrate did not have proper regard to the provisions of s 16C of the Crimes Act.
3. The appeal is allowed. The order of the Magistrate is set aside. In its place the appellant is ordered to pay one fine of $8,000.
Crimes Act 1914 (Cth) s 16A, s 16C; A New Tax System (Goods and Services Tax) Act 1999 (Cth) Division 31; Taxation Administration Act 1953 (Cth) s 8C(1)(a); Income Tax Assessment Act 1936 (Cth) s 162; Criminal Law (Sentencing) Act 1988 (SA) s 10, s 13, referred to.
House v The King (1936) 55 CLR 499, applied.
Beacham v Christiansen [2016] WASC 346; Chief Executive Officer of Customs v Rota Tech Pty Ltd (1999) 201 LSJS 390; Darter v Diden (2006) 94 SASR 505, distinguished.

PULLMAN v AUSTRALIAN TAXATION OFFICE
[2017] SASC 44
Magistrates Appeal: Criminal
KELLY J.
Introduction

This is an appeal against sentence. The appellant pleaded guilty in the Adelaide Magistrates Court on 28 October 2016 to a total of 34 offences of failing to furnish the Commissioner of Taxation with documents as required by taxation law.
Of those 34 offences, 22 related to failing to lodge Goods and Service Tax (GST) returns contrary to s 8C(1)(a) of the Taxation Administration Act 1953 (Cth) and as required under Division 31 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). The appellant was registered for GST on a quarterly lodgement cycle until 11 September 2015 and failed to lodge GST returns for the quarterly tax periods between 1 July 2003 and 31 December 2012, between 1 April 2013 and 31 December 2013, and between 1 July 2014 and 30 September 2015. The other 12 offences related to failing to lodge income tax returns for the financial years ending 30 June 2003 to 30 June 2014 contrary to s 8C(1)(a) of the Taxation Administration Act 1953 (Cth) and as required by s 162 of the Income Tax Assessment Act 1936 (Cth).
The Magistrate convicted the appellant on all offences and imposed a fine of $25,000 plus court costs. The Magistrate apportioned $8,000 of that amount for the 12 income tax returns not lodged and the remaining $17,000 for the GST returns not lodged.
The appellant appeals on two grounds. Firstly, the appellant complains that the sentence, being the fine imposed of $25,000, was manifestly excessive in the circumstances. In relation to this first ground, the appellant complains that the Magistrate failed to take into account the relatively small debt owed to the Deputy Commissioner of Taxation following lodgement of the various returns. Secondly, the appellant complains that the Magistrate failed to have regard to s 16C of the Crimes Act 1914 (Cth) (the Crimes Act). In relation to this ground, the appellant complains that the Magistrate failed to take into account that the appellant is of extremely limited means.
Discussion
It is evident from the affidavits filed on appeal that the appellant did not engage any legal representation to assist him at any stage until the commencement of this appeal. For many years, he did not answer correspondence and notices of demand from the Australian Taxation Office (ATO) until eventually the inevitable happened and a prosecution was commenced.
Although the Magistrate had some information about the appellant during sentencing submissions, the fact is the appellant was unrepresented and it is evident from the affidavit material that the whole of the appellant’s circumstances were not put before the Magistrate.
The Magistrate’s remarks on sentence were brief. After discussing the general principles the Magistrate then addressed even more briefly the appellant’s personal circumstances in which he described the appellant as having a “small but positive income”.
The full picture which appears in the affidavit material filed on appeal paints a somewhat pitiful picture. The appellant is currently 46 years old. He lives at home with his elderly mother. He has worked for many years as a self-employed IT consultant but his business has not been particularly fruitful. Rather, he has a history of extremely low income, barely taxable, averaging approximately $13,700 per year for the last 13 years. His most recent taxable income disclosed for the years ending 30 June 2014 and 30 June 2015 was $9,323 and $10,843 respectively.
The appellant attested to the fact that he suffered a relationship breakdown in around 2003 and subsequently let his business affairs get away from him. In the affidavit sworn on appeal he asserted as follows:
I live at home with my elderly mother. Because my income at the moment is so small my mother only charges $50.00 per week board. I do not have much of a social life outside of my family and I have managed to live on a very low income for years. I believe I have suffered from depression throughout but I have not sought any assistance for this.
