Legislation: ACT Civil and Administrative Tribunal Act 2008, s 68

Payroll Tax Act 2011, s 81

Taxation Administration Act 1999, ss 11, 25, 30-37 and 82

Cases: Hay v Commissioner for ACT Revenue [2014] ACAT 23

HJA Holdings Pty Ltd & Ors v ACT Revenue Office [2014] ACAT 24

Jokhan & Jokhan and Commissioner for ACT Revenue [2012] ACAT 15

Rawson Finances Pty Ltd v Commissioner of Taxation (2013) FCAFC 26

RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64

Secretary, Dept of Social Security and Marie Carruthers [1993] AATA 330

Scott and Anor v Commissioner of ACT Revenue [2013] ACAT 73

Touma v Chief Commissioner of State Revenue [2012] NSWADT 2

COMMISSIONER FOR ACT REVENUE

1. Subject to Order 2, the respondent's decision is confirmed.

2. The respondent's decision that a penalty tax rate of 90% be imposed is set aside and substituted with a decision that the relevant penalty tax rate is 50%.

3. The matter is remitted to the respondent for calculation of payroll tax, penalty tax and interest in accordance with these orders.

1. The Applicant company, Highrise Concrete Contractors (Aust) Pty Ltd ('the Applicant' or 'Highrise') is a member of a group of companies ('the group') involved with the construction industry. The case concerns the quantum of payroll tax that the group is liable to pay in the ACT and of the penalties for any tax default. The Commissioner for ACT Revenue ('the Respondent' or 'the Commissioner') administers the relevant payroll tax legislation in the ACT.

2. The Commissioner, from March 2011, sought information from various members of the group, including Highrise, so that an assessment of payroll tax could be made. On 13 March 2012, a notice of assessment was issued. Due to the insufficient information available at that time, the assessment was based on an estimate.

3. The estimate method involved a visit on 8 December 2011 to a worksite in Canberra to inspect various site records relevant to the group's activities in the ACT. Searches of the Australian Security and Investment Commission records and websites of the members of the group were undertaken. Using the latter information and data as a guide, the Commissioner estimated that 10 employees were employed by the group in the ACT between 2006 and 2012, with estimated wages of $60,000 per annum plus $5400 (i.e. 9%) in superannuation.[1] The assessment allowed a standard rate of primary tax (i.e. 6.85% of the ACT estimated taxable wages), with no allowance for a tax-free threshold due to the insufficient information available to accurately determine the payroll of the group in the ACT or Australia-wide (this information being required to calculate the application of the threshold).[2] Highrise was determined by the Commissioner in the assessment to be a member of a group of eight companies and the "predominant employer",[3] and so it was legally liable for the group's payroll tax liabilities[4] and the assessment was issued to it.

4. Interest was imposed due to a tax default, being failure to register for payroll tax in the ACT, failure to lodge returns, and failure to pay the payroll tax by the due dates.[5] The rate for penalty tax was set at its highest, 90%, due to the failure by the Applicant and the group to comply with notices issued by the Commissioner, meaning that the tax default was "caused wholly or partly by the intentional disregard of a tax law".[6]

5. The Applicant lodged an objection to the assessment by letter dated 7 May 2012 and provided various documents in support. In summary, the Applicant raised that it had provided completed questionnaires to the Commissioner in 2011; that an accurate rather than an estimated assessment of the payroll tax could be made and that its payroll would be below the threshold; that delays by the Applicant were in part due to the illness of the Principal of the Applicant's previous accountancy firm; that some members determined to be part of the group by the Commissioner were not part of a group; that there was no intentional disregard by the Applicant, and that indeed it was compliant with NSW payroll tax requirements and had paid payroll tax in NSW for its ACT wages.[7]

6. The Commissioner, in a letter dated 6 November 2012, disallowed the objection and provided a Reasons Statement.[8] The reasons stated in summary that while the taxpayer had provided some completed questionnaires in 2011, this was only after considerable follow up. The Commissioner had not received a third completed questionnaire for another member of the group and had not received any of the requested financial statements. The Commissioner stated that the letter with attachments which the Applicant claimed was posted to the Commissioner on 27 September 2011 had not been received. Any compliance with NSW payroll tax requirements did not remove the responsibility of the group to comply with ACT payroll tax requirements. The Applicant and some members of the group were issued with notices which they did not comply with by the due date and had no reasonable excuse for failing to comply, so the 90% penalty tax rate was appropriate. There were no grounds for remitting the penalty tax. While the Applicant advised that the issues with compliance were in part caused by the previous accountant's ill-health, the Commissioner stated that a failure to comply by a taxpayer's agent is legally a default by the taxpayer.

7. An application for review of the objection decision was filed with the ACT Civil and Administrative Tribunal (the Tribunal) on 3 December 2012 with supporting material, including financial statements recently prepared, but unsigned, by the Applicant's newly engaged accountant. Much of this material had not been submitted to the Respondent before it was lodged with the objection. In summary, the Applicant submitted that an assessment of the actual payroll for the group could be made and the tax, interest and penalties should be adjusted accordingly.[9]

8. The parties filed and exchanged Statements of Facts and Contentions, and various supporting documents and witness statements. The Commissioner's office prepared a folder of all relevant documents, known as the T documents. On 16 May 2013, the Applicant filed with the Tribunal signed financial statements and other key documents for members of the group including for the Applicant.

