Deputy Commissioner of Taxation v Rojas

The background to this claim 7The defendant was a director of the company from 1 March 2010 until a liquidator was appointed on 2 September 2011 by court order. The plaintiff seeks to recover damages and costs in respect of the DPNs for actual and estimate liabilities in accordance with the figures set out in the amended statement of claim. During the hearing the plaintiff has indicated that interest has been waived. 8There are two bases for the plaintiff's claim: (a)A DPN served on the defendant for actual liabilities that the company accrued (the Actual Liabilities DPN); (b)A DPN served on the defendant following service of a notice of estimated liabilities determined by the plaintiff in circumstances where the company failed to lodge Business Activities Statements ("BAS") (the Estimated Liabilities DPN). 9I shall deal with each of these in turn.

The Actual Liabilities DPN 10This is based on a notice issued by the plaintiff after the company failed to remit money to the Australian Taxation Office ("ATO") for amounts withheld from employee's salaries for Pay As You Go ("PAYG") tax liabilities. This DPN relates to 13 periods and totals $135,766.00 (see the affidavit of Erin Stevenson affirmed 17 September 2012, annexure E, page 16). The company withheld monies from its employees income tax to remit to the ATO, but failed to comply with its obligations to pay these sums to the ATO. 11The relevant period over which the failure to remit from employees' retained salary covers the periods 1 December 2008 to 31 December 2008 and 1 December 2009 to 31 December 2009. An amount for payments/credits allocated by this DPN is also included. 12As the company failed to remit the money withheld, the defendant, from the time he commenced as a director of the company, became automatically liable to a penalty equal to an amount that the company had failed to remit by reason either of s 222AOD of the Income Tax Assessment Act 1936 (Cth) ("ITAA 1936") or s 269-20(3) of the Taxation Administration Act 1953 (Cth) ("TAA 1953"). The provisions of ITAA 1936 apply in respect of liabilities prior to 1 July 2010, and the provisions of TAA 1953 applied to liabilities after that date.

The Estimated Liabilities DPN 13Mr Rojas commenced as sole director of the company on 1 March 2010. 14On about 9 September 2010 the ATO completed an audit into the BAS for the company. The audit determined that no BAS had been lodged for certain periods between 2008 and 2010. On 5 July 2010 Mr Rojas agreed to lodge outstanding BAS. The ATO determined the PAYG withholding liability using records supplied by Mr Rojas as follows: Period PAYG amount withheld 01/01/2010 - 31/01/2010 $14,000 01/02/2010 - 28/02/2010 $14,000 01/03/2010 - 31/03/2010 $14,000 01/04/2010 - 30/04/2010 $14,000 01/05/2010 - 31/05/2010 $14,000 01/06/2010 - 30/06/2010 $14,000 Total $84,000

