Commissioner of State Revenue Victoria v Gas Ban Pty Ltd

TAXATION - Payroll tax - Collection and recovery - Statutory demand issued by Commissioner to recover tax - Effect of claim that assessments glaringly erroneous where application made to set aside statutory demand - Taxation Administration Act 1997 (Vic) ss 44 and 45; Corporations Act 2001 (Com), ss 459G, 459H(1)(a), 459J(1)(b)

CORPORATIONS - Winding up - Insolvency - Statutory demand - Statutory demand issued by Commissioner to recover tax - Genuine dispute as to existence of amount of debt - Whether claim that assessments glaringly erroneous can give rise to genuine dispute or constitute proper basis for exercise of power to set aside statutory demand for some other reason - Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473, applied - Corporations Act 2001 (Com), ss 459G, 459H(1)(a), 459J(1)(b); Taxation Administration Act 1997 (Vic), ss 17, 44, 45, 96(2), 104, 110, 126, Part 10.

Nicholas Kotros, Solicitor for the Commissioner of State Revenue

1 This is an appeal from orders of a judge of the Commercial and Equity Division of which the effect was to allow the respondent ('Capital Securities')'s application under s 459G of the Corporations Act 2001 (Com) to set aside the appellant ('Commissioner')'s statutory demand dated 9 December 2008 for the payment of payroll tax under the Payroll Tax Act 1971 (Vic) and the Pay-roll Tax Act 2007 (Vic).

2 On 23 July 2007, the Commissioner wrote to Capital Securities advising that he had begun an investigation into Capital Securities' compliance with the Payroll Tax Acts 1971 and 2007 and inviting Capital Securities to register as an employer and make voluntary disclosure 'prior to any further investigation activity'. The Commissioner requested a response by 13 August 2007. Capital Securities did not respond.

3 On 16 August 2007, Mr Berhard Seifert, a director of Capital Securities, spoke by telephone to Ms Yasmin Burraston of the State Revenue Office and, on the same day, the Commissioner wrote again to Capital Securities, in substantially identical terms to the letter of 23 July 2007, but asking for a response by 6 September 2007. Once again, Capital Securities did not respond.

4 On 12 September 2007, the Commissioner wrote once more to Capital Securities noting that there had been no response to his request for information and warning that, unless Capital Securities provided the information requested by 19 September 2007, 'I will register Capital Securities (Aust) Pty Ltd on the information I have on hand and issue assessments accordingly'.

5 Capital Securities did not respond to that letter and so, on 30 October 2007, the Commissioner issued three assessments of Capital Securities' tax liability (assessments 54261161, 54261187 and 54261234) (the 'original assessments') together with a covering letter of the same date in which were set out the findings of the Commissioner's investigation, including the 'taxable wages' and payroll tax assessed for each period. Under the heading 'Objection', the letter stated that:

If you are not satisfied with an assessment made under the Taxation Administration Act 1997, you may object against the assessment under section 96 of the Taxation Administration Act 1997.

An objection in writing, stating fully and in detail the grounds of the objection, must be received by the Commissioner of State Revenue within 60 days of the service of the notice of assessment unless the Commissioner permits the objection to be lodged outside the 60 day period.

6 Capital Securities did not respond to the assessments and on 26 November 2007 the Commissioner sent a Reminder Notice noting that the assessments were due for payment on 20 November 2007 and requesting payment within seven days.

7 On 10 December 2007 Ben Caines of Kevin Lucas & Associates Pty Ltd sent to the Commissioner by email the profit and loss statements for Capital Securities for the years ended 30 June 2006 and 30 June 2007, which also showed the figures for the year ended 30 June 2005. The statements included figures for wages, consultancy fees and commissions paid.

8 On 13 December 2007, Yasmin Burraston replied by email:

Thank you for your assistance on the telephone today. As discussed, contractor payments are taxable for payroll tax unless an exemption applies.

Below is a link to the Contractors' Information ...

Would you please review the amounts expensed in the Profit and Loss Statements as 'Consultancy Fees' and 'Commission Paid' and advise me as to whether these payments are to contractors and if so, whether they are taxable or exempt. In the case of an exempt payment, please advise on what grounds the payment is exempt'.

The link contained detailed instructions for ascertaining whether any particular payment of consultancy fees or commissions paid was exempt.

9 On 20 December 2007, Ben Caines sent to the Commissioner by email three tables of 'Wages', 'Superannuation Contributions', 'Consultancy Fees' and 'Commission Paid' for each of the years ended 30 June 2005, 2006 and 2007. The tables did not contain any of the information sought by Yasmin Burraston as to whether payments by way of commissions and consultancy fees were exempt and if so as to the basis on which it was claimed that they were exempt.

10 At 10.55 am on 15 January 2008, Ashley Hyssoli of the State Revenue Office telephoned Ben Caines and explained that he had not provided any reasons for treating as exempt the commissions and consultancy fees included in the original assessments. After some discussion, Mr Caines transferred Mr Hyssoli to someone who introduced himself as Kevin Lucas, the principal of the practice, who questioned why his client was being investigated and why an investigation letter was issued. Mr Hyssoli replied that the issue for the moment was whether there were reasons for exempting contractor and commission payments and, when Mr Lucas continued to question the motives for investigating Capital Securities, Mr Hyssoli replied that, if Mr Lucas had 'different issues to the ones discussed with Ben Caines he could put them in writing to the State Revenue Office'. With that, Mr Lucas hung up the telephone and did not provide any more information.

11 On 13 February 2008, Max Warlow of Max Warlow and Associates Pty Ltd, on behalf of Capital Securities, faxed to Joseph Wong of the State Revenue Office referring to a telephone conversation which they had had the previous day and stating that:

[I] will be lodging a formal Notice of Objection, in the meantime, I would like all legal action to pursue the apparent payroll tax debt withheld, as it is clear that there are some serious mistakes which have occurred in respect of this employer and that the debt is not correct.

