Cassaniti v Commissioner of Taxation

Federal Court of Australia|2018-02-16|Before: Robertson J

The parties bring in short minutes to give effect to these reasons, within 14 days.
The respondent pay the applicant's costs, as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The applicant, Mrs Mariolina Cassaniti, seeks declarations that she is entitled to credits against her liability to income tax for the years ended 30 June 2012, 30 June 2013 and 30 June 2014 (the relevant years). The entitlement to those credits is claimed to arise from amounts said to have been withheld from salary paid to her, pursuant to s 18-15(1) of Sch 1 to the Taxation Administration Act 1953 (Cth). The applicant submits that the respondent Commissioner reduced the applicant's taxable income to the total of the net weekly payments of her salary in each of the relevant years, but also disallowed any credits against her tax liabilities, thereby increasing her overall tax liabilities. 2 The amount of the credit claimed by the applicant for the year ended 30 June 2012 is $14,427; for the year ended 30 June 2013 is $14,088; and for the year ended 30 June 2014 is $13,235. These were the amounts of tax withholding credit disallowed by the respondent Commissioner.

The statutory provisions 3 Section 18-15 is in the following terms: 18-15 Tax credit for recipient of withholding payments (1) An entity is entitled to a credit equal to the total of the *amounts withheld from *withholding payments made to the entity during an income year if an assessment has been made of the income tax payable, or an assessment has been made that no income tax is payable, by the entity for the income year. The asterisked expressions are defined in s 995-1 of the Income Tax Assessment Act 1997 (Cth), as follows: amount withheld by an entity from a *withholding payment means: (a) an amount that the entity withheld from the payment under Division 12 in Schedule 1 to the Taxation Administration Act 1953;… … withholding payment means: (a) a payment from which an amount must be withheld under Division 12 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not withheld);… … withholding payment covered by a particular provision in Schedule 1 to the Taxation Administration Act 1953 means a *withholding payment consisting of: (a) a payment from which an amount must be withheld under that provision (even if the amount is not withheld);… … 4 Division 12 includes s 12-35, in Subdiv 12-B, which 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). 5 The amount required to be withheld from a payment is to be worked out under the withholding schedules made under s 15-25: see s 15-10(1). 6 Section 15-25 provides that the Commissioner may make one or more withholding schedules specifying the amounts, formulas and procedures to be used for working out the amount required to be withheld by an entity from a withholding payment covered by Subdiv 12-B. 7 By s 16-5, if Div 12 requires an entity to withhold an amount from a payment, the entity must do so when making the payment. 8 By s 16-70(1), an entity that withholds an amount under Div 12 must pay the amount to the Commissioner in accordance with Subdiv 16-B. 9 By s 16-140, such an entity must apply to register with the Commissioner. 10 By s 16-150, an entity that must pay an amount to the Commissioner under s 16-70(1) must notify the Commissioner of the amount on or before the day on which the amount is due to be paid (regardless of whether it is paid). The notification must be in the approved form and lodged with the Commissioner. 11 By s 16-155, within 14 days after the end of a financial year, the payer must give a payment summary (and a copy of it) to the recipient if during the year the payer made one or more withholding payments to the recipient. 12 By s 16-153(2), an entity must give a report to the Commissioner in the form required by s 16-153(3), not later than 14 August after the end of a financial year, if during the financial year the entity made any payment from which an amount was required to be withheld under Subdiv 12-B.

The notices of assessment 13 Notices of amended assessment were issued to the applicant on 29 June 2015. The correspondence from the respondent Commissioner in June 2015 also shows they were questions of administrative penalty, but that matter is not before the Court and proceedings in relation to it in the Administrative Appeals Tribunal were discontinued. In relation to penalty, it appears that the applicant is content to stand or fall by reference to the s 18-15(1) question.