9. At the hearing, the General Manager for the Applicant, Mr Joe Bassil, and the person who made the assessment decision for the Commissioner gave evidence.

11. The Applicant was an ACT employer for the purposes of the payroll legislation and paid wages in the ACT between the years ended 30 June 2006 to 30 June 2011 (inclusive) and for the months ended 31 July 2011 to 29 February 2012 (inclusive) (the relevant period).

12. At the hearing, an additional ninth company was agreed to be part of the group, Vertigo Construction Group Pty Ltd.

13. The Applicant is part of a group for the purposes of the ACT payroll legislation, the group consisting of nine entities (see paragraph 13, above) that were members of the group during part or the whole of the relevant period as follows:

Highrise Concrete Contractors (Aust) Pty Ltd (the Applicant)

14. The Applicant is liable for payroll tax in the ACT for the group during the relevant period.

15. The Commissioner had insufficient information, when the assessment was made on 13 March 2012, to make an assessment of the actual payroll tax liabilities of the Applicant and members of the group for the relevant period.

16. The Commissioner had insufficient information, when the assessment was made, to make an assessment of the actual Australia-wide payroll of the Applicant and members of the group for the relevant period.

17. Since the Commissioner had insufficient information when the assessment was made to make an assessment of the actual ACT payroll tax liabilities and the Australia-wide payroll of the Applicant and members of the group for the relevant period, the tax-free threshold could not be applied at the time of the assessment.

18. At the hearing the parties agreed that the remaining contested issues and facts were as follows:

(a) whether an assessment of the actual payroll tax liabilities of the Applicant and members of the group for the relevant period in the ACT can be calculated at the date of the hearing, using the additional information provided by the Applicant or obtained by the Respondent to the date of the hearing;

(b) whether the tax-free threshold could be applied at the date of the hearing, using the additional information provided by the Applicant or obtained by the Respondent to the date of the hearing;

(c) whether the estimate used to support the assessment is reasonable; and

(d) whether the penalty of 90% of the amount of tax unpaid imposed on the Applicant is appropriate.

19. The Payroll Tax Act 1987 (repealed) (PRT Act 1987) applies to the Applicant until 30 June 2011. From 1 July 2011, the Payroll Tax Act 2011 (PRT Act 2011) applies. Both Acts are tax laws for the purposes of the Taxation Administration Act 1999 (TAA). The TAA's provisions apply to the payment of tax, and where there is a tax default the legislation imposes interest (section 25) and penalties (sections 30-37).

20. Each member of a group is jointly and severally liable for any payroll tax liability of any other members of the group (section 11A PRT Act 1987 and, following amendments, section 8 PRT Act 1987; then section 81 PRT Act 2011).

21. The Commissioner may make an assessment of tax liabilities by estimation where there is "insufficient information to make an exact assessment" (section 11(2) TAA).

22. Where a taxpayer defaults on their tax liabilities, interest is payable and may be remitted (section 29 TAA). However, a decision about interest is not reviewable by the Tribunal (Scott and Anor v Commissioner of ACT Revenue [2013] ACAT 73 (Scott)).

23. Where a taxpayer defaults on tax liabilities, penalty tax is payable. The minimum rate of penalty tax is 25% of the unpaid tax (section 31(1) TAA). The rate increases to 50% if the default was caused wholly or partly by a "failure to take reasonable care" (section 31(2) TAA), unless there is a "reasonable excuse" (section 31(3) TAA). Where there is an "intentional disregard ... of a tax law", the rate increases to 75% (section 31(5) TAA). The rate of 90% applies if the taxpayer or their agent conducts themselves in various ways after being notified that an investigation is to be a carried out, including where the taxpayer or their agent "fails, without reasonable excuse, to comply with a requirement made by the commissioner under division 9.2 for the purposes of determining the taxpayer's tax liability" (section 34(b) TAA) or "otherwise shows intentional disregard for a tax law" (section 34(d) TAA). No penalty tax is payable in certain circumstances (section 31(6) TAA), and the Commissioner may remit all or part of the penalty tax in certain circumstances (section 37 TAA). Relevant sections of the TAA, and of the PRT Act 1987 and the PRT Act 2011, are extracted at the end of these Reasons for Decision.

24. The burden of showing that an objection should be sustained is with the taxpayer, the Applicant in this case (section 101(3) TAA). The Tribunal's main task is to decide if the taxpayer has shown that the objection should be sustained.[10]

25. The Tribunal may confirm, vary or set aside the decision being reviewed and, if the decision is set aside, the Tribunal may make a substitute decision or remit the matter for decision back to the decision-maker in accordance with directions or recommendations (section 68 ACT Civil and Administrative Act 2008).

26. The Applicant's contentions changed over the course of its dealings with the Commissioner and during the Tribunal proceedings, as the financial statements were prepared and finalised. The Applicant's case as presented at the hearing and in its final Submission is summarised here.

27. The Applicant contended that, because the finalised financial statements and other key documents for all members of the group had been provided by the date of the hearing, the Commissioner could now make an accurate assessment of its payroll tax liability. Any inconsistencies with the questionnaires completed by Mr Joe Bassil are due to the circumstances he was in when he completed them, with the previous accountancy firm not being helpful.[11] Also, at that time, Mr Bassil held various misconceptions about payroll tax liabilities in the ACT. For example, Mr Bassil stated in evidence that he didn't understand what a group was for the purposes of payroll tax and thought that the Applicant was under the threshold to pay ACT payroll tax.[12] In his evidence, Mr Bassil explained that he had learned the job of being General Manager "on the job" and had the usual responsibilities as a General Manager of Highrise and another member of the group, and "other responsibilities".[13]

28. The Applicant contended that the threshold could be applied once an accurate assessment of payroll was made by the Commissioner. In the alternative, the Applicant contended that since the ACT payroll could be estimated, the Australia-wide payroll could be estimated to determine the application of the threshold.