...

The SRO's figures as assessed wages are:-

04/05 (but only from 1/5/05 - 30/06/05) $ 181, 458

05/06 $1,302,929

1/7/06 - 31/12/06 $ 788,168

1/1/07- 30/6/07 $ 755,347

In an email dated 10 Dec 07 to Ms Burraston, the SRO was provided with copies of the employers relevant P & Ls

In another email on 20/12 sent to M/s Burraston, she was advised the total wages of the employer for the full financial years in question were:-

1. 04/05 $265, 859

2. 05/06 $541, 055.23

3. 06/07 $ 859, 887

It needs to be stated that in the 04/05 year there were payments to consultants and commissions which I have not had an opportunity to determine, and IF these payments were taxable (which is not known at this stage) the total remuneration for 04/05 would have been $568,729.

For the 05/06 year if the payments to consultants and commissions were all taxable (which is not known) the total would have been $788, 766.

For the 06/07 year if the payments to consultants were all taxable (which is unknown) the total would have been $989,098.

So, even on a worse case scenario, the SRO figures, the basis of their assessment are simply not correct, and flawed.

...

Whilst the 60 day period for lodgment of an Objection has lapsed, clearly the taxpayer's emails of Dec 07 were within the 60 day period, and were an endeavour to dispute the assessment! Thus, can this fax be ALSO treated as a request to lodge an Objection outside the 60 day period.

Whilst I will attempt to lodge this objection as soon as possible, I need to firstly clarify the status of the payments to consultants and commissions.

In the meantime, given the SRO has clearly acted on incorrect information, can all endeavours to take legal action to recover the amounts initially assessed cease.

12 On 25 March 2008 Mr Warlow wrote again to the State Revenue Office referring to his fax of 13 February 2008 in which he had requested an extension of time in which to object against the original assessments. Under the heading 'Grounds of Objection', Mr Warlow stated:

The SRO's assessment was apparently based on information (data) independently obtained by the SRO.

Whilst the SRO auditor refused to reveal the source, from my experience the most common source is what the employer declared for WorkCover purposes.

In this regard, I have also attached copies of the actual certified remuneration for WorkCover purposes (Attachment B).

As can be seen, the employer for WorkCover declared:

1 July '06 to 30 June '07 $843, 251

1 July '05 to 30 June '06 $510,777

1 May '05 to 30 June '05 $164, 962

I have also attached a copy of an email dated 14 March 2008 from Allianz which confirms the above...[and] copies of the Financial Accounts which are consistent with the above, and a letter from the ATO re Capital Securities Superannuation audit.

All these documents illustrate that the information initially used by the SRO was incorrect!

It is clear that the information obtained utilized [sic] by the SRO was flawed!

13 On 1 July 2008, Leah Alperovich of the Technical Advice & Review Branch of the State Revenue Office wrote to Mr Warlow acknowledging Mr Warlow's letter of 25 March 2008 and fax of 13 February 2008, and continued:

As the above assessments were issued on 30 October 2007, your objection was not received by this office within the 60-day period prescribed under section 99 of the Taxation Administration Act 1997 ('the TAA'). In your fax dated 13 February 2008, you requested that the Commissioner accept your objection out of time.

Your request is currently being reviewed by Johanna Cho of this office to determine whether in the present circumstances the Commissioner should grant permission under section 100 of the TAA to lodge the objection after the prescribed 60-day period. You will be contacted if further information is required to make a determination under section 100 of the TAA.

You should note that a decision by the Commissioner under section 100 of the TAA to refuse permission to lodge an objection out of time is a non-reviewable decision.

Please note that any assessed tax liability remains payable even though you have requested the Commissioner to accept your late objection...

14 On 15 August 2008, Ms Cho wrote to Mr Warlow referring to Mr Warlow's letter of 25 March 2008 and advising, as follows:

... your letter of 25 March 2008 is not a valid objection to the Assessments. However, reassessments for the period 1 May 2005 to 30 June 2007 based on the correct wage and superannuation figures as well as the commission and consultancy payments will be issued. In relation to the default assessments, a reassessment may be issued if the Company can provide actual taxable wages to the State Revenue Office ('SRO'). Please note that the reassessment may include late payment interest and penalty.

15 Under the heading 'Background' Ms Cho then set out a history of the correspondence up to that point, and explained in relation to the application for an extension of time in which to object that:

Out of time objection

Your letters dated 13 February 2008 and 25 March 2008 are not valid objections to the Assessments as these letters were not received by this Office within 60 days from the date of service of the Assessments, which were dated 30 October 2007, as prescribed under section 99 of the TAA.

Under section 100 of the TAA, a taxpayer may apply to the Commissioner in writing for permission to lodge an objection after the 60-day period ...

By letter dated 13 February 2008, you applied to the Commissioner for permission to lodge an out of time objection. Having reviewed all the circumstances of this matter the Commissioner has decided not to exercise his discretion to extend time for lodging an objection [whereafter Ms Cho set out the Commissioner's reasons for refusing to extend time].

16 Ms Cho concluded with respect to the subject assessments:

Although the Company did not provide the information in relation to the commission and consultancy payments, consideration has been give to the fact that the Company provided profit and loss statements to support the correct wage and superannuation figures for the 2005 to 2007 financial years on 10 December 2007 and on 20 December 2007. Accordingly reassessments for the period 1 May 2005 to 30 June 2007 based on the correct wage and superannuation figures as well as the commission and consultancy payments will be issued.

17 Ms Cho then dealt with default assessments for the period July to October 2007, November 2007 and December 2007, which are not is issue in this proceeding, stating:

Default assessments

The default assessments for the period July to October 2007, November 2007 and December 2007 were issued to the Company because the Company failed to lodge its payroll tax returns within the required due date.

However, a reassessment may be issued if the Company can provide the actual taxable wage to the SRO. Please note that the reassessment may include late payment interest and penalty.

