Deputy Commissioner of Taxation v Hubbard

The defence

1. By defence filed 28 May 2020, the defendant pleads: 1. that the debt is in a genuine dispute ([4]); 2. denies the debt is due and payable and states there is ([5] and [9]): 1. a plausible contention requiring investigation; 2. a serious question to be tried with respect to the debt; and 3. the dispute is bona fide and truly exists in fact, and that the grounds, alleging the existence of the dispute are real and are not spurious, hypothetical, illusory or misconceived.
2. Ms Hubbard deposes: 1. that "the current notice of assessments are incorrect and inflated" ([77]); and 2. that she has "caused an objection to be lodged with the ATO" ([87]).
3. In summary, the basis upon which the defendant seeks to defend the proceedings, is that the amounts for which she has been assessed are not the correct amounts of tax payable, there is a genuine dispute that the current notices of assessment are incorrect and inflated and that she has lodged an objection with the Australian Tax Office.

Plaintiff's evidence

1. The plaintiff's evidence establishes that: 1. the defendant was assessed for income tax for the years ended 30 June 2005 to 30 June 2017 (Currie Aff [8]); 2. the Notices of Assessment for income tax for the years ended 30 June 2005 to 30 June 2017 were served on the defendant on or about the dates of issue (Currie Aff [9)]; and 3. as the defendant failed to pay all outstanding income tax amounts as specified on the Notices of Assessment on or before their respective due dates GIC became payable pursuant to s 5-15 of the Income Tax Assessment Act 1997 (Cth) (ITAA97) and Pt IIA of the Taxation Administration Act 1953 (Cth) (TAA53) (and prior to 1 July 2010 pursuant to s 204 of the ITAA36 (Currie Aff [11])).
2. The plaintiff has also produced an evidentiary certificate pursuant to s 350-10 in Sch 1 of the TAA53 certifying, the defendant's indebtedness to the Commonwealth in respect of the tax-related liabilities the subject of the claim in the proceedings in the amount of $2,932,104.86 as at 29 July 2020 (Currie Aff [13]).
3. The plaintiff helpfully set out the statutory scheme and the relevant principles. I agree with and then adopt these submissions.

Income tax statutory scheme

1. The plaintiff has issued the defendant Notices of Assessment for Income Tax for each of the years ending on 30 June 2005 to 30 June 2017 (Currie Aff [8]).
2. The Notices of Assessment in respect of the defendant's income tax liabilities were served on the defendant pursuant to Pt 2A of the Taxation Administration Regulations 1976 (Cth) and Pt 2 Div 4 of the Taxation Administration Regulations 2017 (Cth) by sending by post to XXX, Glenorie NSW 2157 being the defendant's preferred address for service, on or about their respective issue date (Currie Aff [9]).
3. GIC accrued on the amounts of income tax which were due and payable pursuant to s 5-15 of the ITAA97 and Pt IIA of the TAA53 (and prior to 1 July 2010 pursuant to s 204 of the ITAA36).