29. The Applicant cross-examined the witness for the Respondent suggesting that the estimate was unreasonable, but offered no alternative estimate method.

30. The Applicant contended that no penalties should be applied or, in the alternative, that reduced penalties should be applied given the circumstances of the case, particularly:

(a) Mr Joe Bassil's responses to the Commissioner's requests and demands, including referring the Commissioner's staff to the Applicant's previous accountant;

(b) the unhelpful conduct of the previous accountancy firm, with their Principal being ill - the Applicant provided two medical invoices showing that the Principal had surgery on 14 November 2011;[14]

(c) while the Applicant's previous accountancy firm had the information, the relevant financial statements were not prepared in 2011, but were prepared by a new accountancy firm and provided for the hearing;[15] and

(d) engaging a new accountancy firm to prepare what the Commissioner had requested in the Notices, i.e. financial statements, as expeditiously as possible.

31. The Applicant submitted that any non-compliance with regard to payroll tax in the ACT was unintentional and that the General Manager of the Applicant, Mr Joe Bassil, was a truthful person. In evidence, Mr Bassil explained that he had misconceptions about payroll tax and groups in 2011, had learned on the job and had significant responsibilities. The Applicant also submitted that it and St George Concrete Pumping Service Pty Ltd were confirmed by the NSW Office of Revenue to be compliant with lodgements for NSW.[16] The Applicant advised that "[t]he wages declared in the ACT Payroll Tax questionnaire were subject to NSW Payroll Tax and were paid accordingly [i.e. in NSW]"[17] and, further, that there was no reason for the Applicant to avoid its liabilities in the ACT, since "when comparing the Payroll Threshold between NSW and ACT it is actually advantageous for a company to be registered with the ACT Revenue Office instead of the NSW Office of State Revenue due to the higher threshold".[18]

32. The Respondent contended that the Applicant had not met the burden of proof to sustain the objection and for the decision under review to be varied or set aside (refer to paragraphs 24 and 25 above). While there is substantial additional information provided by the Respondent at the date of the hearing to that provided to the Commissioner at the time of the assessment and the objection, this does not allow an assessment of the actual payroll tax liabilities of the Applicant and members of the group for the relevant period in the ACT.

33. The additional material is largely "secondary evidence, primarily financial statements".[19] The necessary "[s]ource data ... to enable calculations of taxable wages"[20] has not been provided. Source data is required due to the nature and scale of discrepancies between the "financial statements ... and between those documents and other documents" and "there is no cogent reason for why the representations about wages ... in one document ... should be preferred or accepted over another".[21] While the Respondent's witness agreed that certain source data had not been requested, the Respondent argued that "[t]he reliability of the financial statements is for the Applicant to prove, not the Commissioner to disprove".[22]

34. The Respondent also contended that source data was required since the Applicant's representations were "directly or indirectly" attributable to Mr Joe Bassil, "who showed he was willing to say whatever he thought might suit the Applicant's purpose, regardless of the truth".[23] The contention of the Respondent that Mr Joe Bassil is untruthful was also relevant to the appropriate penalty rate.

35. The parties agreed that if it is not possible to determine the group's ACT or Australia-wide wages, then it is not possible to determine if a threshold applies. The Respondent contended that it is not possible to determine with confidence the wages; hence, the threshold cannot be determined or applied.

36. The Respondent contended that the method and information used for the estimate, and which is set out above, is reasonable. In any case, if the estimate were to be varied based on the further information provided by the Applicant or obtained by the Respondent since the assessment was made, it would take into account "service and/or relevant contracts which were not previously included"[24] and be "upwards".[25]

37. The Respondent contended that the 90% rate for penalty tax (section 34 TAA) is appropriate. The Applicant failed to provide the Commissioner with requested information, despite repeated and various requests and demands. Two Notices under section 82 of the TAA were issued on 31 March 2011 to Altitude Construction Group Pty Ltd (Altitude) and St George Concrete Pumping Service Pty Ltd (St George) and then a third Notice was issued on 2 June 2011 to the Applicant. None of these Notices were fully complied with by the due date or by the time of the objection decision being made.

38. The Respondent argued that there were no grounds for finding the Applicant had a reasonable excuse (under section 34(b) TAA)) or for reduction or remission of the penalty (under sections 31(3), 31(6) and 37 TAA). In particular, the conduct of the Applicant's prior accountancy firm that is alleged by the Applicant does not establish the grounds for reasonable excuse, reduction or remission of the penalty. In the circumstance of this case, any failure to comply by a taxpayer's agent is a default by the taxpayer.

39. The Tribunal considered the following four contested issues (as listed in paragraph 18 above):

Issue 1: Whether an assessment of the actual payroll tax liabilities of the Applicant and members of the group for the relevant period in the ACT can be calculated, using the additional information provided by the Applicant to the date of the hearing?

Issue 2: Whether the tax-free threshold can be applied, using the additional information provided by the Applicant to the date of the hearing or, in the alternative, using an estimate of the Australia-wide?