To ensure your correspondence can be forwarded to the appropriate area for action...

18 On 11 September 2008, the Commissioner issued the three reassessments (Assessments 58246545, 58246561 and 58246579) (the 'reassessments') for the years ended 30 June 2005, 30 June 2006 and 30 June 2007 which Ms Cho had foreshadowed in her letter of 15 August 2008. The reassessments accorded to the figures provided by Mr Warlow except for 'Commission Paid' and 'Consultancy Fees.' Although Mr Warlow suggested in his letter of 13 February 2008 that some unidentified part of the 'Commission Paid' and 'Consultancy Fees' could be exempt, the reassessments included all Commission Paid and Consultancy Fees on the basis that it had not been demonstrated that they were exempt.

19 The reassessments were payable on 25 September 2008. Like the original assessments, each of the reassessments included the following information:

If you are not satisfied with an assessment made under the Taxation Administration Act 1997, you may object against the assessment under section 96 of the Taxation Administration Act 1997.

An objection in writing, stating fully and in detail the grounds of the objection, must be received by the Commissioner of State Revenue within 60 days of the service of the notice of assessment unless the Commissioner permits the objection to be lodged outside the 60 day period.

20 None of the reassessments was paid by the due date and on 29 September 2008 the Commissioner issued Reminder Notices to Capital Securities requesting payment within seven days. They were not paid.

21 On 7 October 2008, Mr Warlow wrote to Ms Cho as follows:

I refer to your letter of 15 August 2008 in which, amongst other matters, you (the SRO) rejected the taxpayer's Objection to assessments 54261161, 54261187 and 54261234 on the basis that these Objections were lodged out-of-time and the Commissioner did not feel inclined to grant permission to lodge an out-of-time Objection.

However, you did indicate a re-assessment may be issued if Capital Securities (Aust) Pty Ltd (Capital ) can provide actual taxable wages to the SRO.

In this regard, I wish to advise that I have finally be able to obtain accurate taxable wages, namely:-

The 'difference' in the above and the remuneration initially utilised by the SRO is, of course, the treatment of payments to contractors. Given the SRO was not provided with any indication to the extent which the payment to contractors was taxable or otherwise, the SRO assessed the total payments (to contractors and commissions).

However, as can be seen, not all these payments are taxable.

In this regard, could the SRO please re-assess Capital for the above 3 financial years based on the above correct figures.

22 Surprisingly, Mr Warlow did not refer in his letter to the reassessments as such, and he did not purport to object against the reassessments. According to his letter, however, he believed at the time he wrote it that the only 'difference' between the Commissioner and Capital Securities was as to whether Commissions and Consultants Fees were taxable. Until the reassessments were issued, there was also a 'difference' as to the correct wage and superannuation figures.

23 On 9 October 2008, the Commissioner issued a Final Notice in which he stated that payment of the reassessments was overdue and that, in order to avoid recovery action, they should be paid immediately. There was no response to that notice.

24 On 13 November 2008, the Commissioner issued an Urgent Notice Legal Action Pending, that $83,280.29 still remained outstanding and that, in the event it was not paid immediately, the matter might be referred to the Solicitor for the Commissioner of State Revenue to instigate winding up proceedings in the Supreme Court. There was no response to that notice.

25 On 9 December 2008 the Commissioner served a Creditor's Statutory Demand for Payment of Debt for payment of the amount of $85, 574,83 being the total amount due under the reassessments.

26 On 18 December 2008, Ms Cho wrote to Mr Warlow referring to his letter of 7 October 2008, as follows:

In my letter dated 15 August 2008, you were advised that your letter dated 25 March 2008 is not a valid objection to the assessments issued on 30 October 2007 for the years ended 30 June 2005, 2006 and 2007 ('the Assessments') and that the Commissioner has decided not to exercise his discretion to extend the time for lodging an objection under section 100 of the Taxation Administration Act 1997 and that this decision is non-reviewable. You were advised that reassessments may be issued if the Company can provide the actual taxable wages in relation to the default assessments for the period July to October 2007, November 2007 and December 2007, which is the period after the investigation and does not relate to the assessments the subject of this objection.

27 On 19 December 2008, Capital Securities paid the Commissioner $33,353.62, being the amount which it conceded was due in respect of the reassessments.

28 On 11 February 2009, Simon A Nixon, the solicitor for Capital Securities wrote to the Commissioner advising that, when the matter came on before the court on 18 February 2009, Capital Securities intended to pursue an application to set aside the Statutory Demand.

29 On or about 13 February 2009, Kang Ko, solicitor, on behalf of the State Revenue Office had a meeting with representatives of Capital Securities and was provided with several payroll documents relating to Consultancy and Commission payments.

30 On 19 February 2009, Mr Ko wrote to Mr Nixon noting that the application to set aside the statutory demand had been listed for 18 March 2009, and advising as follows:

Further to our recent discussion regarding the information provided by your client's accountant, I have been instructed to request that your client provide invoices of payments made out to relevant persons and/or entities which are the subject of the exemption sought by your client.

Where possible, your client will also be required to obtain written confirmation for each and every person and/or entities confirming their relationship in respect of the company, in particular, the number [of] days they have been engaged by clients over the relevant financial years.

Please provide the information by close of business 6 March 2009 to enable this Office to facilitate any possible resolution in this matter before the next return date...

We refer to your letter dated 19 February 2009 and note your request for the provision of invoices of payments made out to the relevant persons and/or entities which are the subject of the exemption sought. Our client is currently collating this information and anticipates being able to provide it shortly.

Our client maintains and continues to maintain that the objections lodged on its behalf remain valid and subsisting objections notwithstanding the position adopted by your office. Alternatively, ..., the Commissioner, acting reasonably, should have duly granted our client an extension of time in which to lodge objections.

We further reiterate that our client remains ready and willing to remit any amounts properly owing, but remains of the view that the amounts assessed by the Commissioner in the subject assessments were wrong, and excessive.