Legal principles 14 There appeared to be little difference between the parties as to the law, both parties treating the decisions of Edmonds J in David Cassaniti v Commissioner of Taxation [2010] FCA 641; 186 FCR 480 and Cassaniti v Commissioner of Taxation [2010] FCA 642; 79 ATR 378 as establishing the relevant principles. The contest between the parties was as to the facts and the application of those principles to the facts. 15 In David Cassaniti Edmonds J said, at [37], that if either of the two conditions referred to in s 18-15(1) is met, then a taxpayer will be entitled to a credit "equal to the total of the amounts withheld". "It follows that if no amount was withheld there will be no entitlement to a credit amount." His Honour said, as to the word "withheld": [163] It is clear that the prevailing sense is one of deprivation, the holding back of something due to the employee, resulting in the reduction of a gross amount to a net amount which is paid to the employee. Accordingly, no credit will be available to the payee if they have received a gross amount. There must be a process by which this withholding takes place. It may be reflected in actual funds held by the payer on behalf of the employee pending payment to the Commissioner; on the other hand, and more usually, it may only be reflected in the wage records and books of account of the payer as an accounting entry. [164] Where an amount has been set aside by the payer and is quarantined in a bank account pending its remission to the Commissioner clearly the presence of the funds so designated will demonstrate that a withholding has been made. Indeed the remission of the amounts withheld will invariably lead to the same conclusion. [165] Where in the usual case the withholding process is represented only by accounting entries the question whether a legitimate process of withholding has ensued will depend upon a close examination of those books and records and the surrounding circumstances to see whether it may be inferred from those records and circumstances that a withholding has occurred. At one end of the spectrum, a mere journal entry in the absence of other evidence may not be sufficient evidence, having regard to the surrounding circumstances, that there has been a payment of salary and wages and a withholding from that payment. The authorities make it plain that entries of this kind, standing alone, are not conclusive evidence of the transaction: see, Temples Wholesale Flower Supplies Pty Ltd v FCT (1991) 29 FCR 93 at 100-103. At [173], his Honour said that an employee is only entitled to a credit to the extent of the amount actually withheld by the payer.

The issue 16 The issue therefore is whether any amounts were withheld from payments of salary or wages to the applicant as payee. 17 Three employers are involved: the first is Ultra Nova Financial Services Pty Ltd as trustee of the Ultra Nova Discretionary Trust (Ultra Nova) from about June 2010 to about 20 May 2012; the second is Darlinghurst Properties (NSW) Pty Ltd as trustee for the Darlinghurst Financial Services Trust (Darlinghurst) from about 21 May 2012 to about April 2014; and the third is United Financial Pty Ltd as trustee for the United Financial Trust (United) from about April 2014 onwards. As I have said, the relevant years are the years ended 30 June 2012, 30 June 2013 and 30 June 2014.

The evidence 18 The applicant made three affidavits, dated 23 May 2017, 8 August 2017 and 7 February 2018. 19 The applicant's income tax return for the year ended 30 June 2012 states as income from one payer of $59,056 with "tax withheld" of $12,882. It also shows, from another payer, income of $6,250 with "tax withheld" of $1,365. For the year ended 30 June 2013, one payer is shown. The income is stated to be $66,181 with "tax withheld" of $14,088. For the year ended 30 June 2014, two payers are shown. As to the first the income is stated to be $13,750 with "tax withheld" of $2,893. For the second payer the income is stated to be $49,056 with "tax withheld" of $10,342. 20 A substantial part of the applicant's first affidavit consists of copies of her bank statements for the relevant period, the years ended 30 June 2012 to 30 June 2014. 21 Also annexed to that affidavit are group certificates and the applicant's payslips for each of the three financial years. 22 The applicant states at [20] of her first affidavit: I have never been a director of my respective employers, or had any control over, or played any management role in relation to them. I have never been given (or had access to) any of the company or employer records that relate or refer to when or if PAYG withholding amounts were held back and when or if they were paid to the ATO. 23 The applicant annexed to her second affidavit a copy of her employment contract with Ultra Nova dated 7 June 2010; a copy of her employment contract with Darlinghurst dated 21 May 2012; and a copy of her employment contract with United dated 31 March 2014. In each case the form of the contract was a signed "Offer of Employment". In each case the copy was not a copy signed by the applicant. 