Deputy Commissioner of Taxation v Reslan

Supreme Court of NSW|2018-12-04|Before: Adamson J

Introduction

By statement of claim filed on 8 March 2018, the Deputy Commissioner of Taxation (the plaintiff) claims against Samer Reslan (the defendant) $1,275,402.37 together with a further General Interest Charge (GIC) on amounts outstanding. On 10 May 2018, the defendant, who represented himself, filed a defence as follows: "1. The Defendant does not agree with any paragraph written in the claim. 2. The Defendant has provided copies of invoices and attended an interview with the ATO auditors and would like to request for these documents to be made available and to be used in evidence. 3. The Defendant wishes to challenge this decision in the court. 4. The Defendant does not agree with any of the amounts claimed against himself."
On 2 July 2018 the plaintiff filed an affidavit sworn by Wendy Delahunt on 2 July 2018 in support of his claim. The plaintiff, for whom Ms Campos appeared, also relied on the affidavit of Natalie Gruber affirmed 3 December 2018.
The defendant, who appeared on his own behalf, has neither filed nor served any evidence. After the plaintiff had adduced his evidence, the defendant sought an adjournment of the proceedings in order to obtain legal advice. I refused the adjournment: see Deputy Commissioner of Taxation v Reslan [2018] NSWSC 1864.

Relevant legislation and principles established by authority

Income tax assessments

Section 168 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) empowers the Commissioner of Taxation (the Commissioner) to make an assessment of taxable income derived and the tax (if any) payable thereon. The Commissioner is required to issue a notice of assessment and serve it on the person liable to pay the tax: s 174(1), ITAA 1936. The validity of a notice of assessment is not affected by non-compliance with any provisions of the ITAA: s 175, ITAA 1936.

Income tax and GIC

Income tax is payable as a consequence of an assessment made by the plaintiff: s 5-5, Income Tax Assessment Act 1997 (Cth) (ITAA 1997). General Interest Charge (GIC) is charged from the date on which income tax is due: s 5-15, ITAA 1997.

Schedule 1 of the Taxation Administration Act 1953

Schedule 1 of the Taxation Administration Act 1953 (Cth) (TAA) includes provisions which facilitate the Commissioner's recovery of tax. Section 255-5 provides that an amount of "tax-related liability" that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner. Liabilities for income tax and GIC are "tax-related liabilities": s 255-10 of Sch 1 of the TAA (items 37 and 70). Section 255-5(2) provides that the plaintiff may sue in a court of competent jurisdiction to recover an amount of tax-related liability that remains unpaid after it has become due and payable. This Court is such a court.
Item 2 of s 350-10(1) of Sch 1 to the TAA (formerly s 177 of the ITAA 1936) provides that a notice of assessment is conclusive evidence that the assessment was properly made and, except in proceedings under Part IVC of the TAA on a review or appeal relating to the assessment, that the amounts and particulars of the assessment are correct. The correctness of a notice of assessment cannot be challenged in legal proceedings for recovery of the tax debt: F J Bloemen Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia; Simons v The Commissioner of Taxation of the Commonwealth of Australia (1981) 147 CLR 360 at 375 (Mason and Wilson JJ, Stephen and Aickin JJ agreeing) and 378-379 (Murphy J); [1981] HCA 27.
A taxpayer who is dissatisfied with an assessment may challenge it in review or appeal proceedings under Part IVC of the TAA. In that event, the taxpayer bears the burden of proof that the assessment is excessive or incorrect or should not have been made: s 144ZZK(b), TAA. Section 14ZZM relevantly provides that a pending review does not affect the recovery of the unpaid tax.
Section 255-45 of Sch 1 of the TAA provides that a certificate signed by the plaintiff is prima facie evidence of certain matters in a proceeding to recover an amount of tax-related liability. The certificate may state that a notice required to be served was, or is taken to have been, served (TAA, Sch 1, s 255-45(2)(c)) or that a sum specified in the certificate is, as at the due date specified in the certificate, a debt due and payable by the person to the Commonwealth (TAA, Sch 1, s 255-45(2)(e)).
Section 350-10(3) of Sch 1 of the TAA provides that production of a certificate signed by the plaintiff which states that from the time specified in the certificate an amount was payable under a tax law is prima facie evidence that the amount is payable from that time and that the particulars stated in the certificate are correct.
Section 255-50 of Sch 1 to the TAA provides that an allegation in, relevantly, the plaintiff's pleading is prima facie evidence. The section applies even if evidence is given in support or rebuttal of the matter.
The provisions referred to above are among those which placed the Commissioner in a "position of special advantage": Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673 at 674-675 (Gibbs CJ, Murphy, Wilson, Brennan and Deane JJ agreeing). Generally, the Commissioner is entitled to pursue recovery proceedings to judgment even if the taxpayer has commenced proceedings under Part IVC of the TAA: Southgate Investment Funds Ltd v Deputy Commissioner of Taxation (2013) 211 FCR 274; [2013] FCAFC 10 at [77] and s 14ZZM of the TAA.

The plaintiff's evidence

On 19 December 2017 the Commissioner issued a notice of assessment to the defendant for the year ended 30 June 2017. The assessment was, accordingly, conclusive evidence that the amount of $1,243,244.50 was a debt due to the Commonwealth on the date specified for payment, 21 November 2017.
On 2 July 2018 the plaintiff issued a certificate under s 255-45 of the TAA in which he certified that the notice of assessment was, or is taken to have been, served on the defendant and that, as at 27 June 2018 the sum of $1,309,828.27 was a debt due and payable to the Commonwealth for the defendant's tax-related liability. Further, as referred to above, allegations in the statement of claim are prima facie evidence of the fact: s 255-50 of Sch 1 to the TAA. A further certificate was annexed to Ms Gruber's affidavit which certified the same amount ($1,309,828.27) as at 3 December 2018.

Consideration

The allegations made in the defence filed on 10 May 2018 do not amount to defences against the plaintiff's claim. For the reasons given above, the correctness of an assessment cannot be challenged in recovery proceedings such as the present. Any challenge must be made by the defendant under Part IVC of the TAA. The assessment itself is conclusive evidence. The certificate dated 2 July 2018 is prima facie evidence of service and the updated amount. There is no evidence to the contrary. The allegations in the statement of claim are, also, prima facie evidence.

Conclusion

The pleaded defence does not amount to a defence to the plaintiff's claim. No matter has been raised on behalf of the defendant which could constitute an arguable defence to the plaintiff's claim. If the defendant wishes to challenge the assessment of his tax-related liability, this is not the appropriate forum.
I note that the amount set out in the certificate dated 3 December 2018 is the same as the amount set out in the certificate dated 2 July 2018. This would appear to be an error as the GIC would continue to accrue. However, Ms Campos confirmed that this was the amount sought by the plaintiff by way of judgment although she accepted that it was an understatement.
There is no reason why costs ought not follow the event in accordance with the general rule: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

Orders

For the reasons set out above, I make the following orders: 1. Judgment for the plaintiff in the sum of $1,309,828.27. 2. Order the defendant to pay the plaintiff's costs.

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: 05 December 2018

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