To avoid the necessity of Court proceedings, and to avoid the escalation of costs for both parities, we are instructed to resolve the matter on the following basis:

(1) Subject to the condition stated in (2) below, my client shall immediately tender to the Commissioner - but under protest - the sum of $52,021.21 (being the amount outstanding under the alleged debt, and calculated as the difference between the amount set forth in the statutory demand and the mount previously tendered by our client on 19 December 2008).

(2) Our client shall make the payment referred to in paragraph (1) if, and only if, the Commissioner grants our client an extension of time in which to lodge fresh objections against both: (i) the assessments dated

30 October 2007; and (ii) the assessments dated 11 September 2008, where the period of such extension shall be 60 days from the date of consent orders in the Supreme Court proceeding (refer below), and where the Commissioner grants such an extension without prejudice to the status of the objections already lodged on behalf of our client.

(3) That the parties consent to the following orders to be made by the Court in this proceeding:

(i) The statutory demand issued by the defendant and dated 10 December 2008 be set aside;

(ii) Each party bear their own costs of the proceeding;

(iii) The proceeding otherwise be dismissed.

Kindly provide your response on 4.00 pm Thursday 5 March 2009.

Please also note that we reserve the right to produce, and we intend to rely on this letter on the question of costs...Please note that this is an open letter.

32 On 6 March 2009, Mr Nixon wrote again to the Commissioner referring to the Commissioner's letter of 19 February 2009, and advising that, contrary to what had been said in Mr Nixon's letter of 4 March 2009, it was not possible to provide the documents which the Commissioner had requested within the time required but that they would be provided 'within the near future'. They have still not been provided.

33 On 17 March 2009, Mr Nathan, solicitor for the Commissioner, responded to Mr Nixon's offer to settle the proceeding, as follows:

I am instructed to reiterate to you the current terms that the Commissioner is willing to offer and for your client to consent to adjournment:

(1) a re-assessment to the information provided by you regarding the contractor payment exemption for the 04/05, 05/06 and 06/07 period and/or

(2) to give your client the opportunity to lodge an out of time objection application in relation to the increased liability in the 04/05 Reassessment.

You are advised that in either alternative the Commissioner does not have the power to give your client appeal rights to either decision pursuant to section 100(4) of the Tax Administration Act 'a decision by the Commissioner under this section to refuse permission or to impose conditions on permission is a non-reviewable decision'.

34 Mr Nixon replied on 17 March 2009 that Capital Securities maintained its position.

35 The matter came before Associate Justice Efthim on 18 March 2009 and on 26 May 2009 his Honour gave judgment dismissing Capital Securities application to set aside the statutory demand under s 459G and extending time for compliance with the demand until 4.00pm on 9 June 2009.

36 From those orders, Capital Securities appealed to the judge. On 11 June 2009 the judge allowed the appeal and set aside the statutory demand.

37 In argument before the judge, the Commissioner relied on ss 17, 44 and 45 and Part 10 of the Taxation Administration Act 1997 ('the Act') as in effect putting the amount of the reassessments beyond the area for 'genuine dispute' for the purposes of s 459H(1) of the Corporations Act.

38 The respondent argued that there was a genuine dispute as to whether the assessments were valid, based on the fact that there were 'two sets of assessments' (the initial assessments and the reassessments); that the Commissioner had not served notice of withdrawal of the initial assessments; and that the reassessments were to be seen as tentative or provisional in light of the Commissioner's subsequent review and consideration of the reassessments.

39 The judge held that, perforce of s 9 of the Act, a reassessment follows a 'previous assessment' or 'initial assessment' and thus that the reassessments amended or replaced the initial assessments;[1] that the effect of section 9, and in particular ss 9(3) and 9(4), was that there was no need for the Commissioner to give a notice of withdrawal of the initial assessments before issuing the reassessments;[2] and, therefore, that the reassessments were not 'tentative of provisional'. His Honour said that:

Even [making] the assumption that the State Revenue Office was reconsidering the assessments, that does not mean that the reassessments were tentative or provisional. Rather, it merely indicates that the State Revenue Office may have been prepared to reconsider the reassessments. A reassessment validly issued does not become invalid if at some subsequent date a taxpayer brings some relevant information to the attention of the Commissioner that may indicate the assessment was excessive, and the Commissioner, acting properly, agrees to consider the information. The system of assessment would not work if such was the case.[3]

40 The judge then went on, however, to hold that the there was otherwise a genuine dispute as to whether the reassessments were 'valid assessments', because:

The reassessments of 11 September [2008] contain a glaring error in that the first one records, as the taxable wages for the two months from 1 May 2005 to 30 June 2005, the yearly wages for the year 1 July 2004 to 30 June 2005 as given by Mr Warlow in his letter of [13] February of 2008. Secondly, the assessment also relies upon the remuneration figures that appear in Mr Warlow's letter of 13 February 2008, which Mr Warlow expressly said had not been checked to see whether in fact the payments to contractors were exempt or not. The SRO knew the figures supplied by Mr Warlow that they used were to be reviewed by Mr Warlow.

The letter that was sent to him on 15 August 2008 by the SRO is, in my view, open to the construction that he was being invited to provide correct wage and superannuation figures as well as commission and consultancy payments so that reassessments could be issued for the relevant periods. The SRO then, without waiting for a response from Mr Warlow, issued the amended assessments including the blatant error, the 'fundamental misconception' I think it was called by the plaintiff, for the first year and including the figures which came from Mr Warlow's letter which said that at that stage it had not been determined whether the contract payments were captured by the Act or not.

Sir Garfield Barwick speaks about a valid assessment requiring the Commissioner having facts which he knows of and accepts. In my view there is a genuine dispute open to the taxpayer in this case that these assessments were not based upon known facts accepted by the Commissioner, but were issued in some way in error.[4]

41 In this appeal, the Commissioner contends that the judge was correct to dismiss the respondent's arguments as to the invalidity of the reassessments, for the reasons which his Honour gave, but wrong in holding that there was otherwise a genuine dispute as to whether the reassessments were valid.