24 The first of these documents states that the applicant will be paid $65,000 "per annual gross". The document also states that "Your net weekly pay will be paid into a bank account that you nominate." The second and third of these documents contain an identical term or terms. 25 The applicant's third affidavit provided "Further Explanations" in light of objections taken by the respondent to some parts of the applicant's earlier affidavits. 26 The respondent filed two affidavits by Mr Aris Zafiriou. Mr Zafiriou is the Director, Significant Debt Management, employed by the Australian Taxation Office (ATO). The first affidavit was dated 6 September 2017. Mr Zafiriou's conclusions from the documents annexed were as follows. 27 There was no information on any of the ATO's computer accounting systems that Ultra Nova ever notified or withheld PAYG withholding amounts in respect of the applicant. The Statement of Account for that entity showed that no PAYG withholding amounts were remitted to the respondent Commissioner by that taxpayer. There was no information on any of the ATO's computer accounting systems that Darlinghurst ever notified or withheld PAYG withholding amounts in respect of the applicant. The Statement of Account for that entity showed that no PAYG withholding amounts were ever remitted to the Commissioner by that taxpayer. There was no information on any of the ATO's computer accounting systems that United ever withheld PAYG withholding amounts in respect of the applicant. United was never registered for GST or PAYG withholding. 28 Mr Zafiriou's second affidavit, sworn 8 February 2018, provided additional explanations in light of objections taken, on behalf of the applicant, to his earlier affidavit. 29 It was common ground that the jurisdiction of the Court was "in any matter… arising under any laws made by the Parliament" for the purposes of s 39B(1A)(c) of the Judiciary Act 1903 (Cth) and that the Court should make findings of fact on the evidence before it.

Submissions 30 The applicant submitted, in her summary of case, that the credits she claimed in her income tax returns were equal to the total of amounts withheld from weekly payments of salary from her employment as an office clerk in the tax and accounting firm with which her husband was associated. That firm was Armstrong Scalisi Holdings Pty Ltd (Armstrong Scalisi) trading under the name CAP Accounting. 31 The essence of the applicant's case was that her contracts of employment showed the gross amount and the amounts received into her bank account showed the net amount such that she was entitled to a credit equal to the total of the amounts withheld from withholding payments made to her during the three relevant income years. 32 The applicant accepted that the withholding must occur at the time each payment was made and submitted that this was shown by the payslips and by the PAYG summary documents. The applicant submitted that if it was the case that the amounts withheld had not been paid to the Commissioner, this did not show that the amounts were not withheld from the payments made to her. 33 The essence of the respondent Commissioner's case was that the applicant's evidence was unreliable and that the inferences the applicant invited the Court to draw from the applicant's evidence should not be drawn. The Commissioner relied strongly on evidence showing that the amounts claimed to have been withheld from the payments to the applicant had not been paid by any of the payers to the Commissioner. 34 There was no dispute that the applicant performed work at an accountancy practice styled CAP Accounting (later renamed "Accolade Advisory"), that practice being operated by Armstrong Scalisi. There was also no dispute that the applicant was paid salary or wages. It was common ground that the applicant was employed by the three companies and those companies provided the applicant's services as a clerk to CAP Accounting. 35 In written submissions filed on her behalf and dated 29 January 2018, the applicant submitted as follows. 36 For Ultra Nova, the applicant relied on the payroll advice recording that on 4 July 2011 she was paid in respect of the week 27 June 2011 to 3 July 2011 a net amount of $978 based on a gross pay of $1,250 per week. The same withholding occurred for each subsequent week until about 22 May 2012. The applicant also relied on bank statements. The net amount of $978 paid on 4 July 2011 appeared in the bank statement and was repeated at weekly intervals until 22 May 2016. The applicant also relied on the group certificate indicating gross payments to the applicant of $59,056 and tax withheld of $12,882. 37 For Darlinghurst, the applicant relied on payroll advice showing that Darlinghurst paid the applicant's wages on 28 May 2012 and for the remaining 5 weeks of the 2012 financial year. The applicant relied on bank statements, group certificates and payslips. Reference was made to the applicant being paid a net amount of $977 on 28 May 2012, based on an entitlement to receive a salary of $1250 per week. From the bank statements, the $977 payments made in the 2012 year appeared at weekly intervals in the applicant's account. On 4 July 2012, Darlinghurst issued the applicant with a group certificate for the 2012 tax year indicating gross payments of $6250 and tax withheld of $1365. A similar exercise was conducted for 2013 and for 2014. 