I accept that assertion. Indeed it is the only explanation for why an intelligent man with the qualifications this appellant has failed for 13 years to respond to any notices, letters of demand and legal processes until it was too late.
Prior to the commencement of the prosecution proceedings, administrative penalties in the amount of $12,140 had been imposed upon him for failure to lodge various returns or statements. The appellant fully paid these penalties using funds which he received from an inheritance he had received when his uncle died in 2006. Those administrative penalties were subsequently cancelled once the prosecution proceedings were commenced and the credit for those payments was placed on his tax account. This tax credit largely cancelled out the tax debt he owed which was calculated at being $12,949.83. That figure includes an assessment of $10,080 by way of outstanding GST liabilities and $2,869.83 by way of outstanding income tax liability. This left approximately $809.83 in tax still owing.
The appellant asserted that of the current amount owing most of it is interest which has accrued on the relatively modest tax liability of approximately $1,500.
As it transpired, the appellant need never have registered for GST because his business turnover has been so consistently low for the past 13 years. The appellant has now deregistered himself and is no longer required to lodge quarterly returns. He asserts that all of his taxation lodgements are now up to date. The respondent does not dispute any of these facts asserted.
The test to be applied in determining whether it is appropriate for this Court to interfere with the sentence imposed is the well-known test set out in House v The King.[1]
[1] (1936) 55 CLR 499.
Here two complaints are made on appeal. First, that the ultimate sentence imposed on the appellant was manifestly excessive and; second, that the Magistrate did not have due regard to s 16C of the Crimes Act as amended.
Section 16C of the Crimes Act provides as follows:
16CFines
(1)Subject to subsection (2), before imposing a fine on a person for a federal offence, a court must take into account the financial circumstances of the person, in addition to any other matters that the court is required or permitted to take into account.
(2)Nothing in subsection (1) prevents a court from imposing a fine on a person because the financial circumstances of the offender cannot be ascertained by the court.
Generally speaking s 16A of the Crimes Act sets out the general sentencing principles to which the court is to have regard when passing sentence in respect of federal offences. That section, broadly speaking, reflects but does not mirror the kind of considerations that a court is required to take into account under s 10 of the Criminal Law (Sentencing) Act 1988 (SA) when sentencing for a state offence.
Section 16C of the Crimes Act, again broadly speaking, reflects but does not mirror s 13 of the Criminal Law (Sentencing) Act 1988 (SA) which provides as follows:
13—Order for payment of pecuniary sum not to be made in certain circumstances
(1)The court must not make an order requiring a defendant to pay a pecuniary sum (other than a VIC levy) if the court is satisfied that the means of the defendant, so far as they are known to the court, are such that—
(a)     the defendant would be unable to comply with the order; or
(b)     compliance with the order would unduly prejudice the welfare of dependants of the defendant,
(and in such a case the court may, if it thinks fit, order the payment of a lesser amount).
(2)Subject to subsection (3), the court is not obliged to inform itself as to the defendant's means, but it should consider any evidence on the subject that the defendant or the prosecutor has placed before it.
(3)In considering whether the defendant would be able to comply with the order, the court should have regard to—
(a)     the fact that the defendant could enter into an arrangement under Part 9 Division 3; and
(b)     any information available to the court as to other pecuniary sums that have been paid, or are payable, by the defendant.
I accept the submission made by counsel for the respondent that the terms of s 16C of the Crimes Act do not provide the same scope for leniency as the terms of s 13 of the Criminal Law (Sentencing) Act 1988 (SA). Nevertheless, when sentencing, even for a Commonwealth offence, the Magistrate was required to turn his mind to the issue of the financial circumstances of the appellant and take them into account before determining to impose any fine. Of course the Magistrate was also bound to take into account the matters referred to in s 16A of the Crimes Act, relevantly in this case the need to pass a sentence of appropriate severity according to the circumstances of the offence, as well as the other matters set out in s 16A(2) of the Crimes Act.