The relevant principles

1. The defendant's liabilities for income tax claimed in these proceedings are assessed liabilities, in that the plaintiff relies upon having given the defendant Notices of Assessment in respect of those liabilities.
2. In respect of income tax, s 175 of the ITAA36 is headed "Validity of assessment" and provides: "The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with."
3. Pursuant to s 350-10(1) in Sch 1 of the TAA53, the Notices of Assessment and Notices of Amended Assessment in respect of income tax which have been produced by the plaintiff are conclusive evidence in these proceedings that: 1. the assessments were properly made; and 2. except in proceedings under Pt IVC of the TAA53 on a review or appeal relating to the assessment, the amounts and particulars of the assessment are correct.
4. It is a fundamental and established feature of the statutory scheme relating to the recovery of assessed liabilities, recognised by the High Court, that the effect of s 350-10 in Sch 1 of the TAA53 is that the correctness of a notice of assessment cannot be challenged in recovery proceedings on any ground: F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 375 (Mason and Wilson JJ with Stephen and Aickin JJ agreeing); Commissioner of Taxation v Futuris Corporation Limited (2008) 237 CLR 146 at 166 [64], [65] (Gummow, Hayne, Heydon and Crennan JJ) (Futuris); and Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at 491-493 [40]-[45] (Gummow ACJ, Heydon, Crennan and Kiefel JJ) (Broadbeach Properties).
5. In Futuris, the High Court held that in recovery proceedings: 1. it is clear that the validity of an assessment is not affected by failure to comply with any provision of the Act under which the assessment was made, but a dissatisfied taxpayer may object to the assessment in the manner set out in Pt IVC of the TAA53; 2. in review or appeal proceedings under Pt IVC, the amount and all the particulars of the assessment may be challenged by the taxpayer but with the burden of proof provided in ss 14ZZK and 14ZZO of the TAA53; and 3. the protection afforded by s 175 of the ITAA36 encompasses all errors in the process of assessment such as a failure to take into account a material factor; taking into account an extraneous factor or an error in the calculation of tax due. Those matters may be challenged only in the context of Pt IVC proceedings.
6. In Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation [2017] NSWCA 17 the New South Wales Court of Appeal (per Payne JA, with McColl JA and Meagher JA agreeing) considered the effect of s 350-10(1) in Sch 1 of the TAA53. The Court of Appeal held that: 1. Section 350-10(1) applies according to its terms as "conclusive evidence" in recovery proceedings (at [43]); 2. "Where, as in the present case, a notice of assessment is admitted in evidence in recovery proceedings, it will conclusively be established that the assessment was "properly made" and "except in proceedings under Pt IVC of this Act on a review or appeal relating to the assessment… the amounts and particulars of the assessment… are correct" (at [44]); 3. the effect of s 350-10 "was squarely addressed by Futuris. … This Court is bound to conclude that it was thus conclusively established that the assessment was "properly made" and "the amounts and particulars of the assessment… are correct" (at [47]). also see Commissioner of Taxation v Ornelas [2016] FCA 457.