38 In relation to United, where the applicant commenced employment on 7 April 2014, she relied on her payslips, bank statements and the group certificate for the 2014 tax year. The net amounts payable to her of $987 appeared in her bank statements and the group certificate indicated gross payments to her of $13,750 and tax withheld of $2,893. 39 The respondent Commissioner submitted in his written submissions dated 5 February 2018 that the evidence was insufficient to prove, as a matter of fact, that amounts were withheld by the payer from the applicant's salary or wages. It followed that the applicant had shown no entitlement to a credit pursuant to s 18-15(1). 40 The respondent Commissioner drew attention to s 16-150 which requires an entity that must pay an amount to the Commissioner to notify the Commissioner of the amount on or before the day on which the amount is due to be paid (regardless of whether it is paid). If during the financial year an entity made one or more withholding payments, by s 16-155, within 14 days after the end of the financial year the entity must provide a payment summary to the recipient. By s 16-153, the entity must provide to the Commissioner copies of all payment summaries no later than 14 August after the end of the financial year. 41 The respondent Commissioner submitted that the applicant had not placed wage records or books of account of the payer into evidence in this case. The respondent Commissioner also submitted that, under s 16-5, the withholding must be made at the time of the payment, such that the applicant must prove that there was a contemporaneous arithmetical subtraction or deduction from the withholding payments. As I have noted, this was common ground. 42 The respondent Commissioner relied on the following in David Cassaniti v Commissioner of Taxation: [167] Where there is a controversy about the occurrence of a withholding the surrounding circumstances may either support or detract from the drawing of an inference that a withholding was in fact made. There are a number of reporting requirements where an employer makes a PAYG withholding. In particular, pursuant to s 16-150 of Sch 1 to the TAA the payer is required to give notification to the Commissioner of the amounts it was required to pay to the Commissioner under s 16-70(1) on or before the day on which the amount is due to be paid (regardless of whether it is paid). [168] The notification must be in the "approved form" and lodged with the Commissioner. This will usually be by way of lodgement of the Business Activity Statements ("BAS"). Further, pursuant to s 16-153(2) the payer is required to give an annual report to the Commissioner in the "approved form" being a summary of payments withheld not later than 14 August after the end of the financial year. [169] These provisions govern and describe the obligations of the payer of salary and wages. Compliance with those provisions will constitute contemporaneous documentary evidence from which it may be inferred that a withholding has occurred. Conversely, where there has been little or no compliance with those provisions, it may be an open question whether in fact a withholding was made. [170] In the normal course, it could be expected that a payer of salary of [sic] wages who was making withholdings at the required rate would have in its possession, accounting and wage records showing an arithmetic subtraction from a gross amount and payment of the net amount, or alternatively records showing that the amounts withheld had been set aside for payment to the Commissioner. [171] If a payer was to rely upon accounting records to show that a withholding had occurred in relation to a particular employee it would be necessary to show that an arithmetic subtraction had been made in respect of that employee. This follows from the terms of s 12-35. [172] A payer of salary and wages who was complying with the requirements of the TAA could be also expected to keep records showing a global amount deducted in respect of all employees in a reporting period in order to complete its BAS (s 16-150 of Sch 1 to the TAA), and to keep records enabling it to report annually the total amount of PAYG withholding (subs 16-153(2)). The absence of such records may inferentially lead to the conclusion that no amount was withheld. 43 The respondent Commissioner also submitted that a failure to remit any allegedly withheld amounts to the Commissioner will legitimately put into question whether deductions were actually made: Perdikaris v Deputy Commissioner of Taxation [2008] FCAFC 186; 172 FCR 412 at [36]. I note however that that observation was made in the context of an administrative law claim that the Commissioner had taken into account an irrelevant consideration. 44 In relation to Ultra Nova, the respondent Commissioner submitted there was almost no compliance by Ultra Nova with the obligations imposed by Div 16 in Sch 1 to the Taxation Administration Act and the Income Tax Assessment Act 1936 (Cth) on a payer of salary and wages. This was a significant part of the "surrounding circumstances" which the Court should take into account in determining whether a withholding, in fact, occurred. 