As I have observed earlier, the Magistrate made only brief reference to the personal circumstances of the appellant. The primary focus of the Magistrate’s remarks was to correctly identify the need to impose a sentence which would act as a deterrent to others minded to commit offences “against the public purse”, as he put it, and to impose a penalty that bore an appropriate relationship to the administrative penalties that would have applied in respect of the offending had the Commonwealth not elected to prosecute the appellant.
It is also true that the Magistrate had brief details from the appellant himself as to his personal circumstances, but nothing like the detail with which I have been provided on appeal in the sworn affidavits. I cannot help but think that had the Magistrate had the benefit of full submissions, and indeed a medical report concerning the appellant’s psychological state, the outcome might have been different.
The critical issue on this appeal is whether in all of the circumstances the Magistrate did have proper regard to the terms of s 16C of the Crimes Act. The direction in that section is clear. The court must take into account the financial circumstances of a person in addition to any other matters that the court is required or permitted to take into account. This is not to say that the financial circumstances of an appellant are determinative. It is clear from the authorities that in the ordinary case they will not be. Nevertheless, in light of the brevity of the Magistrate’s remarks, and bearing in mind that the fine ultimately imposed by the Magistrate is a figure which represents an amount around double the annual income the appellant has earnt in the past 10 years, I cannot think that the Magistrate did have proper regard to this consideration.
The circumstances I have set out above paint a picture of a man who has been severely depressed for a number of years. There can be no other explanation for the failure to answer the many reminders, notices and letters of demand for such an extended period.
The appellant has no prior convictions in respect of taxation offences. His liability to pay GST arose because he was wrongly or mistakenly registered for it. Had he never been registered, the liability to collect it would never have arisen because he never went anywhere near the threshold which requires a person to collect GST. He used his inheritance to pay the administrative penalties to the Commissioner of Taxation thereby extinguishing most of the tax debt, which consisted principally of interest.
His annual income is less than the basic wage. Other citizens on one form of government pension or another enjoy a significantly better income than this appellant.
The appellant’s prospects of rehabilitation are excellent.
I acknowledge the authorities to which I was referred govern the sentencing principles which must apply in the ordinary case to those who commit offences of this nature. In my view this is not an ordinary case. Notwithstanding the submission of the Commonwealth prosecutor that this was a “run of the mill” case, when the whole of the appellant’s circumstances are taken into account, I cannot agree with that submission. This was not a man who set out to wilfully defraud the Commissioner of Taxation. He has barely earned a taxable income at any stage of the last 13 years. His principal failure was to incorrectly fill out paperwork or forms which in turn created an obligation for him to lodge GST returns. The amount of GST he did collect was minimal. As it turned out, had he not been registered, his business would never have come close to generating the requisite turnover for that obligation to arise. The appellant was too depressed to properly manage his business affairs. There is a world of difference between this man’s circumstances and the circumstances of the offender in Beacham v Christiansen.[2] In that case the debt owed to the taxation department was just under $100,000. The appellant is not a man who was earning a significant income and who wished to evade tax. Nor is he a drug dealer or an illegal foreign fisherman who was caught stealing fish from Australian waters as were the offenders in Chief Executive Officer of Customs v Rota Tech Pty Ltd[3] and Darter v Diden[4] respectively. He is an ordinary citizen who became severely depressed, was probably poorly advised or not advised at all in relation to the need to lodge quarterly GST returns, and incurred a debt quite disproportionate to the tax he failed to pay.
[2] [2016] WASC 346.
[3] (1999) 201 LSJS 390.
[4] (2006) 94 SASR 505.
I am satisfied that in all of the circumstances of this appellant’s case the Magistrate did not have proper regard to the provisions of s 16C of the Crimes Act. I acknowledge that ordinarily the fine imposed on a person who commits these offences should represent at least a figure more than the amount of the administrative penalties which would have been imposed. However, for the reasons I have given, I regard this man’s circumstances as exceptional. If those circumstances do not permit a court to extend leniency, then I cannot think of a matter where the court would ever adopt a merciful approach.
The appeal is allowed. The order of the Magistrate is set aside. In its place I order that the appellant pay one fine of $8,000.