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  • Unreported Judgment

Valeba Pty Ltd v Deputy Commissioner of Taxation

 

[2012] QSC 200

 

 

SUPREME COURT OF QUEENSLAND

  

PARTIES:

FILE NO/S:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

DELIVERED ON:

2 August 2012

DELIVERED AT:

Brisbane 

HEARING DATE:

28 May 2012

JUDGE:

Dalton J

ORDER:

1.Order that the statutory demand dated 13 October 2011 is varied so as to specify an amount of $71,733.44.

2.Declare that the demand has had effect, as so varied, from the time the demand was served on the applicant company.

CATCHWORDS:

STATUTORY DEMAND – SETTING ASIDE – DEMAND SERVED BY DEPUTY COMMISSIONER OF TAXATION – CONCLUSIVITY PROVISIONS OF TAXATION LEGISLATION – GENUINE DISPUTE – OTHER REASON TO SET ASIDE

Corporations Act 2001 (Cth)

Income Tax Assessment Act 1936 (Cth)

Taxation Administration Act 1953 (Cth)

Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473

Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581

COUNSEL:

Mr L D Bowden for the applicant

SOLICITORS:

Provest Law for the applicant

ATO Legal Services for the respondent

[1] This is an application to set aside a statutory demand under the Corporations Act 2001 (Cth).  The applicant taxpayer submitted various returns from September 2006 until March 2009.  The taxpayer did not, however, pay in accordance with those returns and on 13 October 2011 the Deputy Commissioner of Taxation issued a statutory demand for an amount of $107,563.69.  Payment was not made in accordance with the demand, and on 4 November 2011 this application to set aside the statutory demand was filed. 

[2] It seems that the applicant’s financial affairs had been left in the hands of the applicant’s bookkeeper.  After the statutory demand was made, a director of the applicant investigated matters.  He swore that he then became aware that the applicant’s bookkeeper had taken money she was not entitled to from the applicant.  He caused another bookkeeper to be employed and the returns submitted during the above period were reviewed.  The opinion of the new bookkeeper was that the returns were inaccurate, and new returns were prepared from source documents.  Then the taxpayer lodged amended returns.

[3] The Deputy Commissioner of Taxation has accepted the accuracy of some of the new returns (June 2008-March 2009) and accordingly allowed credits of $35,830.25 to the applicant taxpayer.  However, the Deputy Commissioner is of the view that the remaining amended returns (September 2006-June 2007) cannot be accepted because they fall foul of the four year rule established by s 105-55 of Schedule 1 to the Taxation Administration Act 1953 (Cth) and refuses to allow credits in relation to those returns.  In relation to those returns (September 2006-June 2007) the affidavit material on behalf of the Deputy Commissioner is to the effect that Notices of Assessment were issued to the applicant taxpayer after the review of the amended returns.

[4] This application has been adjourned from time to time to allow the applicant to pursue the matters of the amended returns described above. 

[5] The taxation liabilities with which I am concerned are GST liabilities, PAYG withholding amounts and General Interest Charges.  Apart from the assessments which issued in relation to the September 2006-June 2007 amended returns, after they were rejected, the material before me does not show that there have been any assessments or declarations in relation to these liabilities.  Rather, the taxpayer’s liability is put on the basis of a Running Balance Account established pursuant to s 8AAZC of the Taxation Administration Act 1953.  The description of the debt on the statutory demand was as follows:

 

“Running Balance Account deficit debt as at 13 October 2011 in respect of amounts due under the BAS provisions as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (‘the ITAA 1997’) [BAS provisions include, generally: the goods and services tax provisions, the PAYG withholding provisions, the PAYG instalment provisions, the fringe benefit tax instalment provisions and the deferred company instalment provisions] and the general interest charge payable under section 8AAZF of the Taxation Administration Act 1953 (‘the TAA 1953’), being a debt due and payable by the company pursuant to section 8AAZH of the TAA 1953.”