45 The respondent Commissioner also referred to the Administrators' Report to Creditors dated 23 April 2013, exhibited to the first affidavit of Mr Zafiriou which showed that Ultra Nova had ceased trading and had terminated the employment of its employees well before some of the entries in the payroll advice documents on which the applicant relied. That Report also showed that Ultra Nova did not maintain a bank account and did not pay its employees directly, whereas the obligation to withhold is cast on the entity that makes the payment, even if that is not the employer. The Report also stated the Ultra Nova did not maintain proper financial records and all that was produced to the Administrators was a ledger of outstanding leave and superannuation entitlements. 46 The respondent Commissioner submitted the evidence did not establish that any PAYG in respect of the applicant was actually withheld by Ultra Nova. 47 The respondent Commissioner also relied on subpoenaed records of the Australia and New Zealand Banking Group Ltd (ANZ) in relation to the applicant's bank account, requiring the bank to produce "all documents identifying the name, bank and account number of the payer" for each deposit listed in the table in the subpoena. The Commissioner submitted that these records showed that the payer for the dates beginning on 4 July 2011 and ending on 6 June 2012 was Armstrong Scalisi. 48 In relation to Darlinghurst, the respondent Commissioner submitted that Darlinghurst's non-compliance with its obligations as a payer, imposed under Div 16 in Sch 1 to the Taxation Administration Act and the Income Tax Assessment Act and its failure to remit any (allegedly) withheld amount to the Commissioner tended against a finding that a contemporaneous process of withholding from payments took place. The respondent Commissioner submitted that the evidence did not establish that any PAYG in respect of the applicant was actually withheld by Darlinghurst. The Commissioner submitted that the records produced by ANZ under subpoena showed that the payer for the dates beginning on 4 November 2013 to 7 April 2014 was Armstrong Scalisi. 49 In relation to United, the respondent Commissioner repeated his submissions as to the consequence of United's non-compliance with its obligations under Div 16 in Sch 1 to the Taxation Administration Act and the Income Tax Assessment Act and its failure to remit any allegedly withheld amounts. The respondent Commissioner submitted the evidence did not establish that any PAYG in respect of the applicant was actually withheld by United.

Rulings on evidence 50 I admit paragraph 18 of the applicant's first affidavit, including MC10, MC11 and MC12. These were, respectively, the group certificates for the financial year ended 30 June 2012 and the applicant's payslips; the group certificate for the financial year ended 30 June 2013 and the applicant's payslips; and the group certificates for the financial year ended 30 June 2014 and the applicant's payslips. In my opinion a sufficient basis was established in the evidence of the applicant as to their source for them to be admitted into evidence, and I so rule.

The evidence of the applicant 51 The applicant was cross-examined at some length. 52 Although her memory of the detail of some events was not good, I accept her evidence as truthful. In saying that the applicant's memory was not good I take into account that she had for some while being seeing a doctor about problems she was having with her memory, such as difficulty in concentrating. 53 In my opinion, the applicant's knowledge was consistent with her position as a clerk in the accounting business throughout the period of her employment, her roles being limited to such things as greeting clients, answering telephone calls, filing and photocopying, making coffees and making clients welcome. She did not work on the payroll and it was not part of her role to do the accounts. 54 In particular, I accept the evidence she gave as follows, even though, in terms of the documentary evidence on which she relied, evidence from a more direct source, her own records, was available to her but was not put into evidence. 55 I find that the applicant was given an offer of employment at Ultra Nova in early June 2010 and that her annual gross salary or wages was $65,000, with her net weekly pay being paid into a bank account that she nominated. I also find that the applicant was given an offer of employment by Darlinghurst in late May 2012 with the same terms of remuneration. I also find that the applicant was given an offer of employment by United in late March 2014, again on the same terms as to remuneration. I find she accepted these offers at those times and that she was employed in accordance with those terms of remuneration. 56 I do not accept the submission on behalf of the respondent Commissioner that I should find on the basis of the applicant's oral evidence that the applicant was not given these documents at the times to which I have referred. In my opinion, the cross examination on those issues was, for a person of the applicant's education and understanding, too oblique to found the conclusion for which the respondent Commissioner contended. For example, to refer in questions to a "form" would not readily induce recollection of a letter. 