Armstrong Scalisi Holdings
174 The above observations of Robertson J were adopted by Ward CJ in Eq in Armstrong Scalisi Holdings at [219]. There the defendant, ASH, carried on an accounting practice under the name CAP Accounting. The Deputy Commissioner brought proceedings seeking to recover an RBA deficit debt of approximately $4 million plus interest. The proceedings followed service by the Deputy Commissioner of a Notice of Estimate of Liability estimating ASH's liability for PAYGW amounts in the period from 1 July 2009 to 31 October 2013. ASH denied liability and asserted that it had only one employee, Mr Cassaniti, and that it had complied with all of its obligations. It said it otherwise procured its labour requirements through the use of a labour hire company and that the relevant labour hires were the employees of that company. ASH did accept that it made payments for the remuneration of the staff, but said that it did so on behalf of the labour hire company. On that basis, Mr Cassaniti claimed that ASH had never been under any obligation to withhold PAYGW amounts in respect of those employees. Although ASH paid money to the employees as wages, it claimed it was really paying money to the labour hire companies in return for the provision of services. It said that, in order for a withholding obligation to arise under s 12-35, the amount paid to an individual as an employee must be characterised as salary or wages and paid in the course of an employer-employee relationship. The expression, "in the course of" an employer-employee relationship was said to mean that the wages had to be paid to the employee by an employer. ASH claimed that any alleged debt arising as a result of the Estimate Notice served on it by the Deputy Commissioner had been negated because it had provided the Deputy Commissioner with a statutory declaration to the effect of "verifying facts in the circumstances sufficient to prove that any alleged underlying liability never existed". In general terms, the contents of the statutory declaration identified its above claim that it was not the employer of the workers. The parties agreed upon separate questions for determination and four such questions were posed to the Court which went to the effectiveness of the statutory declaration to revoke or to reduce the Estimate Notice. It was not in doubt as between the parties that, if the statutory declaration complied with the requirements of ss 268-40 and 268-90, then the estimate would be revoked pursuant to s 268-40(4).
175 The major question identified to the Court was:
1. Is the statutory declaration … a statutory declaration that answers the description in, and satisfies the requirements of, ss 268-40 and 268-90 of Schedule 1 to the Taxation Administration Act 1953 (Cth)?
176 Unfortunately, an issue arose as to the authority of the delegate to issue the Estimate Notice and that caused the separate question process to derail slightly. Although Ward CJ accepted that that issue made the question set out unnecessary to decide, her Honour indicated that the statutory declaration did not meet the statutory requirements of s 268-40(4) as it was not "to the effect" that the underlying liability never existed or that a specified lesser amount is the unpaid amount of the underlying liability.
177 Her Honour considered the predecessor to the existing estimate regime and the introduction of Div 268 in July 2010 as well as the purposes which it was intended to achieve. Her Honour carefully analysed the legislative provisions in the Division (at [59]-[73]) and there is no need to address those matters here.
178 In considering the issues surrounding the identified separate question, Ward CJ referred to Robertson J's statement in Transtar Linehaul as to the requirements of ss 268-40 and 268-90. Her Honour accepted that an affidavit or statutory declaration was insufficient if it merely did no more than assert that no amounts on account of PAYG withholding were withheld from payments made to any person or that the recipient of the notice had no employees receiving salary or wages and no amount was paid to them from which it might have withheld the relevant amount. Her Honour also accepted there was an equivalence to the requirements of the affidavit referred to in s 268-40 (which "verifies facts sufficient to prove") and those applicable to a statutory declaration. After considering the submissions advanced by the respective parties her Honour concluded:
(a) The relevant issue of construction was as to the meaning of the phrase "to the effect" in the context of s 268-40 that the requisite statutory declaration must be to the effect either "'that a specified lesser amount is the unpaid amount of the underlying liability' … or 'that the underlying liability never existed'" (at [261]).
(b) In the matter before her Honour, the provider of the statutory declaration asserted that no amount of PAYG relating to the relevant period ought to have been or was withheld by the defendant and has not been remitted to the Deputy Commissioner (at [262]).
(c) The requirements of a statutory declaration were akin to an affidavit "verifying certain facts" in that the person making it must attest to the truth of the facts stated in the declaration. Her Honour accepted the "equivalence" identified by Robertson J in Transtar Linehaul between the affidavit and statutory declaration. In particular, the requirements in relation to the statutory declaration directs attention to the substance of the statutory declaration rather than its form (at [264]-[265]).
(d) The expression "to the effect" of something else is, in substance, the same as (albeit not necessarily identical to) that other thing. It is commonly understood as being a paraphrase or summary of the content of something else and not a verbatim account (at [266]).
(e) At [267], her Honour said:
A declaration "to the effect" that a state of affairs never existed (i.e., the underlying liability) or that a "specified" lesser sum was unpaid requires the maker of the declaration to attest to facts which would be sufficient, if accepted in a contested dispute, to establish that state of affairs or that specified lesser sum. By "sufficient", I mean that, accepting the substance of the declared fact is true, the conclusion which would, on balance, follow is that some specified lesser sum is unpaid or that underlying liability never existed. The defendant's position seems to be that, while acknowledging that a mere statement (or conclusion) without reference to the underlying facts would be insufficient, it is required to do no more than provide a declaration setting out facts showing what has been withheld and (by the omission of facts as to any other withholding) that no other sums have been withheld.