Issue 3: Whether the estimate used to support the assessment is reasonable?

Issue 4: Whether the penalty of 90% of the amount of tax unpaid imposed on the Applicant is appropriate and whether it should be reduced or remitted?

40. Findings against each of these considerations are set out below.

Issue 1: Whether an assessment of the actual payroll tax liabilities of the Applicant and members of the group for the relevant period in the ACT can be calculated, using the additional information provided by the Applicant to the date of the hearing?

41. There is substantial additional information provided by the Applicant at the date of the hearing to that provided to the Commissioner at the time of the assessment and the objection. However, the Tribunal finds that this does not allow an assessment of the actual payroll tax liabilities of the Applicant and members of the group for the relevant period in the ACT due to inconsistencies across all the material provided.

42. The Notices required financial statements to be provided. However, now they have been provided, there are many discrepancies with earlier material submitted by the Applicant. One area of such discrepancies, inconsistencies between financial materials prepared by the previous accountant and the new accountant, was not able to be explained by the witness for the Applicant: "Well, there is a difference, but I don't understand - I don't know why it is or - I'm not the accountant".[26] No explanation was provided in the Applicant's written submissions for the discrepancies between the financial materials prepared by the two accountancy firms.

43. The onus is on the Applicant to prove the reliability of the financial statements. Given the discrepancies with prior material, the reliability of the most recently provided material is not demonstrated. The Commissioner's witness gave evidence that, in the circumstances of the case at the date of the hearing, if a decision based on an estimate had not already been made, a fuller investigation involving review of source documents would normally be initiated due to these discrepancies.[27] The nature and scale of discrepancies between the financial statements and other additional material provided by the Applicant and that provided by the Applicant prior to the objection decision being made is such that the Commissioner is entitled to require source documents to make an accurate assessment of the group's payroll tax liabilities. Since the necessary source documents have not been made available, an assessment based on an estimate is appropriate in this case (see section 11(2) TAA).

44. The Tribunal does not rely on an adverse finding about the credibility or truthfulness of Mr Joe Bassil for this finding, for the reasons set out in regard to penalties below.

Issue 2: Whether the tax-free threshold could be applied, using the additional information provided by the Applicant to the date of the hearing or, in the alternative, using an estimate of the Australia-wide wages?

45. Given the Tribunal's finding in relation to Issue 1 above, namely that it is not possible to determine with confidence the group's actual ACT wages, it follows that it is not possible to determine with confidence the group's actual Australia-wide wages. For this reason it is not possible to determine if a threshold may be applied.

46. While the Respondent was able to estimate the ACT payroll using various methods including a site visit to obtain data,[28] this method is not useful to estimate the group's Australia-wide payroll. The Respondent does not have jurisdiction in the other states and territories where the group members operate to undertake aspects of the estimation method, in particular the site visit to inspect group records.

Issue 3: Whether the estimate used to support the assessment is reasonable?

47. The method and information used for the estimate in the assessment is reasonable given the non-routine nature of the matter. The witness for the Commissioner gave evidence that, in the circumstances, with so little reliable information available from the Applicant or information lodged with the Australian Tax Office, there was no other method for estimating that could have been used.[29] The Applicant offered no alternative method.

Issue 4: Whether the penalty of 90% of the amount of tax unpaid imposed on the Applicant is appropriate and whether it should be reduced or remitted?

48. The Commissioner determined a 90% rate for penalty tax under section 34 of the TAA, and also determined that there were no grounds for reduction or remission. The objection decision stated that the reason for the 90% penalty rate was the Applicant's non-compliance with the three section 82 Notices and the absence of a reasonable excuse (section 34(b) TAA).[30] The original assessment also stated that the tax default was caused by the intentional disregard of a tax law.[31]

49. For the reasons set out earlier (at paragraph 24), the burden of proof in regard to the appropriateness of a 90% penalty rate rests with the Applicant. Thus, the Applicant must satisfy the Tribunal that section 34 does not apply: specifically, that there was not a failure to comply with a section 82 Notice or, if there was, there was a reasonable excuse for this (section 34(b) TAA), and that there was no intentional disregard of a tax law.

50. The Respondent contended that the Applicant failed to comply with section 82 Notices issued to three members of the group. As explained earlier, the Respondent issued two Notices on 31 March 2011 to Altitude and St George, and then a third Notice was issued on 2 June 2011 to the Applicant. None of these notices was fully complied with by the due date, or even by the time of the objection decision being made.

51. Although the Notice to St George was addressed to the registered address of that company, the substance of the letter refers to another company which is part of the group and with a similar name but a different ABN, namely St George Concrete Pumping Pty Ltd.[32] Given the primary importance of the Applicant knowing to which company the Notice referred, and the ambiguity that followed from this error in its content, the Tribunal finds that the section 82 Notice issued to the Applicant in regard to St George is invalid. As in the case of Secretary, Dept of Social Security and Marie Carruthers [1993] AATA 330, in finding the Notice to be invalid the Tribunal's finding is consistent with the "long standing common law principle that statutes are to be construed strictly where penalties apply".[33] The effect of this is that the Applicant did not fail to comply with one of the three Notices. However, the Tribunal finds that the Applicant failed to comply with the other two Notices, which were valid.