57 I accept the applicant's evidence that she was given the letters of offer on or about the dates they bear. The circumstances in which the copies later came into the applicant's possession do not count against this conclusion. I accept the applicant's evidence that she was later, after she had commenced the present proceedings, provided with these copies by Mr Sam Cassiniti. 58 I find that the document constituting the payroll advice from 1 July 2011 to 22 May 2012 and from 1 May 2012 to 30 June 2012 recorded payment advices received contemporaneously by the applicant once a week but with only one week on each payment advice. I note that the applicant has not, since she commenced these proceedings, checked to see whether the composite payroll advices document was correct but I do not regard that as affecting the accuracy of its contents. 59 I find that the payslips showing payment dates of 2 July 2012 through to 24 June 2013 were received contemporaneously by the applicant, that is, on about the date that each document bears. Each of these showed a PAYG withholding amount. I accept the accuracy of the contents of these payslips. 60 I accept the applicant's evidence, at [7] of her affidavit dated 7 February 2018, that each week in the 2012-2014 financial year she received from Mr Michael Lowe a hard copy payslip. 61 As to the payment summaries for the year ending 30 June 2012 (two summaries, each showing the payer as Ultra Nova), the year ending 30 June 2013 (showing the payer as Darlinghurst), and the year ending 30 June 2014 (showing the payers as Darlinghurst and United), their provenance as copies is obscure but I accept the applicant's evidence that she was given shortly after each financial year a copy of these documents for the purposes of her income tax returns for each of the years: see [4] of the applicant's affidavit of 7 February 2018. 62 I accept the statements, admitted into evidence as submissions, made by the applicant in her affidavit of 8 August 2017 that she did not receive the full amount referred to in her contract with Ultra Nova, the Darlinghurst contract or the United contract; her payslips under the heading "Annual Salary" correctly recorded her gross income for each employer; and she only received into her nominated bank account the amounts referred to beside the words "Net Pay". In relation to any pay amount, she had never received the amount referred to beside the words "Gross Pay".

Other findings 63 I find that United is not and has not been registered for PAYG withholding. I find that Darlinghurst did not lodge Business Activity Statements for the quarterly tax periods being the three relevant income years. I find that Ultra Nova did not lodge Business Activity Statements for the quarterly tax periods ending 30 September 2011 to 30 June 2012. 64 I find that United did not lodge any payment summaries for the 2014 income year. I find that Darlinghurst did not lodge payment summaries for any of the relevant income years. I find that Ultra Nova did not lodge any payment summaries for the 2011 and 2012 income years. 65 I find that no tax file number (TFN) declarations were lodged in respect of United in any income year; that no TFN declarations were lodged in respect of Darlinghurst in any income year; and that no TFN declarations were lodged in respect of Ultra Nova in any income year. 66 I find that no PAYG withholding amounts were remitted to the Commissioner by Darlinghurst. I find that no PAYG withholding amounts were remitted to the Commissioner by Ultra Nova. I find that United was not registered for PAYG withholding and that it did not remit any PAYG withholding amounts to the Commissioner. 67 I accept the conclusions reached by Mr Zafiriou at [33]-[35] of his first affidavit as follows. 68 For the period 1 July 2011 to on or around 20 May 2012 there is no information on the ATO systems that Ultra Nova notified or withheld PAYG withholding amounts in respect of the applicant. No PAYG withholding amounts were remitted to the Commissioner by Ultra Nova. 69 For the period on or around 21 May 2012 to on or around 6 April 2014 there is no information on the ATO systems that Darlinghurst notified or withheld PAYG withholding amounts in respect of the applicant. No PAYG withholding amounts were remitted to the Commissioner by Darlinghurst. 70 For the period on or around 7 April 2014 to 30 June 2014 there is no information on the ATO systems that United withheld PAYG withholding amounts in respect of the applicant. United was never registered for PAYG withholding. 71 The respondent Commissioner contended for the following findings. 72 As I have earlier indicated, the respondent Commissioner submitted that records produced on subpoena to the ANZ for documents identifying the name, bank and account number of the payer for each of 36 deposits to the applicant's bank account rendered doubtful whether the three entities nominated by the applicant as the payers were indeed the payers of the relevant amounts to the applicant. 