[6] The affidavit accompanying the statutory demand similarly swore that the debt was one:

 

“… of $107,563.69 owed by Valeba Pty Ltd to [the Deputy Commissioner of Taxation] relating to Running Balance Account deficit debt as at 13 October 2011 for amounts due under the BAS provisions as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (‘the ITAA 1997’) and the general interest charge payable under s 8AAZF of the Taxation Administration Act 1953 (‘the TAA 1953’).”

[7] Consistently with this, the affidavit material on this application from the respondent was to this effect:

 

“16.From my perusal of the BAS exhibited hereto at ‘YK-1’, I say and verily believe that the Applicant materially reported its liabilities for GST on taxable supplies in respect of the quarterly periods from 1 April 2007 and [sic] 31 March 2009 as follows:

17.From my perusal of the AIS and Debt Recovery File, I say and verily believe that the said GST amounts were allocated to the applicant’s RBA.

18.As a consequence of the Applicant’s failure to pay the said amounts owing under the RBA by the relevant due dates, the Applicant became liable to pay GIC on the tax debt for each day there was a RBA deficit debt.

19.The amount of $107,563.69, being the Applicant’s RBA deficit debt the subject of the Statutory Demand, comprises of the unpaid components of the PAYG Withholding amounts and GST liabilities referred to in paragraphs 12 to 17 of this my affidavit and associated GIC calculated up to and including 12 October 2011.

Balance of the RBA Deficit Debt

  1. Now produced and shown to me and marked with the letters

[sic]‘YK-2’ is a true and correct copy of a document under the hand of Robert Ravenello, whom I know to be a Deputy Commissioner of Taxation of the Commonwealth of Australia, which is a RBA statement pursuant to section 8AAZ1 of the TAA53 in respect of primary tax debts due under the BAS provisions and associated GIC due by the Applicant printed 24 February 2012.  That RBA Statement shows that as at 13 October 2011, being the date of the statutory demand, the Applicant’s RBA deficit debt was $107,563.69.”

[8] The material before me shows that after the credits of $35,830.25 discussed above were made, the applicant’s RBA Statement as at 25 March 2012 showed a deficit debt of $78,671.69.  Thus, at the time the application was heard before me, the material from the respondent showed that the debt the subject of the statutory demand was no longer owing in the amount of that statutory demand.  The material before me also showed that the taxpayer is objecting to the Deputy Commissioner’s rejection of, and failure to reassess, the amended returns for the quarters September 2006-June 2007.

Sufficiency of the Affidavit Supporting the Application to Set Aside

[9] The amended returns in respect of the quarters ended June 2008-March 2009 were lodged by the taxpayer on 28 February 2012.  The amended returns in relation to the quarters ended September 2006-June 2007 were lodged on 8 March 2012.  That is, all the amended returns were lodged well after the statutory demand was served and after the application to set it aside was made.  The affidavit supporting the application to set aside the statutory demand is quite general in its terms.  It relies upon the fact that the Deputy Commissioner had not raised any assessments against the applicant (and on the material before me that seems right at that stage).[1]  The director of the applicant further swore that liability for the taxes as claimed did not exist; that it had no basis in law or fact, and that the company had paid all taxes properly owing for the relevant period.  He swore to a belief that the Deputy Commissioner had used incorrect turnover levels of the applicant’s business to calculate the disputed taxes and/or that the disputed taxes were based upon estimates rather than what, in fact, the applicant company had earned.

[10] This rather spartan affidavit was supplemented on the hearing before me.  The director of the applicant swore to the fact that after filing the application to set aside the statutory demand (and swearing the affidavit supporting it) he employed a new bookkeeper and, as described above, discovered that the returns submitted to the Deputy Commissioner by the taxpayer were erroneous and that amended returns have now been lodged.