42 The respondent was not represented at the hearing of the appeal but, in its written submissions filed in advance of the hearing, it contended[5] that the judge's decision should be upheld under s 459H(1) of the Corporations Act on the basis that the initial assessments and the reassessments are 'mutually inconsistent', 'tentative or provisional' and, therefore, 'invalid', and further or alternatively, under s 459J(1)(b) of the Corporations Act on the basis that, unless the demand is set aside, Capital Securities will have to pay the tax debt without right of review or appeal.

43 It is convenient to deal first with the validity of the assessments, and whether otherwise there was a genuine dispute for the purposes of s 459H(1), and then with s 459J(1)(b) of the Corporations Act.

44 The judge was right to hold that the Commissioner did not need to give notice of withdrawal of the initial assessments before issuing the reassessments.

45 Section 9 of the Act expressly empowers the Commissioner to make one or more reassessments of tax. The process of reassessment is effected by the Commissioner inserting the amount of the reassessment in the notice of reassessment and serving it on the taxpayer.[6] The notice of reassessment thereby replaces the initial assessment, or previous reassessment, without need of further notice or other manifestation of intention to withdraw the original assessment or preceding reassessment.

46 In the result, it is to be expected that there should be differences between the initial assessments and the reassessments. So far from signifying that the reassessments are invalid, the differences are the logical consequence of the Commissioner undertaking a process of reassessment of Capital Securities' liability to tax in accordance with s 9 and then giving effect to his determination by the issue of notices of reassessment.

47 The judge was also right to hold that the fact that the Commissioner was considering or may have considered the possibility of further reassessment did not render the reassessment tentative of provisional.

48 Assessment is a process with the consequence that a specified amount will become due and payable as the proper tax.[7] It is definitive in character in that it assumes that, so far as can then be seen, a fixed and certain sum is definitely due. The Act expressly contemplates, however, that an assessment may be amended or reassessed if the Commissioner, whether acting unilaterally in exercise of his powers or as the result of an objection or review or appeal, later comes to a different view as to the tax which is due.

49 An assessment is not tentative or provisional in the sense which may deny it the status of a valid assessment unless it appears ex facie or from surrounding documentation that it is conditional or subject to revision[8] or if it appears aliunde that the assessment has been issued by the Commissioner knowing that it does not reflect any rational assessment of the taxpayer's liability to tax,[9] or with reckless indifference to whether it does or does not reflect any such assessment, or otherwise in bad faith (in the sense of a 'conscious maladministration of the assessment process').[10] Nothing of that kind is suggested in this case.

50 With respect, the judge was wrong, however, to hold that there was otherwise a genuine dispute as to whether the reassessments were invalid. That reflects a misconception of the conclusive evidence provisions of the Act.

51 We have referred already to the provisions of the Act on which the Commissioner relied. They follow the form of Commonwealth taxation provisions providing for the assessment and recovery of Commonwealth taxation. Sections 17 and 127 of the Act, which in terms are similar to ss 175, and 177(1) of the Income Tax Assessment Act 1936 (Com), provide that the validity of an assessment is not affected by non-compliance with taxation law and that production of a notice of assessment is conclusive evidence of the due making of the assessment and that the amount and all particulars of assessment are correct, except in objection, review and appeal proceedings.

52 Sections 44 and 45 of the Act, which are in terms similar to ss 108 and 109 of the Income Tax Assessment Act 1936 (Com) (now Part 10 of the Taxation Administration Act 1953 (Com)), provide that tax payable is a debt due to the Crown in right of the State and payable to the Commissioner and that if the whole or part of the tax payable by a taxpayer has not been paid to the Commissioner as required, the Commissioner may recover the amount unpaid in a court of competent jurisdiction.

53 Section 96(2) of the Act, for which there is no counterpart in the Commonwealth legislation, purports to oust the jurisdiction of courts and tribunals to consider the validity of assessments otherwise than in Part 10 proceedings. Evidently, it was designed to exclude the possibility of judicial review of the type which the High Court held in Richard Walter[11] is available in relation to Commonwealth taxation liabilities.

54 The combined effect of the recovery regime comprised of ss 17, 27, 44, 45 and Part 10 (in particular s 104) of the Act[12] is, therefore, that:

• once assessed, tax is a debt due and payable to the Crown;

• production of a notice of assessment is conclusive evidence in all proceedings, except review and appeal proceedings, of the existence of the debt;

• the fact that an objection, review or appeal is pending does not in the meantime affect the assessment or decision to which the objection, review or appeal relates; and

• the Commissioner may recover the tax as if no objection, review or appeal were pending.

55 To adopt and adapt the words of Mason and Wilson JJ in Bloemen:[13]

An explicit and, in our view, correct statement of the effect of [s127 is that it] was ... 'intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground'...

This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions. The effect of this policy is that, once the Commissioner takes advantage of [s127] by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment[14] or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under [Part 10].

Although [s 110] places the onus on a taxpayer upon a reference or appeal of proving [the taxpayer's case], it enables him to contest his substantive liability to tax. It is then for the [Tribunal] upon a reference or the court on an appeal, within the framework of the taxpayer's objection, to ascertain whether he is liable to tax and, if so, in what amount. The [Part 10] procedures accordingly protect the taxpayer and enable him to have his liability to tax determined.