73 By reference to those records the respondent Commissioner submitted, by way of example, that the payment for 4 July 2011 into the applicant's account was not made by Ultra Nova but by Armstrong Scalisi. There was no evidence to explain why it was that Armstrong Scalisi was making that payment. The respondent Commissioner submitted that a finding should be made that Ultra Nova did not make that payment. The same applied to the pay dated 8 August 2011, 7 September 2011, 4 October 2011, 14 November 2011, 6 December 2011, 2 January 2012, 6 February 2012, 5 March 2012, 2 April 2012, 30 April 2012 and 5 June 2012. Those records then showed the payer as Darlinghurst from the pay dated 2 July 2012 to, but not including, the pay dated 4 November 2013. Thereafter the payer was shown as Armstrong Scalisi up to, but not including, the pay dated 5 May 2014 which, along with the pay dated 3 June 2014 showed the payer as United. In each instance the records required to be produced on subpoena were by reference to monthly intervals. The respondent Commissioner submitted that the applicant was in the insuperable difficulty of being paid by someone other than the payer she claimed. The documents did not support any withholding by Armstrong Scalisi. The same analysis, it was submitted, applied to Darlinghurst and United but without the added feature of an Administrators' report referring to the difficulties with records. 74 The respondent Commissioner submitted that the Court could not be satisfied on the balance of probabilities that the letters of offer, the payslips, the summaries and the payroll advice were the true records of the three companies. The respondent Commissioner submitted it would be open to the Court to find on the balance of probabilities that those documents were recent inventions by some or all of Mr Sam Cassaniti, Mr David Cassaniti and Mr Michael Lowe. It was submitted that those documents must have been falsely prepared. 75 Secondly, the respondent Commissioner relied heavily on the surrounding circumstances, where there was not clear contemporaneous evidence of the PAYG being withheld. 76 Thirdly, the respondent Commissioner submitted that the applicant was not at arm's length from the employer or payer as she is married to Mr David Cassaniti, who is the cousin of Mr Sam Cassaniti. The respondent Commissioner submitted that Mr David Cassaniti, Mr Sam Cassaniti and Mr Michael Lowe, the successor to Mr David Cassaniti as the director of CAP Accounting were in the camp of Mrs Cassaniti and none of them was called to give evidence. 77 As to Ultra Nova, the respondent Commissioner submitted that the company ceased trading prior to 20 March 2012 whereas Mrs Cassaniti said that she continued to be employed by and work for that company until at least 21 May 2012. The respondent Commissioner also submitted that the Administrators' report to creditors dated April 2012 stated that the director had failed to provide any books and records in respect of the company's financial affairs and that was highly relevant to the determination of the authenticity of the records relied on by the applicant which were, or were at least part of, the evidence produced to the applicant's solicitors some time in the last 12 months by Mr Lowe and by Mr Sam Cassaniti. 78 Also by reference to the Administrators' report, the respondent Commissioner submitted that Ultra Nova did not maintain a bank account and as such did not pay the employees directly. According to the Administrators' information, the employees were being paid by Reliance Financial Services (NSW) Pty Limited. 79 The same Report noted that Ultra Nova had terminated the employment of the employees prior to the appointment of the Administrators on 20 March 2012. 80 This was in contrast to the applicant's case which was that she continued to be employed and paid by Ultra Nova until as late as about 21 May 2012. 81 In my opinion the Administrators' report is evidence to be taken into account, but I do not conclude from that material that Ultra Nova had no records. The Administrators' report was: "prepared from our investigations to date, which has relied on the available books and records of the Company and information provided by the Company's director. Due to the time constraints imposed by the Act, this information has generally been accepted without conducting an audit or obtaining independent verification of its accuracy." The company's sole director at that time was Ms Karen Foster. I have considered and weighed that evidence against the evidence of the applicant and prefer the applicant's more direct evidence as to the provenance of the records. 82 As to Ultra Nova ceasing to trade and terminating the employment of the employees by 20 March 2012, I prefer the direct evidence of the applicant and the documentary evidence on which she relies, given that the Administrators were drawing inferences from incomplete information. I find that the applicant continued to be paid wages or salary as an employee of Ultra Nova until on or about 20 May 2012. 83 As to the subpoenaed bank records in relation to the applicant's employment by Ultra Nova, those records show the payer for the entirety of the period in the relevant years as Armstrong Scalisi. 