52. In regard to the Applicant's failure to comply with the two valid Notices, did the Applicant have a reasonable excuse? The Commissioner determined in the objection decision that the ill-health of the Principal at the Applicant's previous accountancy firm was not a defence since a "failure to comply by a taxpayer's agent is legally a default by the taxpayer" (Jokhan & Jokhan and Commissioner for ACT Revenue [2012] ACAT 15 (Jokhan, at paragraph 19). However, the circumstances of a taxpayer's agent can be relevant to whether there is a reasonable excuse (Jokhan, at paragraphs 18 and 19). It is not clear from the Reasons Statement to the objection or the original assessment whether the ill-health of the previous accountant was considered in determining that there was no reasonable excuse. The Commissioner acknowledged in his Closing Submissions to the Tribunal that "the Applicant's claim arising from the alleged conduct of [the previous accountants] might be construed as a claim that the Applicant had a reasonable excuse" and set out the reasons for contending that there is no reasonable excuse.[34]

53. The Respondent submitted that the Tribunal should not accept Mr Joe Bassil's "word"[35] and contended that he was "consistently evasive ... or attempted to attribute false statements and responsibility generally to the Applicant's accountant".[36] The Commissioner contended that issues Mr Joe Bassil raised about the Applicant's previous accountancy firm were not corroborated by the accountants or otherwise, and an adverse inference can be drawn from the Applicant's failure to call anyone from the previous accountancy firm (Jokhan).

54. The Tribunal has considered the arguments by the Respondent. The Tribunal finds that the Applicant's General Manager, Mr Joe Bassil, was consistent in his evidence that he thought the Principal of the Applicant's previous accountancy firm would manage the various requests and demands from the Commissioner. Initial correspondence from the Commissioner was sent to the office of the Applicant's previous accountancy firm, being the registered address for the relevant companies, and Mr Bassil claims these were not passed onto him. Later, he learned that the Principal of the accountancy firm was sick and stated this to the Commissioner as a reason why the firm was not doing its job and was not responding to him and the Commissioner as he would have expected. Mr Joe Bassil's claim that the Principal was ill during 2011 is in part corroborated by medical invoices showing that the Principal of the firm had a medical procedure on 14 November 2011.[37] The Respondent's own evidence was that the Applicant's previous accountancy firm "probably wasn't the most cooperative" and "didn't return [the Respondent's delegate's] phone calls".[38] No adverse inference from the absence of further evidence from the previous accountancy firm must be made in circumstances where this latter evidence is available, and Jokhan can be distinguished for this reason. The Tribunal accepts that the Applicant's previous accountancy firm was not co-operative towards Mr Bassil or the Commissioner, that the ill-health of the Principal may in part explain this behaviour and that this adversely impacted on the Applicant's ability to respond in a timely manner to the requests and demands from the Commissioner.

55. Mr Bassil agreed that he certainly became personally aware of the requests from the Commissioner by 12 July 2011 when he received an email from the Commissioner's office, and possibly earlier (by 2 June 2011).[39] At this time, he realised the previous accountancy firm was not managing the necessary responses to the Commissioner's office. He attended the firm's office and obtained some assistance in completing them himself and then, on 26 September 2011, emailed two completed questionnaires (for Altitude and Highrise) to the Commissioner's office. Mr Bassil claimed that he then posted the two completed questionnaires and three fully completed questionnaires (including an additional completed questionnaire for St George Concrete Pumping Services Pty Ltd) to the Commissioner's office on 27 September 2011.[40]

56. The Commissioner contended Mr Joe Bassil's credibility was poor because he completed questionnaires seeking wages information dated between 26 September 2011 and 27 September 2011 that he knew, or ought to have known, was false.[41] The Tribunal finds that information in the completed questionnaires conflicts with information provided subsequently by the Applicant, and these discrepancies raise issues about how an accurate assessment can be made by the Commissioner. However, the Tribunal also finds that any inconsistencies and inaccuracies in the information provided by Mr Joe Bassil do not prove that he is untruthful. He completed the questionnaires to the best of his ability with some assistance from the previous accountancy firm but without the assistance of the Principal. His evidence, as set out earlier, was that he was under the misapprehension at that time that no payroll tax was due in the ACT and that he had learned on the job and undertaken no training as the General Manager. The Tribunal accepts that at the time they were completed, Mr Bassil did not know that his responses in the questionnaires were incorrect.

57. The Commissioner also contended that the letter of the 27 September 2011 "was not sent ... and that Mr Bassil falsely represented that it was sent in an effort to explain ... non-compliance".[42] Mr Bassil denied that he lied about posting the three fully completed questionnaires on 27 September 2011. The Applicant provided an MYOB print out for 27 September 2011 in corroboration of Mr Bassil seeking the information to complete the questionnaire on that day.[43] While the same has not been provided for Altitude or St George, Mr Bassil explained consistently in his evidence that he thought the wages for Altitude over the relevant period were nil, and the Tribunal finds that the Notice for St George is defective as explained earlier. Therefore, the absence of MYOB reports for the latter two members of the group does not undermine the Applicant's evidence.

58. The Respondent cross-examined Mr Bassil about a conversation between the Commissioner's office and himself[44] and also about an email he sent to the previous accountant[45] that suggested that he knew, subsequent to 27 September 2011, that the questionnaires were not completed and lodged. In his evidence, Mr Bassil re-iterated that, at the time of these communications, he thought that only the financial statements were outstanding; he may have communicated poorly and/or misunderstood communications about what remained to be provided, and he was focused on the operations of the business ("machinery, the employees").[46] The Tribunal accepts Mr Bassil's evidence in this regard. The Tribunal also notes that in documents signed by Mr Bassil and in his evidence he used non-standard, irregular English terms, phrases and grammar and that misunderstandings in communications with him might occur as a result of this. The Tribunal does not draw any adverse findings about Mr Joe Bassil's credibility, and accepts that he posted documents on or about 27 September 2011 that were not received by the Commissioner's office.