[11] Pursuant to s 459G(3) it is necessary that an affidavit supporting the application to set aside a statutory demand be filed and served with the application.  That affidavit must promote the company’s case but it need not detail all the evidence that supports the contention of a genuine dispute.[2]  A mere assertion that there is a genuine dispute is not enough; the affidavit must disclose facts showing that there is a genuine dispute.  In my view the affidavit filed with the application in this case is sufficient.  It does do more than merely assert the existence of a genuine dispute.  It asserts that the company had not earned sufficient income to justify the amount of tax claimed by the Deputy Commissioner and that the Deputy Commissioner must have used something other than the actual income received by the applicant company during the relevant periods to calculate the claimed taxes.  At the stage the director of the company swore the supporting affidavit he did not know what had occurred in relation to the previous bookkeeper, but after having investigated the matter, it appears that at least in relation to some of the disputed quarters the assertion that tax had been calculated on something more than the actual income or turnover of the applicant company was correct.  In some ways, the situation is analogous to that when expert evidence is necessary to show the genuine dispute on an application to set aside a statutory demand.[3]

Grounds to Set Aside Statutory Demand

[12] The Commissioner relied on the High Court authority of Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd[4] for the broad proposition that the applicant could not succeed in showing a disputed debt within the meaning of s 459H or any other reason within the meaning of s 459J(1)(b) of the Corporations Act.

[13] I turn first to the question as to whether or not the amount claimed by the Deputy Commissioner in this case is outside the area for a genuine dispute for the purposes of s 459H(1) of the Corporations Act.[5]It seems to me that the Broadbeach Properties decision can be distinguished here on a factual basis, and perhaps also on a legal basis.

[14] Factually, the taxpayers in Broadbeach Properties had lodged objections to assessments and declarations which had not been determined, but were conceded to involve arguable points.  Here, the respondent has accepted the contention of the applicant taxpayer as to an amount of $35,830.25.  In respect of that amount, the position of the taxpayer is quite different from that of the taxpayers in Broadbeach Properties.  In relation to the balance of the amount specified in the statutory demand, objections have been made and no determination has been made of them.  Factually, the situation with respect to those remaining amounts is similar to that in Broadbeach Properties.

[15] The matter of legal distinction between Broadbeach Properties and the present case is as to the conclusiveness provisions of the taxation legislation as to amounts claimed by the Commissioner.  At [22] in Broadbeach Properties the High Court stated the first question for its consideration to be whether or not there could be a genuine dispute as to the existence or amount of a debt, the subject of a statutory demand, where a notice attracting the conclusive evidence provisions of the taxation legislation is tendered by the Commissioner in the s 459G proceeding to set aside the statutory demand.

[16] In Broadbeach Properties, assessments and declarations were in evidence on the s 459G proceeding.  Section 105.100 of Schedule 1 to the Taxation Administration Act 1953 applied to those assessments and declarations.  It provides that the production of such a notice of assessment or declaration is conclusive evidence of the correctness of the amount owing, except in proceedings pursuant to Part IVC of that Act.

[17] Here, as outlined above, the Deputy Commissioner squarely put its case on the s 459G application on the basis of a Running Balance Account statement.  Section 8AAZI of the Taxation Administration Act 1953 provides:

 

“(1)The production of an RBA Statement:

(a)is prima facie evidence that the RBA was duly kept; and

(b)is prima facie evidence that the amounts and particulars in the statement are correct.

…”

[18] In my view, it is clear from Broadbeach Properties that the provisions of s 105.100 of Schedule 1 to the Taxation Administration Act were essential to the conclusion of the High Court that the tax debts in that case were outside the area of genuine dispute for the purposes of s 459H(1) of the Corporations Act – see paragraphs [40]-[49] and [57]:

 

“Nothing turns upon the attribution to a s 459G application of the character of a proceeding in which, as Keane JA said, a tax debt may be disputed by the applicant taxpayer.  Section 459G applications by taxpayers are not Pt IVC proceedings and production by the Commissioner of the notices of assessment and of the GST declarations conclusively demonstrates that the amounts and particulars in the assessments and declarations are correct.  That being so, the operation of the provisions in the taxation laws creating the debts and providing for their recovery by the Commissioner cannot be sidestepped in an application by a taxpayer under s 459G of the Corporations Act to set aside a statutory demand by the Commissioner.”