56 The same is true in proceedings to wind up a taxpayer in insolvency upon its failure to pay tax as assessed. As the High Court explained in Broadbeach Properties Pty Ltd,[15] the operation of the tax debt recovery regime cannot be sidestepped in an application by a taxpayer under s 459G of the Corporations Act to set aside the statutory demand by the Commissioner for payment of tax as assessed. The effect of the recovery regime is to 'attach special incidents or characteristics [to tax debts] which do not pertain to debts owed by one citizen to another within the sense of the general law', and so to 'make inapplicable, for example, pleas that might otherwise tender an issue for trial of an action to recover the debt'.[16] Consequently:

the relevant 'truth' or 'reality' is that disclosed by the operation of the taxation laws with respect to the 'tax debts'. It is the special character thus given to these 'debts' to which the statutory demand provisions of the Corporations Act then speak.

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 [under the State Act, Part 10 proceedings] and production by the Commissioner of the notices of assessment ... conclusively demonstrates that the amounts and particulars in the assessments and declarations are correct.[17] 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.

The matter was explained, with respect correctly, by Williams J in Bluehaven Transport Pty Ltd v Commissioner of Taxation.[18] The use by the Commissioner of the statutory demand procedure in aid of a winding up application is in the course of recovery of the relevant indebtedness to the Commonwealth by a permissible legal avenue. The phrase 'may be recovered' in ss 14ZZM and 14ZZR of the Administration Act [State Act, s 104] applies to the statutory demand procedure. That state of affairs places the existence and amounts of the 'tax debts' outside the area for a 'genuine dispute' for the purposes of s 459H(1) of the Corporations Act.[19]

57 For the same reasons in this case, the notice of reassessment on which the Commissioner relies are conclusive evidence of the due making of the reassessments, and that the amount and all particulars of the reassessments were correct.

58 Apart from that, there are several other aspects of the judge's reasoning which are problematic. First, contrary to the judge's conclusion, there was no 'glaring error' in the reassessment of the taxable wages for the period 1 May 2005 to 30 June 2005. Section 11 of the Act empowered the Commissioner to make the reassessment on the information that the Commissioner had from any source at the time of the reassessment. It is not disputed that that is what he did on the basis of the information obtained in the course of his investigation into Capital Securities (as was detailed in the Commissioner's letter of 30 October 2007 to Capital Securities) and later, at the time of reassessment, on the basis of the additional information provided by Ben Caines on behalf of Capital Securities in his email of 20 December 2007.

59 Mr Warlow asserted in his fax of 13 February 2008 that, of the total of $568,729 for the year 2004/2005 provided by Mr Caines, only $265,859 was paid in the period May to June 2005 and from that must be deducted a still as yet undetermined amount said to have been paid by way of commissions and consultancy fees. But, significantly, despite the Commissioner's repeated requests of Capital Securities, Mr Caines, Mr Lucas and Mr Warlow for particulars of the basis on which exemption was claimed for commissions and consultants fees, none was ever provided (as was noted in the Commissioner's letter of 15 August 2008 to Mr Warlow).

60 On 7 October 2008, Mr Warlow provided a set of figures different to that which had been provided by Mr Caines on 10 December 2007 and different to that asserted by Mr Warlow in his fax of 13 February 2008 and, interestingly, which were larger than the figures of 13 February 2008. But still he did not provide the particulars of the basis of exemption claimed.

61 There was, therefore, a rational basis for the Commissioner's assessment and reassessment for the period May to July 2005 and there was no 'blatant error'. Contrary to the apparent tenor of the judge's reasoning, the fact that Mr Warlow made unsubstantiated claims that the wages assessed were comprised in part of exempt commissions and consultant fees did not mean that they were exempt, still less that the Commissioner was in error in assessing or reassessing on the basis that there were not exempt.

62 Next, in his reasons for judgment his Honour said that:

The letter that was sent to [Mr Warlow] on 15 August 2008 by the SRO is, in my view, open to the construction that he was being invited to provide correct wage and superannuation figures as well as commission and consultancy payments so that reassessment could be issued for the relevant periods. The SRO then, without waiting for a response from Mr Warlow, issued the amended assessments including the blatant error, the 'fundamental misconception' I think it was called by the plaintiff, for the first year and including the figures which came from Mr Warlow's letter which said that at that stage it had not been determined whether the contract payments were captured by the Act or not.[20]

63 With respect, that is not correct. In his letter of 25 March 2008, Mr Warlow listed all the grounds of objection on which he said Capital Securities would wish to rely if granted an extension of time in which to object to the initial assessments. On 1 July 2008, Ms Alperovich replied that Mr Warlow's request for an extension of time was being considered by Ms Cho and that Mr Warlow would be notified of the result. On 15 August 2008, Ms Cho informed Mr Warlow that the time in which to object would not be extended but that reassessments would issue to take into account profit and loss statements provided by Mr Caines 'to support the correct wage and superannuation figures for the 2005 to 2007 financial years'. There was no question of any further information to be provided in relation to those reassessments, and none was provided. The reassessments issued on the basis which Ms Cho said they would issue.

64 It is true that Ms Cho also sought in her letter of 15 August 2008 further information in relation to the period July to October 2007, November 2007 and December 2007, for which Capital Securities had failed to lodge payroll tax returns. But that was dealt with under a separate heading in the letter and obviously had nothing to do with the subject reassessments.

65 It is also true that, after the reassessments issued to Capital Securities, Mr Warlow again sought a reassessment of the initial assessments, in terms which suggest that he may not have been aware that the reassessments had issued. But there is no suggestion that Capital Securities did not receive the reassessments or the notification of the need to lodge any objection within 60 days, and there is no explanation as to why, if Capital Securities wished to dispute the reassessments, it did not object against them within the time required or seek an extension of time in which to lodge them pursuant to s 100 of the Act.