59. The Applicant submitted that he promptly engaged a new accountancy firm which then prepared the financial statements that were requested by the Commissioner in the Notices, but they were not able to be provided in a finalised form until after the objection decision was made. Although the Respondent contended at the hearing that source documents are required to make an accurate assessment, the Notices only required the Applicant to submit financial statements and the questionnaires to the Respondent.

60. The Tribunal considered the question of whether there was "intentional disregard" by the Applicant. In Touma v Chief Commissioner of State Revenue [2012] NSWADR 2 (Touma), the Administrative Decisions Tribunal of New South Wales considered the conduct of a witness for the Applicant taxpayer, an accountant, and found it did not prove intentional disregard of a tax law by the witness. Similar to this case, in Touma the witness for the Applicant taxpayer had not provided information requested in a notice of investigation since it was not prepared at that time (Touma, at paragraph 55). Dissimilar to this case, the witness in Touma had also ignored specific advice from other professionals about the tax liability. In Touma, the penalty relevant to intentional disregard for a law was affirmed since there was no evidence from the decision-makers of the corporate taxpayer and the burden of proof on the taxpayer about the penalty rate was not discharged.

61. In this case, 'intentional disregard' by the Applicant is attributed by the Commissioner to Mr Joe Bassil's conduct. Mr Joe Bassil is the General Manager - the decision-maker for day to day activities - of the Applicant and another member of the group. The Applicant is held jointly and severally liable for the entire payroll tax liability of the group. The Tribunal is persuaded that there was no intentional disregard of a tax law, similar to the witness in Touma, and that the non-provision of the financial statements was because they were not prepared and, therefore, not available (as occurred with the witness who gave evidence in Touma). The Tribunal notes that in the case of HJA Holdings Pty Ltd & Ors v ACT Revenue Office [2014] ACAT 24, the Tribunal found that "the heading of the section 'Increase in penalty tax for concealment' indicates that, in determining whether the section is applied, there should be more than slow compliance".[47]

62. The Tribunal also notes that the Applicant is fully compliant with the payroll tax requirements of the NSW Office of Revenue, as explained earlier and, furthermore, included the ACT wages in the NSW lodgements and has paid tax in NSW for these wages. This latter evidence by the Applicant was not contested by the Respondent, and supports the Applicant's evidence that it had no intention to disregard the ACT payroll laws.

63. Given the various circumstances set out above, the Tribunal finds that there was a reasonable excuse for failure to comply with the two valid Notices and there was no intentional disregard of a tax law. Thus, the penalty tax rate of 90% applied by the Respondent is not confirmed by the Tribunal. Further, in the absence of intentional disregard of a tax law, the penalty tax cannot be set at 75% (section 31(5) TAA).

64. The evidence and material before the Tribunal does show that the Applicant did not take reasonable care, and that there was no reasonable excuse for this lack of reasonable care. In Scott, the Tribunal quoted from RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue ([2004] NSWADT 64

, at paragraph 23) about the factors which suggest a taxpayer took reasonable care:

"...attempts to comply with tax law, reasonable professional and other inquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law."

65. In Scott, the taxpayers were found to have failed to take reasonable care even though the unintentional default occurred due to a number of factors common to this case, being "ignorance of the law, ...[issues with their agent] conveyance solicitors ... and various aspects of their lifestyle that made them busy and stressed" (Scott, at paragraph 36). In this case, Highrise failed to make proper enquiries about its payroll requirements in the ACT, failed to actively oversight compliance with those requirements in the ACT, and failed to have procedures in place to prevent and deal with errors in compliance. While the Tribunal finds that there was a reasonable excuse for not complying with the Notices for section 34 of the TAA, there was no reasonable excuse for not taking reasonable care (for section 31(3) of the TAA). The Applicant is a well-established operation, had a General Manager and other administrative staff, and was well aware of payroll requirements in at least one state, namely NSW. The penalty tax rate should be set at 50% for this reason (section 31(2) TAA).

66. The Tribunal agrees with the Commissioner's decision that there are no grounds for remission of the penalty tax (section 37 TAA). Despite engaging a new accountant, the Applicant did not take reasonable steps to mitigate the circumstances. In particular, there was continuing poor oversight by the Applicant over communications with the Commissioner even from late 2011, and the continuance of other factors identified earlier that are linked to failing to take reasonable care. The circumstances that resulted in the penalty tax were not exceptional compared to other taxpayers, and it would not be fair and reasonable to remit all or part of the penalty tax.

(a) a reliable assessment of the actual payroll tax liabilities of the Applicant and members of the group for the relevant period in the ACT cannot be calculated at the date of the hearing, nor can the tax-free threshold be applied at the date of the hearing, using the additional information provided by the Applicant or obtained by the Respondent to the date of the hearing;

(b) the estimate used to support the assessment by the Respondent is reasonable and the Respondent's decision is confirmed, except in regard to the penalty tax rate;

(c) the penalty tax rate 90% of tax unpaid imposed on the Application is not appropriate. However, the Applicant did not take reasonable care and there was no reasonable excuse for this lack of reasonable care, and no grounds for remitting it, so the penalty tax rate of 50% is the relevant rate in this case.