(f) The statutory declaration before her Honour declared that there was no liability to withhold any other PAYG amounts and that no amount of PAYG relating to the notice period that "ought to have been withheld by the defendant". That, however, was not "to the effect" that that underlying liability "never existed". On the face of the declaration it was identified that amounts, described as "wages", were paid to certain members of CAP Accounting staff but that ASH withheld no amounts in relation to them. Therefore, the statutory declaration did not disclose facts upon which it could be concluded, as a matter of substance, that the underlying PAYGW liability never existed (at [269]-[270]).
(g) The legislation does not impose a positive obligation on the recipient to disclose why any amount identified as not having been withheld was not, however, at a practical level, that may be required, especially if a recipient is attesting to facts to the effect that an underlying liability never existed or that a specified lesser amount of the liability is unpaid. It may be necessary for the recipient to verify facts to dispel what would otherwise be an available inference that amounts ought to have been but were not withheld (at [271]).
(h) Despite the denials of liability, sufficient facts were not verified in the statutory declaration to show that the liability never existed (at [272]).
(i) The bank accounts indicating payments by the defendant to the employees of the labour hire companies identified the payments as "wages" and that gave rise to an inference that they were paid in that character. There was no evidence which indicated to the contrary.
(j) Consequently, Ward CJ determined that the statutory declaration was insufficient to verify facts that no or a lesser specified amount was owing.
179 It is necessary to set out paragraphs [269] to [272] of her Honour's reasons:
269 I am not satisfied that the 2017 Statutory Declaration is "to the effect" that the underlying liability "never existed". On the face of the Table in Sch 1 to the 2017 Statutory Declaration, payments were made, described as wages, to identified members of CAP Accounting staff (other than Mr Cassaniti) and the declaration makes clear the defendant's position that no amounts were withheld by the defendant in relation to those payments.
270 Therefore, whatever may be the case as to the extent to which the plaintiff could properly test the 2017 Statutory Declaration by reference to other material (such as the Account B statements), and whatever might be said as to whether the defendant has properly complied with its obligations to remit amounts to the plaintiff under Div 16 or whether the maker of the 2017 Statutory Declaration was ultimately proven correct as to the facts so verified (see s 268-90(2)(b)), I consider that the plaintiff has established that the 2017 Statutory Declaration does not disclose facts upon which it can be concluded (and is as a matter of substance not to the effect) that the underlying (PAYGW) liability never existed.
271 I accept that the legislation does not impose a positive obligation on the taxpayer to disclose why it was that any particular amount disclosed (implicitly or otherwise) by the statutory declaration (or affidavit) not to have been withheld was not withheld. However, at a practical level, if a taxpayer is attesting to facts to the effect (or sufficient to prove, in the case of an affidavit) that the underlying liability never existed or that a specified lesser amount of the liability is unpaid (in this case said to be nil) and, on the material provided by the taxpayer, there is some doubt arising as to the characterisation of particular payments, then it may well be that there is a need for the taxpayer to verify facts to dispel what would otherwise be an available inference that amounts ought to have been but were not withheld. In the present case, that issue potentially arises in relation to amounts disclosed in the 2017 Statutory Declaration as paid out of the defendant's Account A to the various third party entities (from which there was no PAYGW) but in respect of which the bank statements record descriptions such as "wages", "Pay" and "Payroll" (see [23] of Mr Zafariou's 10 May 2018 affidavit and Ex AZ-5 thereto; bank statements in Volume 1 of the volumes exhibited to the 2017 Statutory Declaration).
272 The verified facts in the present case disclose at the very least that amounts (described as wages) were paid by the defendant to individuals out of Account A, from which payments no amounts for PAYG tax were withheld. The defendant effectively conceded that this was the case in relation to the so-called "isolated transactions". Thus, the 2017 Statutory Declaration does not verify facts to the effect that the underlying liability "never existed". Nor am I persuaded that the 2017 Statutory Declaration discloses facts upon which it can be concluded (and thus I consider that as a matter of substance it is not to the effect) that the "specified" lesser amount unpaid of the underlying liability is nil. Since the only specified lesser amount in the 2017 Statutory Declaration is "nil", it is apparent from the information in Table A on its face demonstrates that this is incorrect. Therefore, I cannot accept that the 2017 Statutory Declaration is to the effect that the amount unpaid of the underlying liability is nil (that being the position for which the defendant, at least in the declaration and in its pleading in these proceedings, though not perhaps in its final submissions, has contended).
(emphasis in bold added)
180 Whilst her Honour's conclusion on that issue may well be entirely correct, on one reading it may be that the nomenclatures used in the reasons were not entirely consistent with the earlier parts of the reasons. At paragraph [60] it is correctly recognised that the "underlying liability" is not the obligation to withhold amounts but the obligation under s 16-70 to remit amounts to the Commissioner. See also paragraphs [164] and [239]. However, in the passage set out above a distinction appears to be drawn between the obligation to remit and the underlying liability: [270]. The expressions used might suggest that the underlying liability is the failure to withhold. Moreover, in paragraphs [269], [271] and [272], it seems to have been accepted that the recipient of the notice had verified that no amounts for PAYG tax been withheld, but that was not sufficient. Therefore, on one reading it may be that her Honour was ascertaining whether there had been compliance with the obligation to withhold rather than the obligation to remit.