Other evidentiary aides

1. From 1 July 2020, s 255-45 was repealed by the Treasury Laws Amendment (2019 Measures No. 3) Act 2020 (Amending Act). The Amending Act also amended Div 350 in Sch 1 of the TAA53 to provide for the giving of evidentiary and procedural matters in proceedings to recover tax-related liabilities. Section 350-12(1) provides that matters which may be stated in a certificate under s 350-10(3) include those matters set out in s 350-12(2). The matters set out in s 350-12(2) are identical to the matters which may have been stated in a certificate under former s 255-45.
2. Section 350-10(3) in Sch 1 of the TAA53 states the production of a document that appears to be a copy of or an extract from any document made or given by or to an entity for the purposes of a taxation law and is signed by the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner is evidence of the matters set out in the document to the same extent as the original document would have been evidence of in those matters.
3. Relevantly, it remains open to the Commissioner to certify that: 1. a person named in the certificate has a tax-related liability (s 350-12(2)(a)); 2. an assessment relating to a tax-related liability has, or is taken to have been, made (s 350-12(2)(b)); and 3. a notice of assessment or other notice required to be served on a person in respect of a tax-related liability was served on the person (s 350-12(2)(c) and the particulars of such a notice (s 350-12(2)(d)); and 4. that a sum specified in the certificate is, from the date specified in the certificate, an amount payable under a taxation law (s 350-10(3)(b)).
4. The amendments do not substantively change the effect of the law: a certificate produced under s 350-10(3) will have the same evidentiary effect as certificate under the former s 255-45.
5. Section 350-15 in Sch 1 of the TAA53 provides that judicial notice must be taken of the names and signatures of the persons who are, or were at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner if the signature is attached or appended to an official document for the purposes of a taxation law.
6. Pursuant to reg 24 of the Taxation Administration Regulations 2017: "a document bearing the name (however produced) of a person who is, or was at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner in the place of the person's signature is taken to have been duly signed by the person, unless it is proved that the document was issued without authority."
7. Additionally, by force of s 350-20(1) in Sch 1 of the TAA53, in a proceeding to recover a tax-related liability, a fact alleged in the plaintiff's claim is prima facie evidence of that matter. In the absence of the defendant leading evidence to the contrary, the plaintiff's averments will be sufficient proof of the matters alleged.
8. These certificates and the conclusive and prima facie provisions in the various taxation Acts have been accepted in the High Court of Australia, and in this Court: see Broadbeach Properties at [54].
9. In considering the predecessor to s 350-10(3), Pagone in Deputy Commissioner of Taxation v Vasiliades [2015] FCA 412 at [6] found that the Commissioner was entitled to summary judgment when relying on the prima facie evidence of the certificates produced under that section in the circumstances of that case (where the liability was unopposed by the defendants, who did not appear at the hearing of the summary judgment application). See also Kolichis v Deputy Commissioner of Taxation [2014] WASCA 76.
10. In respect of the objection lodged by the defendant, it is well established that the effect of ss 14ZZM and 14ZZR of the TAA53 is to give primacy to the general right of the Commissioner to have tax paid irrespective of the pendency of an appeal or review and its merits. The cases have long recognised this legislative policy: see the authorities referred to in Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 at 135-9. As observed by Kenny J in Deputy Commissioner of Taxation v Hua Wang Bank Berhad (No 2) [2010] FCA 1296 at [49]: "The Commissioner is not prevented from suing for recovery of tax debts simply because the taxpayer has not had relevant objections determined or has not exhausted review or appeal rights: see TAA 1953, sections 14ZZM and 14ZZR and Clyne v Deputy Commissioner of Taxation (1983) 48 ALR 545 at 547; 57 ALJR 673 at 675 …"
11. The plaintiff submitted that the defendant has failed to make out any defence to the claim. The Court can be satisfied that the defendant is liable for the amount as pleaded in the statement of claim. Therefore, the plaintiff is entitled to judgment against the defendant.
12. In the affidavit of Zeanda Ragg dated 23 April 2021 at [8] she updates the defendant's indebtedness and deposes: On 23 April 2021, I accessed the Commissioner's records for the defendant relative to the plaintiff's claim. I am informed and verily believe from my perusal of the Commissioner's records that, as at 23 April 2021: payments and/or credits totalling $3,388.24 have been made or applied to the defendant's income tax related liabilities the subject of the claim in the proceedings since 29 July 2020; and the defendant's liability for income tax and GIC claimed in the proceeding is $3,084,394.06.
13. Ms Ragghas annexed a certificate dated 23 April 2021 issued pursuant to s 350-10(3) in Sch 1 of the TAA53 for the sum of $3,084,394.06.
14. In oral submissions, the defendant explained that during her 20 years of marriage, she and her husband ran a mortgage broking business and property development. While she raised their four children. She relied on and trusted him with all the financials. She was not privy to any emails or financial records including taxes. She says that she only became aware that she had not paid tax for 10 years when she got a call from the Australian Tax Office. She has lodged an objection to the assessments but that will take three to four weeks to be determined (T8-9).

Conclusion

1. While I have sympathy for the position the defendant finds herself in, there are very limited avenues to challenge tax assessments in this Court. In her defence she asserts that the amounts for which she has been assessed are not the correct amounts of tax payable. This is not a matter which is justiciable in these proceedings. In particular, in respect of the defendant's liability for income tax which is an assessed liability, the particulars and amounts of which are conclusively proven by the plaintiff producing the Notices of Assessment and Notices of Amended Assessment in respect of those liabilities. There is no evidence to support the proposition that the amounts in the assessments are incorrect. The plaintiff has established on the balance of probabilities that the defendant owes the plaintiff the sum of $3,084,394.06.
2. While the defendant has lodged an objection with the plaintiff, as set out earlier in this judgment, the plaintiff is not prevented from suing for the recovery of the tax debts while the objection process is taking place. The defendant's defence fails. Judgment is to be entered in favour of the plaintiff against the defendant for the sum of $3,084,394.06.

Costs

1. Costs are discretionary. Costs usually follow the event. The defendant is to pay the plaintiff's costs on an ordinary basis.

Judgment The defendant is to pay the plaintiff the sum of $3,084,394.06.

The Court orders that: (1) The defendant is to pay the plaintiff's costs on an ordinary basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 April 2021