Payroll Tax Act 2011 - currently in force

(1) If a member of a group fails to pay an amount that the member is required to pay under this Act in relation to any period, every member of the group is liable jointly and severally to pay the amount to the commissioner.

(2) If 2 or more people are jointly or severally liable to pay an amount under this section, the commissioner may recover all of the amount from them, or any of them, or any 1 of them.

(3) If, under this section, 2 or more people are jointly and severally liable to pay an amount that is payable by any 1 of them, each person is also jointly and severally liable to pay -

(a) any amount payable to the commissioner under this Act or another law in relation to the amount, including any interest and penalty tax; and

(b) any costs and expenses incurred in relation to the recovery of the amount that the commissioner is entitled to recover from the person.

(4) This Act does not prevent a person who is jointly and severally liable to pay an amount of tax and who pays the amount to the commissioner from recovering a contribution from anyone else who is liable to pay all or part of the amount.

(5) This section applies whether or not the person was an employer in the relevant period.

Payroll Tax Act 1987 - version effective 1 July 2008

section 8 inserted by A2008-2, s15; Act repealed by 2011-18, s104(1)

8 Joint and several liability of group members

(1) If a member of a group fails to pay an amount that the member is required to pay under this Act in relation to any period, every member of the group is liable jointly and severally to pay the amount to the commissioner.

(2) If 2 or more people are jointly or severally liable to pay an amount under this section, the commissioner may recover the whole of the amount from them, any of them or any 1 of them.

(3) If, under this section, 2 or more people are jointly and severally liable to pay an amount that is payable by any 1 of them, each person is also jointly and severally liable to pay -

(a) any amount payable to the commissioner under this Act or another law in relation to the amount, including interest and penalty tax; and

(b) any costs and expenses incurred in relation to the recovery of the amount that the commissioner is entitled to recover from the person.

(4) Nothing in this Act prevents a person who is jointly and severally liable to pay an amount of tax and who pays the amount to the commissioner from recovering a contribution from any other person who is liable to pay the whole or part of the amount.

(5) This section applies whether or not the member was an employer during the relevant period.

Payroll Tax Act 1987 - version effective 12 August 2004

section 11A inserted by A2004-43, s4 and omitted by A2008-2, s19

11A Joint and several liability of group members

If a member of a group fails to pay an amount that the member is required to pay under this Act in relation to any period, every member of the group is liable jointly and severally to pay the amount to the commissioner.

Note The commissioner may recover the amount from the members of the group, any of them or any 1 of them (see the Taxation Administration Act 1999, s 50 (1)).

Taxation Administration Act 1999

(1) The commissioner may make an assessment on the information that the commissioner has from any source at the time the assessment is made.

(2) If the commissioner has insufficient information to make an exact assessment of a tax liability, the commissioner may make an assessment by way of estimate.

(1) If a tax default happens, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this division.

(2) Interest is payable under this section in relation to a tax default that consists of a failure to pay penalty tax under division 5.2 but is not payable in relation to any failure to pay interest under this division.

30 Penalty tax in relation to certain tax defaults

(1) If a tax default happens, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid.

Note A taxpayer may also be liable to pay penalty tax under the Land Tax Act 2004

, s 19A (5) (Interest and penalty tax payable on land tax if no disclosure).

(2) Penalty tax imposed under this division is in addition to interest.

(3) Penalty tax is not payable in relation to a tax default that consists of a failure to pay -

(b) penalty tax previously imposed under this division.

(1) The amount of penalty tax payable in relation to a tax default is 25% of the amount of tax unpaid, subject to this division.

(2) The amount of penalty tax payable in relation to a tax default is 50% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by a failure by the taxpayer (or a person acting on behalf of the taxpayer) to take reasonable care to fulfil the taxpayer's obligations under a tax law.

(3) Subsection (2) does not apply if the tax payer satisfies the commissioner that the taxpayer (or a person acting on behalf of the taxpayer) had a reasonable excuse for the failure.

(4) Subsections (2) and (3) apply to a tax default that happened before their commencement in the same way as they apply to a tax default that happened after their commencement.

(5) The amount of penalty tax payable in relation to a tax default is 75% of the amount of tax unpaid if the commissioner is satisfied that the tax default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a tax law.

(6) No penalty tax is payable in relation to a tax default if the commissioner is satisfied that -

(a) the taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the tax law; or

(b) the tax default happened solely because of circumstances beyond the taxpayer's control (or if a person acted on behalf of the taxpayer, because of circumstances beyond either the person's or the taxpayer's control) but not amounting to financial incapacity.

Note The commissioner's decision to impose penalty tax is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the taxpayer (see s 107B).

32 Reduction in penalty tax for voluntary disclosure

The amount of penalty tax determined under section 31 is reduced by 80% if, before the commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out, the taxpayer discloses to the commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.

33 Reduction in penalty tax for disclosure before investigation

The amount of penalty tax determined under section 31 is reduced by 20% if, after the commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out and before it is begun, the taxpayer discloses to the commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.

The amount of penalty tax payable in relation to a tax default is 90% of the amount of tax unpaid if the commissioner is satisfied that, after the commissioner has informed the taxpayer that an investigation is to be carried out and before the investigation is completed, the taxpayer (or a person acting on behalf of the taxpayer) -

(a) deliberately damages or destroys records required to be kept under the tax law to which the investigation relates; or

(b) fails, without reasonable excuse, to comply with a requirement made by the commissioner under division 9.2 for the purposes of determining the taxpayer's tax liability; or

(c) hinders or obstructs an authorised officer exercising functions under that division for that purpose; or

(d) otherwise shows intentional disregard for a tax law.