The relevant legislation 15The legislation enabling the plaintiff to take action to recover unpaid PAYG is as follows. Division 268 of Sch 1 of TAA 1953 provides a scheme to take prompt and effective action to recover unpaid PAYG. The relevant sections are set out below: "26810 Commissioner may make estimate Estimate (1) The Commissioner may estimate the unpaid and overdue amount of a liability (the underlying liability) of yours: (a) under section 1670 in this Schedule (requirement to pay to the Commissioner amounts you have withheld under the Pay as you go withholding rules); or (b) to pay superannuation guarantee charge for a *quarter under section 16 of the Superannuation Guarantee (Administration) Act 1992, to the extent the superannuation guarantee charge has not been assessed before the Commissioner makes the estimate. (1A) For the purposes of this Division, your superannuation guarantee charge for a *quarter is treated as being payable on the day by which you must lodge a superannuation guarantee statement for the quarter under section 33 of the Superannuation Guarantee (Administration) Act 1992, even if, on that day, the charge has not been assessed under that Act. Amount of estimate (2) The amount of the estimate must be what the Commissioner thinks is reasonable. (3) In making the estimate, the Commissioner may have regard to anything he or she thinks relevant. Example 1: In the case of an underlying liability under section 1670 (requirement to pay to the Commissioner amounts you have withheld under the Pay as you go withholding rules), the Commissioner may have regard to information about amounts you withheld under the Pay as you go rules before the period in relation to which the underlying liability arose. Example 2: In the case of an underlying liability to pay superannuation guarantee charge for a quarter, the Commissioner may have regard to information about your contributions to RSAs and complying superannuation funds for earlier quarters. Only one estimate for each liability (4) While the estimate is in force, the Commissioner cannot make another estimate relating to the underlying liability. (5) For the purposes of subsection (4), the estimate is in force if: (a) the Commissioner has given you notice of the estimate; and (b) the estimate has not been revoked; and (c) your liability to pay the estimate has not been discharged. 26815 Notice of estimate Commissioner must give notice of estimate (1) The Commissioner must give you written notice of the estimate. Content of notice (2) The notice must: (a) identify the underlying liability; and (b) specify the date of the estimate; and (c) set out the amount of the estimate; and (d) state that the amount of the estimate is due and payable; and (e) explain how you may have the amount of the estimate reduced or the estimate revoked. (3) To avoid doubt, a single notice may relate to 2 or more estimates, but must comply with subsection (2) in relation to each of them. When notice is given (4) Despite section 29 of the Acts Interpretation Act 1901, a notice under subsection (1) is taken to be given at the time the Commissioner leaves or posts it. Note: Section 28A of the Acts Interpretation Act 1901 may be relevant to giving a notice under subsection (1). Subdivision 268C-Liability to pay estimates Table of sections 26820 Nature of liability to pay estimate 26825 Accuracy of estimate irrelevant to liability to pay 26830 Estimate provable in bankruptcy or winding up 26820 Nature of liability to pay estimate Liability to pay amount of estimate (1) You must pay to the Commissioner the amount of the estimate if the Commissioner gives you notice of the estimate in accordance with section 26815. The amount is due and payable when the Commissioner gives you the notice. Note: The amount of the estimate may be reduced, or the estimate revoked, under Subdivision 268D. Liability to pay amount of estimate is distinct from underlying liability (2) Your liability to pay the amount of the estimate is separate and distinct from the underlying liability. It is separate and distinct for all purposes. Example: The Commissioner may take: (a) proceedings to recover the unpaid amount of the estimate; or (b) proceedings to recover the unpaid amount of the underlying liability; or (c) proceedings of both kinds. Discharging one liability discharges other liabilities (3) Despite subsection (2), if, at a particular time, one of the liabilities to which this subsection applies is discharged, to the extent of an amount, for either of the following reasons, each of the other liabilities to which this subsection applies is discharged to the extent of the same amount: (a) an amount is paid or applied towards discharging the liability; (b) the liability is discharged because of section 26940 (Effect of director paying penalty or company discharging liability). (4) Subsection (3) applies to whichever of the following liabilities are in existence at the particular time: (a) your liability to pay the amount of the estimate; (b) the underlying liability; (c) a liability of yours under a judgment, to the extent that it is based on a liability referred to in paragraph (a) or (b). (5) Subsection (3) does not discharge a liability to a greater extent than the amount of the liability. 26825 Accuracy of estimate irrelevant to liability to pay You are liable to pay the unpaid amount of the estimate even if: (a) the underlying liability never existed or has been discharged in full; or (b) the unpaid amount of the underlying liability is less than the unpaid amount of the estimate. Note 1: Section 26840 revokes the estimate if you give the Commissioner a statutory declaration, or file an affidavit, to the effect that the underlying liability never existed. Note 2: Subdivision 268D provides ways in which you can challenge the estimate or its amount." 16The plaintiff sent an estimate of liability notice to the company on 3 September 2010 addressed to its accountant. 17The Estimated Liability DPN is based on a notice in which the company failed to remit monies to the Deputy Commissioner of Taxation for estimated amounts issued by the Deputy Commissioner of Taxation pursuant to TAA 1953 s 268-10(1). After notifying the company of the estimated liability, the defendant was served with a DPN for the estimates for the period 1 January 2010 to 31 January 2010 to 1 June 2010 to 30 June 2010 on 19 November 2010. 18Pursuant to subsection 268-20(1) in Sch 1 to the TAA 1953, the amount of each estimate became due and payable when the Commissioner gave the company written notice of the estimate. 19An estimate issued by the Commissioner may be reduced or revoked in accordance with Sub Div 268D of Sch 1 of TAA 1953. The DPN estimates were reduced by the Deputy Commissioner of Taxation pursuant to s 268-35(1) in Sch 1 of TAA 1953. The company was notified in writing of the reductions of the estimates on 24 February 2011. 20The amended statement of claim includes an amount for payments/credits in respect of the Estimated Liability DPN.