66 The judge observed that Ms Cho's letter of 18 December 2008 was:

... a most confusing letter, [which] doesn't even tell Mr Walrow that the reassessments have been issued and purports to treat with him on the basis that the initial assessments are still the relevant assessments.[21]

67 With respect, however, it does not appear to us to be confusing. As we read it, it was simply pointing out to Mr Warlow that, contrary to the assertion in Mr Warlow's letter of 7 October 2008, Ms Cho had not indicated to him that :

a reassessment [in relation to the initial assessments] may be issued if Capital Securities (Aust) Pty Ltd (Capital) can provide actual taxable wages to the SRO,

What Ms Cho had stated in her letter of 15 August 2008 was that reassessments will be issued in relation to the initial assessments, and that reassessments may be issued in relation to the period July to October 2007, November 2007 and December 2007 'if the Company can provide the actual taxable wages to the SRO'.

68 Finally, on this aspect of the matter, there was no suggestion of the Commissioner 'treating' with Capital Securities, and on the available evidence no reason for Capital Securities to suppose that the Commissioner was proceeding otherwise than on the basis of the reassessments served on Capital Securities on 10 and 11 September 2008, of which the Commissioner gave Reminder Notices on 29 September 2008, a Final Notice on 9 October 2008 and an Urgent Notice Legal Action Pending on 13 November 2008.

69 Consistently with Broadbeach, the judge should have held that the tax debt the subject of the Commissioner's statutory demand is outside the area for genuine dispute for the purposes of s 459H(1) of the Corporations Act.

Section 459J(1)

1"> 70 In Broadbeach,[22] the High Court said of the application of s 459J(1) of the Corporations Act to winding up proceedings for the recovery of tax:

Something should be added respecting the additional alternative ground found in para (b) of s 459J(1) of the Corporations Act. That was that the statutory demands were to be set aside because the Court of Appeal and the primary judge were 'satisfied' that, although there were no defects in the demands, there was 'some other reason' to set them aside.

It first should be observed that the hypothesis in the present appeals must be, in accordance with what has been said above, that there is no 'genuine dispute' within the meaning of s 459H(1). Both the primary judge and the Court of Appeal emphasised the importance of the disruption to the taxpayers, their other creditors and contributories that would ensue from a winding up, together with the absence of any suggestion that the revenue would suffer actual prejudice if the Commissioner were left to other remedies to recover the tax debts. But these considerations are ordinary incidents of reliance by the Commissioner upon the statutory demand system.

Keane JA, expressing disapproval of what had been said to the opposite effect by Olney J in Kalis Nominees Pty Ltd v Deputy Commissioner of Taxation,[23] held that the scope of the discretion conferred by para (b) of s 459J(1) should be determined by the subject matter and purposes of the Corporations Act, to the exclusion of 'the tax law'.[24] But, as remarked earlier in these reasons, Pt 5.4 contemplates that the 'debts' in respect of which statutory demands may issue will include 'tax debts' in the sense given to that expression in these reasons. The 'material considerations'[25] which are to be taken into account, on an application to set aside a statutory demand, when determining the existence of the necessary satisfaction for para (b) of s 459J(1) must include the legislative policy, manifested in s 14ZZM and s 14ZZR of the Administration Act, respecting the recovery of tax debts notwithstanding the pendency of Pt IVC proceedings.

The result is that the exercise of discretion by the primary judge under s 459J(1)(b) miscarried, and the Court of Appeal erred in upholding and supplementing it. Against the possibility of this Court so concluding, the respondents submitted that the matter should be remitted to the Supreme Court for re-exercise of the discretion under that provision. However, no fresh ground upon which the respondents might then succeed was suggested beyond reference to the time which has elapsed and the progression of the Pt IVC proceedings towards determination. But such a consideration, if it were supported by evidence of the state of progression of the Pt IVC proceedings, would be relevant in the operation of Pt 5.4 of the Corporations Act, if at all, at the later stage of the hearing of any winding up application. There should be no re-exercise of the discretion conferred by s 459J(1)(b).

71 In its written submissions, Capital Securities argued that Broadbeach was distinguishable on the basis that the taxpayer in that case objected to the assessment and therefore had an opportunity of contesting it. It was different here, it was said, because Capital Securities did not object and its failure to do so was attributable to the Commissioner. In those circumstances, the argument proceeded, it would be unjust not to set aside the statutory demand, and thus that was 'some other reason' to set aside the statutory demand under s 459J(1)(b) of the Corporations Act.

72 We note that Capital Securities did not rely on s 459J before Associate Justice Efthim or before the judge below. The Commissioner, however, did not object to it being dealt with for the first time on appeal.

73 Capital Securities contended in its written submissions that the injustice of the situation inhered in the fact that the Commissioner:

(a) declined to treat Mr Caine's emails of 20 December 2007 as an objection against the initial assessments, and declined to treat Mr Warlow's letter of 7 October 2008 as an objection against the reassessments; and

(b) refused to grant an extension of time in which to object against either the initial assessments or the reassessments, and, in relation to the latter, rejected Capital Securities' offer of payment of the tax on the condition that an extension of time be granted.

74 That submission faces difficulties at a several levels. First, it is plain that Mr Caine's emails of 20 December 2007 (which had been re-sent on 15 January 2008) were not an objection to the initial assessments of October 2007. They were a response to Yasmin Burraston's repeated requests for information.

75 Secondly, Capital Securities was not disadvantaged by the Commissioner's refusal to treat Mr Caine's emails as an objection, because, apart from Mr Caine's unsubstantiated assertion that amounts claimed to be commissions and consultants fees were exempt, the reassessments issued in September 2008 took account of the information provided by Mr Caines.

76 Thirdly, Mr Warlow's letter of 7 October 2008 was self-evidently not an objection to the reassessments and it has not been demonstrated that Capital Securities' failure to object to the reassessments was due to any fault on the part of the Commissioner.

77 We note that the judge said in his reasons that:

I have been informed from the Bar table and accept in view of the terms of the letter, that Mr Warlow was not aware of the 11 September 2008 reassessments when he wrote his letter, which explains his failure to refer to the letter and also explains why he had requested that a reassessment be made on the basis of the actual wages and remuneration paid.[26]

But with respect, we do not consider a statement from the Bar table in a matter of this kind is a satisfactory basis for finding that Mr Warlow was misled or mistaken. The fact that Mr Warlow was not put on oath, coupled with the absence of evidence as to why he should not be expected to have given sworn evidence, rather implies that what he might have said on the subject would not have been of assistance to Capital Securities.