Note 1 The Legislation Act

Note 2 The commissioner's decision to impose increased penalty tax is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the taxpayer (see s 107B).

Note 3 Table 34 contains a summary of the effect of s 31 to s 34.

failure to take reasonable care and no reasonable excuse

Penalty tax must be paid by a taxpayer within the period, of not less than 14 days, specified in a notice of assessment of the tax liability of the taxpayer.

The commissioner may remit all or part of an amount of penalty tax payable by a person if satisfied that -

(i) the person has taken reasonable steps to mitigate, or to mitigate the effects of, the circumstances that resulted in the liability for penalty tax; or

(ii) the circumstances that resulted in the liability for penalty tax were exceptional; and

(b) it would be fair and reasonable to remit all or part of the penalty tax.

Note The commissioner's decision to refuse to remit penalty tax payable by a person is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the person (see s 107B).

[1] Witness Statement of Evelyn McCarthy, dated 18/6/2013, page 10 and Respondent's Closing Submissions, dated 6/9/2013, page 2[2] Respondent's Statement of Facts and Contentions, dated 19/4/2013, page 1

[3] Respondent's Statement of Facts and Contentions, dated 19/4/2013, page 2

[4] Notice of Assessment, dated 13/3/2012, Schedule 1, T documents page 812 (T69)

[5] Notice of Assessment, dated 13/3/2012, T documents pages 806-807 (T69)

[6] Notice of Assessment, dated 13/3/2012, T documents pages 806-807 (T69)

[7] Objection Letter, dated 7/5/2012, T documents page 816 (T71)

[8] Respondent's letter to the Applicant, dated 6/11/2012 (T2)

[9] Application for Review of a Decision, filed 3/12/2012

[10] Respondent's Closing Submissions, dated 6/9/2013, page 7, citing Rawson Finances Pty Ltd v Commissioner of Taxation (2013) FCAFC 26; Touma v Chief Commissioner of State Revenue [2012] NSWADT 2; Hay v Commissioner for ACT Revenue [2014] ACAT 23

[11] Transcript, 26/6/2013, pages 124-127 and 152

[12] Transcript, 26/6/2013, pages 147 and 164

[13] Transcript, 26/6/2013, pages 139 and 203 (Evidence of Mr Joe Bassil)[14] T documents, pages 850 and 851 (T71) [15] Transcript, 26/6/2013, page 151 [16] T documents, page 848 ( T71) (Email from Office of State Revenue, 2 May 2012) and T documents, page 816 (Objection letter dated 7 May 2012) (T71)

[17] T documents, page 848 (Email from Office of State Revenue, 2 May 2012) and T documents, page 816 (Objection letter dated 7 May 2012) (T71)

[18] T documents, page 848 (Email from Office of State Revenue, 2 May 2012) and T documents, page 816 (Objection letter dated 7 May 2012) (T71)[19] Respondent's Closing Submissions, dated 6/9/2013, page 8[20] Respondent's Closing Submissions, dated 6/9/2013, page 8

[21] Respondent's Closing Submissions, dated 6/9/2013, page 10

[22] Respondent's Closing Submissions, dated 6/9/2013, page 9

[23] Respondent's Closing Submissions, dated 6/9/2013, page 10

[24] Transcript, 25/6/2013, page 59 (Evidence of Ms Evelyn McCarthy)

[25] Respondent's Closing Submissions, dated 6/9/2013, page 15

[26] Transcript, 26/6/2013, pages 173-175 (Evidence of Mr Joe Bassil)

[27] Transcript, 25/6/13, pages 62 and 67 (Evidence of Ms Evelyn McCarthy)

[28] Transcript, 25/6/2013, page 121 (Evidence of Ms Evelyn McCarthy)

[29] Transcript, 25/6/2013, page 121 (Evidence of Ms Evelyn McCarthy)[30] Reasons Statement to Objection Decision, dated 6/11/2012[31] Notice of Assessment, 13 March 2012, dated 13/3/2012, page 2[32] Notice, dated 31/03/2011 (T11)[33] Secretary, Dept of Social Security and Marie Carruthers [1993] AATA 330, paragraph 11[34] Respondent's Closing Submissions, dated 6/9/2013, pages 16-19[35] Respondent's Closing Submissions, dated 6/9/2013, page 17[36] Respondent's Closing Submissions, dated 6/9/2013, page 12

[38] Transcript, 25/6/2013, page 50 (Evidence of Ms Evelyn McCarthy)

[39] Transcript, 26/6/13, pages 133-137 (Evidence of Mr Joe Bassil); T documents, page 227 (T18)[40] Witness Statement of Joe Bassil, dated 24/6/13, paragraph 20; Transcript, 26/6/13, page 156 (Evidence of Mr Joe Bassil) [41] Respondent's Closing Submissions, page 12[42] Respondent's Closing Submissions, page 11

[45] Witness Statement of Joe Bassil, dated 24 June 2013, Attachment 4

[46] Transcript, 26/6/2013, page 156 (Evidence of Mr Joe Bassil)

[47] HJA Holdings Pty Ltd & Ors v ACT Revenue Office [2014] ACAT 24, at paragraph 128