The defendant's grounds of defence 21The first and most significant concern is whether or not the DPN were served. 22The plaintiff relies on the affidavit of Erin Stevenson, who has described both the creation and service of each DPN. Her affidavit of 17 September 2010 annexes the correspondence (annexures B, C, D and E). 23The relevant provision for notice is s 269-50 of TAA 1953, which provides: "269-50 How notice may be given The Commissioner may give you a notice under section 269 25 by leaving it at, or posting it to, an address that appears, from information held by the Australian Securities and Investments Commission, to be, or to have been within the last 7 days, your place of residence or *business." 24A DPN sent to an address as it is set out in the ASIC records will satisfy the requirements of service: Robertson v Deputy Commissioner of Taxation [2010] ATC 20-174; (2010) 239 FLR 29; [2010] NSWCA 58 at [10]. 25The ASIC search reveals that the defendant's address is the same as the address to which the notices are directed (see annexures A and F to the affidavit of Ms Stevenson of 17 September 2010). 26A notice is validly served even if it is not in fact received by the addressee if this provision is complied with: Deputy Commissioner of Taxation v Gruber (1998) 43 NSWLR 271 at 277. 27The defendant has served no evidence as to service or otherwise explained how it is that he asserts the notices have not been validly sent to him in accordance with the appropriate legislative requirements. 28This defence is not made out.

Challenges to issues of liability generally 29The affidavit material includes all relevant supporting documents including the BAS prepared by the company (affidavit of Mr Manton of 18 September 2012, annexures F1-F13), the ATO statement of account for the company's liabilities and credits under the BAS provisions and the ATO statement of account for DPN liabilities. In each matters, the plaintiff relies upon an evidentiary certificate to certify the amounts of the debt, in accordance with s 255-45 of TAA 1953, which amounts to prima facie evidence of the matters relied upon: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [38] per Gummow ACJ, Heydon, Crennan and Kiefel JJ. 30The onus of proof in satisfying the court that the debt is not due and owing shifts to the director once this certificate has been provided: Deputy Commissioner of Taxation v Gleeson [2010] QSC 260. The defendant once again has served no evidence, and has therefore failed to discharge the onus of proof.

Whether "all reasonable steps" were taken 31The defendant relies on s 269-35(3) and contends that he took all reasonable steps to ensure the directors complied with their obligations. There is no evidence to support this pleading and I reject this defence. Nor is there any evidence to support the contention that there were no steps he could have taken. 32I formally note that, an administrator having been appointed on 2 September 2011, this was substantially more than 21 days after each of the DPNs was served, that date being 19 November 2010. 33Finally, the fact that a person was not a director for the whole of the period, or at the time of service of the DPN, or at the time when the relevant failures occurred, is irrelevant: Canty v Deputy Commissioner of Taxation (2005) 63 NSWLR 152; [2005] NSWCA 84; TAA s 269-20(3) (and see former ITAA s 222AOD).

Concluding remarks 34The defendant has not made out any of the challenges to liability or quantum and accordingly there should be judgment against him in the sum of $145,238.06. 35The defendant is to pay the plaintiff's costs.

Orders (1)Judgment for the plaintiff against the defendant for the sum of $145,238.06. (2)The defendant pay the plaintiff's costs. (3)Exhibits retained for 28 days.

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