84 In respect of Darlinghurst, the subpoenaed records show that Darlinghurst was the payer from early July 2012 to early October 2013. Thus the payer at the beginning and at the end of the applicant's time at Darlinghurst is shown by the subpoenaed records to be Armstrong Scalisi. 85 In respect of United, where the applicant commenced employment on 7 April 2014, the subpoenaed records show United as the payer, so the same questions do not arise in relation to the applicant's time at United. 86 The issue arises under s 12-35, providing that an entity must withhold an amount from salary, wages, commissions, bonuses or allowances it pays to an individual as an employee (whether of that or another entity). It follows that the identity of the payer of salary and wages is significant. 87 There is no direct evidence as to the circumstances in which Armstrong Scalisi, the accounting firm to which the applicant's services as an employee were provided by Ultra Nova and Darlinghurst during successive periods in the relevant years, was making the deposits into the applicant's bank account for salary or wages. There is no suggestion that Armstrong Scalisi was withholding an amount from a withholding payment or had an obligation to do so. Section 12-60 of Sch 1 to the Taxation Administration Act provides that it is the labour hire company which must withhold an amount from a payment that it makes to an individual where the payment is made under an arrangement the performance of which involves the performance of services by the individual directly for a client of the entity. 88 The applicant submitted, in relation to what was shown by the subpoenaed records, that the fact that Armstrong Scalisi was identified as the entity that actually made the payment did not excuse the obligation of Ultra Nova, which had the primary obligation as the employer. The section did not specify how the employer had to pay and if it paid by direction by arranging for the bank to send money or if it arranged in some other way that there was actually a physical payment by a third party, it could not be said that that meant that the entity itself, the employer, was not the payer. The applicant submitted that to construe s 12-35 so that it had the effect of excluding the obligation of the employer because the physical payment was made by a bank or an accounting firm should not "hold the day" so far as the employee was concerned. 89 The inferences I draw are that Ultra Nova and Darlinghurst, for the periods where the subpoenaed records show that the payer was Armstrong Scalisi, were paying their employees indirectly and thus in each instance were the relevant payer of the salary or wages of the applicant. As I have said, the same issues do not arise in relation to United. 90 I have taken into account the surrounding circumstances in what is ultimately a fact-finding exercise. While I accept the applicant's submission that the non-payment to the Commissioner of amounts withheld does not show that the amounts were not withheld from the payments made to the applicant, that non-payment invites particular scrutiny of the facts and matters relied on by the payee. So also does the fact that the applicant and Mr David Cassaniti are wife and husband. Having considered the surrounding circumstances, in particular the evidence of the applicant, I have not accepted the respondent Commissioner's submission that the Court could not be satisfied on the balance of probabilities that the letters of offer, the payslips, the summaries and the payroll advice were the true records of the three companies. Neither have I accepted the respondent Commissioner's submission that those documents were recent inventions by some or all of Mr Sam Cassaniti, Mr David Cassaniti and Mr Michael Lowe or that those documents were falsely prepared. It also follows that I do not accept the Commissioner's submission that there was not sufficiently clear contemporaneous evidence of the PAYG being withheld from payments to the applicant. 91 I have taken into account the submissions made on each side as to the claimed and respective failures to call further witnesses. In the circumstances of this case I do not draw the inferences I was invited to draw either by the applicant or by the respondent Commissioner. In my opinion, in light of my findings on the present evidence, to the civil standard, suggestive of possible offences by officers of the three companies, Mr Sam Cassaniti, Mr David Cassaniti and Mr Michael Lowe, I would not draw the inference that their evidence would not have assisted the applicant's case: see Fabre v Arenales (1992) 27 NSWLR 437 at 449-450.

Conclusion 92 For these reasons, the applicant is entitled to relief on the basis that the claimed amounts were withheld from withholding payments made to her during the relevant years. I direct the parties to bring in short minutes to give effect to these reasons, and to do so within 14 days. The respondent is to pay the applicant's costs. I certify that the preceding ninety-two (92) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

Judiciary Act 1903(Cth)s 39B(1A)(c)

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