78 Furthermore, even if Mr Warlow were unaware of the issue of the reassessments or otherwise misled by the letter of 7 October 2008, there is no evidence as to whether and if so why the officers of Capital Securities were proceeding in ignorance of the reassessments despite service of the notices of reassessment, the Reminder Notices of 29 September 2008 and a Final Notice on 9 October 2008.

79 Fourthly, although Capital Securities did offer a without prejudice payment of the amount of the tax debt, the offer was made on conditions which, understandably, were unacceptable to the Commissioner and which, insofar as they asserted rights to object against the initial assessments, were impossible of achievement.

80 Finally, it can be seen from the Commissioner's letter of 19 February 2009 that the Commissioner was prepared to reconsider the claim for exemption if Capital Securities provided original documents to support its claim for exemption, and it is apparent from the Commissioner's letter of 17 March 2009 that the Commissioner offered to reassess Capital Securities for the 2004 to 2007 period in light of the information provided by Capital Securities in support of its claim for exemption. Capital Securities, however, failed to provide the documents which were requested and refused the offer of reassessment.

81 Capital Securities argued in its written submissions that the Commissioner was at fault in failing to respond to the respondent's letter of 7 October 2008 before expiration of the time for objecting to the reassessments, in that, when the Commissioner did respond on 18 December 2008 (after time for objection had expired), he did not make any make any reference to the fact that reassessments had issued. In effect, Capital Securities adopted the judge's observation that 'if the State Revenue Office had [replied to Mr Warlow within the 60 day period] 'this proceeding may have been avoided, and the company may have its liability determined at a hearing.'

82 We do not accept that argument. With all respect to the judge, the idea that the proceeding may have been avoided is misplaced. As has been observed, once tax is assessed it is a debt due to the Crown and it remains so notwithstanding objection, review or appeal proceedings until and unless the taxpayer succeeds in those proceedings. Consequently, if Capital Securities had lodged an objection to the reassessments, it would still have been required to pay the amount of the reassessments and, if it failed to do so, it would still have been liable to be wound up in insolvency. It would not have been a basis to set aside the Commissioner's statutory demand that any objection, review or appeal proceedings remained to be determined.[27]

83 In Hoare Bros Pty Ltd v Commissioner of Taxation,[28] the Federal Court remarked on the unwisdom of attempting to mark out the limits of the discretion conferred by s 459J(1)(b) of the Corporations Act. It suggested that one possible case in which the discretion might be exercised is the situation where a creditor unreasonably refuses the Company's offer to meet the debt. Presumably, the Court had in mind an unconditional tender of the amount sought to be recovered. But whether or not that is what their Honours intended, we do not consider that this is a case in which the discretion should be exercised. Bearing in mind the legislative policy manifested in s 104 of the Act, and Capital Securities' failure to avail itself of the Commissioner's offer of reassessment, the application to set aside the statutory demand should have been refused.

84 In the result, we shall allow the appeal, set aside the judgment below and in lieu thereof order that the appeal from the orders of Associate Justice Efthim be dismissed.

[5] In accordance with its notice of contention dated 18 May 2010.

[6] Batagol v Federal Commissioner of Taxation [1963] HCA 51; (1963) 109 CLR 243, 251; FJ Bloemen Pty Ltd v Federal Commissioner of Taxation [1981] HCA 27; (1981) 147 CLR 360, 372.

[7] Batagol v Federal Commissioner of Taxation [1963] HCA 51; (1963) 109 CLR 243, 252; F J Bloemen Pty Ltd v Federal Commissioner of Taxation [1981] HCA 27; (1981) 147 CLR 360, 372.

[8] Federal Commissioner of Taxation v Hoffnung (1928) 42 CLR 39, 53-55; Bloemen ibid.

[9] Federal Commissioner of Taxation v Stokes [1996] FCA 1128; (1996) 72 FCR 160.

[10] R v Deputy Commissioner of Taxation (WA); Ex parte Briggs (1986) 12 FCR 301, 308; Deputy Commissioner of Taxation v Richard Walter Pty Ltd [1995] HCA 23; (1995) 183 CLR 168, 213, 222 and 233; Federal Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 237 CLR 146, 157 [25], 163 [49]-[50] and 168 [69].

[11] [1995] HCA 23; (1995) 183 CLR 168.

[12] With which, in relevant respects, the State regime is identical; see also Federal Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 237 CLR 146, 166 [64]-[65]; Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473, 492 [44].

[13] FJ Bloemen Pty Ltd v Federal Commissioner of Taxation [1981] HCA 27; (1980) 147 CLR 360.

[14] 'Assessment' includes a 'reassessment': See _Taxation Administration Act 199_7, s 3.

[15] [2008] HCA 41; (2008) 237 CLR 473.

[16] [2008] HCA 41; (2008) 237 CLR 473, 494 [51]-[52].

[17] Taxation Administration Act 1953, Sch 1, s 105-100; Income Tax Assessment Act 1936, s 177(1) [State Act, s 127].

[18] (2000) 157 FLR 26, 32.

[19] [2008] HCA 41; (2008) 237 CLR 473, 495 [56]-[58].

[22] [2008] HCA 41; (2008) 237 CLR 473, 496 [59]-[62].

[23] (1995) 31 ATR 188, 193.

[24] (2007) 68 ATR 886, 909 [83]; [2006] QSC 394; 25 ACLC 1,341, 1, 361; ATC 20-006, 8,081.

[25] Section 2004(1A) was inserted by the A New Tax System (Tax Administration) Act 1999 (Com), Sch 16, Item 14.

[27] Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473, 496 [59]-[62].

[28] (1996) 62 FCR 302.