[19] At paragraphs [38] and [39] of Broadbeach Properties the High Court noted that a particular amount claimed by the Commissioner in those matters was the subject of a provision similar to s 8AAZI(1) of the Taxation Administration Act, i.e. a provision which made a certificate prima facie evidence.  It seems tolerably clear that the reasoning of the Court did not apply to such claim by the Commissioner in that case – see [39].

[20] I wonder whether because of s 166A(3)(c) of the Income Tax Assessment Act 1936 (Cth) there were deemed assessments in relation to amounts of tax shown on the returns submitted by the applicant,[6] so that s 105-100 of Schedule 1 to the Taxation Administration Act 1953 did operate in respect of at least part of the amount of the statutory demand.  While the material filed on behalf of the Deputy Commissioner did exhibit the BAS and IAS returns originally lodged by the taxpayer, the amount said to be owing was, as set out above, based on, and calculated in accordance with, the Running Balance Account statement, not these returns, and submissions made were on the basis of s 8AAZI, not s 105-100 of the schedule to the 1953 Act.  Section 166A(3)(c) of the 1936 Act was not relied upon by the Deputy Commissioner in written submissions or argument.  The effect of the taxpayer having lodged amended returns was not addressed.  Nor was it explained why assessments had been issued by the Deputy Commissioner for the quarters September 2006-June 2007.

[21] Without deciding the point, it seems that the Deputy Commissioner may not have advanced the best case available to the respondent on this application, and the amount of the statutory demand, or, perhaps, that part of it not referable to the General Interest Charge, may have been deemed to have been assessed at the time of the demand, thus attracting the operation of s 105-100 of Schedule 1 to the 1953 Act.

[22] Nonetheless, by the hearing of the application, the Deputy Commissioner had conceded that, as to the amount of $35,830.25, the claim made in the statutory demand was overstated.  There had been amended returns lodged for the quarters June 2008-March 2009.  The Running Account Balance statement has been adjusted to reflect the fact that the Deputy Commissioner has accepted the amended returns as correct. 

[23] In contrast, he had issued Notices of Assessment in relation to the remaining amounts of the claim (the September 2006-June 2007 quarters).  There can be no doubt that those Notices of Assessment attract the provisions of the taxation legislation as to conclusivity.  The amounts so assessed are thus within the rule in Broadbeach Properties: notwithstanding the taxpayer has lodged objections they are outside the scope of a genuine dispute within the meaning of s 459H of the Corporations Act.  Having regard to [61] of Broadbeach Properties, I can see no scope for setting aside the demand under the provisions of s 459J(1)(b) of the Corporations Act in the factual circumstances of this case.

[24] In the result it seems to me that the taxpayer has succeeded in showing that there is a genuine dispute as to the amount of the debt to which the statutory demand relates within the meaning of s 459H(1)(a).  Unusually, because the respondent has allowed a credit of $35,830.25 to the applicant on its Running Account Balance, there is strong evidence as to the admitted total within the meaning of s 459H(2) and (5).  Accordingly I order, pursuant to s 459H(4)(a) of the Corporations Act, that the statutory demand is varied so as to specify an amount of $71,733.44 ($107,563.69 less $35,830.25), and declare pursuant to s 459H(4)(b) of the Corporations Act that the demand has had effect, as so varied, from the time the demand was served on the applicant company.

[25] I will hear the parties as to costs.

Footnotes

[1] Although, there may have been deemed assessments – see s 166A(3)(c) of the Income Tax Assessment Act 1936 (Cth), discussed below.

[2] Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581, 585.

[3] Cf Graywinter above, p 585.

[4] (2008) 237 CLR 473.

[5] Broadbeach Properties, above [58].

[6] Compare [64] of Broadbeach Properties.

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Editorial Notes

  • Published Case Name:

    Valeba Pty Ltd v Deputy Commissioner of Taxation

  • Shortened Case Name:

    Valeba Pty Ltd v Deputy Commissioner of Taxation

  • MNC:

    [2012] QSC 200

  • Court:

    QSC

  • Judge(s):

    Dalton J

  • Date:

    02 Aug 2012

Litigation History

No Litigation History

Appeal Status

No Status