Clyne v Deputy Federal Commissioner of Taxation [1981] HCA 40;

Clyne v Deputy Federal Commissioner of Taxation [1981] HCA 40; - HCA 1981 case summary — Zoe

[7]

place of address known to the Commissioner), require -

(a) any person by whom any money is due or accruing or may become due to a taxpayer;

(b) any person who holds or may subsequently hold money for or on account of a taxpayer;

(c) any person who holds or may subsequently hold money on account of some other person for payment to a taxpayer; or

(d) any person having authority from some other person to pay money to a taxpayer,

to pay to the Commissioner, either forthwith upon the money becoming due or being held, or at or within a time specified in the notice (not being a time before the money becomes due or is held) -

(i) so much of the money as is sufficient to pay the amount due by the taxpayer in respect of any tax and of any fines and costs imposed upon him under this Act, or the whole of the money when it is equal to or less than that amount; or

(ii) such amount as is specified in the notice out of each of any payments which the person so notified becomes liable from time to time to make to the taxpayer, until the amount due by the taxpayer in respect of any tax and of any fines and costs imposed upon him under this Act is satisfied,

and may at any time, or from time to time, amend or revoke any such notice, or extend the time for making any payment in pursuance of the notice.

(2) Any person who fails to comply with any notice under this section shall be guilty of an offence.

Penalty: One hundred dollars.

(4) Any person making any payment in pursuance of this section shall be deemed to have been acting under the authority of the taxpayer and of all other persons concerned and is hereby indemnified in respect of such payment.

(5) If the Commissioner receives any payment in respect of the amount due by the taxpayer before payment is made by the person so notified he shall forthwith give notice thereof to that person.

(6) In the foregoing provisions of this section -

"tax" includes -

(a) tax assessed, and a tax of a similar nature to provisional tax notified, under a State income tax law; and

(b) any judgment debt and costs in respect of income tax (including tax referred to in paragraph (a));

"person" includes company, partnership, the Commonwealth, a State and any public authority (corporate or unincorporate) of the Commonwealth or a State.

(7) Any notice to be given under this section to the Commonwealth or a State may be served upon such person as is prescribed, and any notice so served shall be deemed to have been served upon the Commonwealth or a State, as the case may be." (at p7)

[14]

With all respect, not all of this reasoning can be accepted. The tax is imposed by the relevant Income Tax Act, not by the Income Tax Assessment Act, and in s. 6(1) of the Act "income tax" or "tax" is accordingly defined as "income tax . . . imposed as such by any Act, as assessed under the Income Tax Assessment Act 1936, or under that Act as amended at any time." Section 17 of the Act provides that, subject to the Act, income tax at the rates declared by the Parliament is levied and shall be paid upon the taxable income derived during the year of income by any person. These provisions suggest that the tax is due, in the sense of owing, once the taxable income during a year of income has been derived because there then arises a legal liability to pay it, notwithstanding that the extent of the liability remains to be ascertained and that payment is to be made in the future. That this is so, at least for certain purposes, is shown by the decision in Commissioner of Stamps (W.A.) v. West Australian Trustee, Executor and Agency Co. Ltd. [1925] HCA 20; (1925) 36 CLR 98, esp at pp 102, 104, 116, 118 and Re Mendonca; Ex parte Federal Commissioner of Taxation (1969) 15 FLR 256, esp at pp 259-260 , and by statements in the judgments of Knox C.J. in Commissioner of Stamps (W.A.) v. West Australian Trustee, Executor and Agency Co. Ltd. [1926] HCA 17; (1926) 38 CLR 63, at p 66 ; Latham C.J. in Aitken v. Federal Commissioner of Taxation [1936] HCA 53; (1936) 56 CLR 491, at p 497 ; and Kitto and Taylor JJ. (dissenting) in Deputy Federal Commissioner of Taxation v. Brown [1958] HCA 2; (1958) 100 CLR 32, at pp 58, 63-64 . On the other hand it has been said that tax is not due until it is assessed (see George v. Federal Commissioner of Taxation [1952] HCA 21; (1952) 86 CLR 183, at p 207 and per Dixon C.J. in Deputy Federal Commissioner of Taxation v. Brown (1958) 100 CLR, at p 40 ). This may be the correct view for most practical purposes. Certainly a notice under s. 218 could not be given before the taxpayer had been assessed, for until that time "the amount due by the taxpayer" could not be ascertained. However, all the authorities to which I have referred are opposed to the view which Williams J. expressed in Gordon Edgell and Sons Pty. Ltd. v. Federal Commissioner of Taxation and seems to have repeated in Deputy Federal Commissioner of Taxation v. Brown (1958) 100 CLR at p 50 , that tax becomes due only when it is payable. At the latest when tax is assessed it becomes a debt due to the Crown although it is not payable until the later date specified in the notice of assessment. For these reasons when the word "due" is used in the Act, without the accompanying words "and payable", it will prima facie mean simply owing. This distinction between "due" and "payable" is clearly drawn in s. 255(1), which requires a person in receipt or control of money belonging to a non-resident to "pay the tax due and payable by the non-resident" (par. (a)) and "to retain . . . so much as is sufficient to pay the tax which is or will become due by the non-resident" (par. (b)) (see also s. 254(d)). (at p10)

[17]

7. The second submission made on behalf of the appellants was that when the moneys became payable by the Bank (i.e. after the deposits matured) they were, because of the assignment, due to the second appellant and not to the taxpayer, and that in these circumstances the notices did not effectively require payment to the Deputy Commissioner. In disposing of this argument, it is not, in my respectful opinion, necessary to have recourse to the doctrine that an assignee of an equitable interest takes subject to the equities and to the infirmities of the assignor's title. The section itself answers the appellant's contentions. The conditions for the giving of a valid notice are laid down in s. 218(1). If those conditions exist at the time when the notice is given there is a valid requirement in respect of the money to which the notice refers, which, in a case under par. (a), will be money which is due or accruing or may become due by the person to whom the notice is given to the taxpayer. The words by which the Parliament grants the power to make the requirement necessarily imply that the person to whom the requirement is given will obey it. Subsequent actions by the taxpayer cannot render the requirement nugatory or ineffective. If that were not so it would be possible for a taxpayer, in a case such as the present in which the notice required payment within seven days of the money becoming due, himself to obtain payment of the money immediately it became due, with the result that when the time came for compliance with the notice there would be no money to which the notice related. It would indeed be possible, in every case in which the money was not payable to the taxpayer at the time when the notice was given, entirely to defeat the purposes of the section. However, once the notice is given, it operates to prevent any subsequent dealing with the money which will prevent compliance with the notice when the time for compliance arrives. An assignment made by the taxpayer after the date of the notice will be ineffective to relieve the person to whom the notice is given of his statutory obligation to pay the money to the Commissioner. Notwithstanding the assignment, the money will be "due" at the time when it would have become payable to the taxpayer if it had not been for the subsequent assignment whose effect is to be ignored. Section 218(4) recognizes that if it had not been for the notice other persons than the taxpayer might have acquired rights to the money, for any payment made in pursuance of the section is deemed to have been made "under the authority of the taxpayer and of all other persons concerned". (at p12)

At a glance

Court

Decision date

Source

Judgment (81 paragraphs)

Clyne v Deputy Federal Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1 (7 August 1981)

Parties

Legislation Cited (2)

Cases Cited (16)