Naumcevski v Deputy Commissioner of Taxation

Court of Appeal (NSW)|2019-02-25|Before: Leeming JA, Payne JA, White JA

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

LEEMING JA: On 14 June 2018, immediately following a four day hearing, the primary judge (Robison DCJ) gave oral reasons for entering judgment in favour of the plaintiff, the Deputy Commissioner of Taxation, against the sole defendant, Mr Sasho Naumcevski, in the amount of $156,257.88. The judgment was based on unpaid taxation liabilities of a company, Lucas Homes Administration Pty Ltd, of which it was agreed that Mr Naumcevski was a director between 25 March 2013 and 26 May 2015.

Legislative provisions

Section 12-35 provides as follows: "12‑35 Payment to employee An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity)."
There are some exceptions to the obligation imposed by s 12-35, but none was said to be relevant. The section departs from the language of its predecessors, but nothing was made of that in submissions. Indeed, Mr Naumcevski submitted, correctly, that "it's not central to the resolution of the issues on this appeal". "Entity" is defined broadly, and includes a company such as Lucas Homes Administration.
Section 12-35 is within Division 12. Section 16-70(1) of Schedule 1 of the Taxation Administration Act provides: "16‑70 Entity to pay amounts to Commissioner (1) An entity that withholds an amount under Division 12 must pay the amount to the Commissioner in accordance with this Subdivision."
It was the appellant's case that if Lucas Homes Administration did not in fact pay amounts to any individual as an employee during the relevant period, then it was under no obligation to withhold any amounts and no obligation to pay any amount so withheld to the Commissioner.
The Commissioner contended, although I do not regard it as having been at the forefront of his submissions, that even if Lucas Homes Administration did not in fact pay amounts to any individual as an employee during the relevant period, it nevertheless withheld amounts and was obliged to pay those amounts so withheld to the Commissioner. I will address the issues in this appeal assuming in favour of Lucas Homes Administration that its construction is correct.
I did not understand there to be any dispute that if Lucas Homes Administration was under an obligation to pay amounts withheld to the Commissioner, then Mr Naumcevski as a director was under an obligation pursuant to s 269-15(1) to cause it to comply with that obligation from time to time and, pursuant to s 269-20, became liable to pay a penalty equal to the unpaid amount of the company's liability. It was an agreed fact at trial that the Commissioner had complied with the statutory requirements for service of each of the director penalty notices issued pursuant to s 262-25. There are defences on which a director may rely, pursuant to s 269-35, but as noted above no challenge to the rejection of that defence by the primary judge was pressed on appeal.
Further, Mr Naumcevski advanced an all-or-nothing case. His submissions, consistently with his testimonial evidence, were that Lucas Homes Administration made no payments to employees by way of salary or wages in the relevant periods. There was no fall-back case that some payments of salary or wages had been made, but less than the amounts on which the Commissioner sued. That is consistent with the way the case was run at trial, where counsel for Mr Naumcevski said: "The fundamental question in this case, from the defendant's perspective, is whether or not employees were employed by Lucas Homes Administration or Relative Constructions."
In this Court, both parties made submissions about the totality of the testimonial and documentary evidence. Mr Naumcevski submitted that this Court should find that at the relevant times, Lucas Homes Administration did not pay any amounts to employees. The Commissioner contended that there was an overwhelming amount of evidence to the effect that it did. The convenient course before dealing more precisely with the parties' submissions is to summarise the testimonial and documentary evidence which was admitted at trial.

Evidence bearing on whether Lucas Homes Administration paid employees

The contemporaneous documents disclosed that in addition to Mr Naumcevski being sole director and shareholder of Lucas Homes Administration in 2013 and 2014, he was also Chief Executive Officer of Relative Constructions Pty Ltd. In cross-examination, he referred to working for his father when referring to Relative Constructions ("Q. When you say worked for your father, you're referring to Relative Constructions there? A. Yes."). Relative Constructions was the "separate entity" referred to in ground 1(e) of the notice of appeal, which Mr Naumcevski claimed was the employer which paid salaries and wages.
Mr Naumcevski's affidavit stated that his father's company Relative Constructions traded as Lucas Homes Construction. That company appears to have had a bank account with the Commonwealth Bank of Australia styled "Relative Constructions Pty Ltd trading as Lucas Homes NSW" (at least, that is how it was described on bank statements in evidence). In evidence were two styles of corporate letterhead, each of which had the same address, telephone and facsimile numbers and website and email addresses, one of which was styled "Lucas Homes Constructions", the other "Lucas Homes NSW". No registered business names search was tendered. Mr Naumcevski stated in his affidavit that Relative Constructions was in liquidation.
The potential for confusion was greater than that caused by Mr Naumcevski being director of Lucas Homes Administration and Chief Executive Officer of a company which seemingly traded as "Lucas Homes Constructions" and "Lucas Homes NSW". Mr Naumcevski described his occupation as "Company Director" and gave evidence in chief that he was also a director of companies which he called "Lucas Homes Realty", "Lucas Homes Enterprises" and "Lucas Homes Financial Services". In cross-examination, by reference to an ASIC historical search based on his name and birthdate he agreed that he was also a director of Lucas Homes Group Pty Ltd, BSL Administration Pty Ltd, BSL Constructions Pty Ltd, BSL Ultimate Bricklaying Pty Ltd and Brickcorp Pty Ltd, as well as other companies which did not appear to be related to the construction industry.
It might be thought that a company director who owned and controlled a company called Lucas Homes Administration but who was also a director of four other companies with similar names (Lucas Homes Realty Pty Ltd, Lucas Homes Enterprises Pty Ltd, Lucas Homes Financial Services Pty Ltd and Lucas Homes Group Pty Ltd), as well as Chief Executive Officer of a company with a refreshingly distinct name but which traded as "Lucas Homes Constructions" and "Lucas Homes NSW", might be careful when signing documents on the part of one company as opposed to another.
The following contemporaneous documents were relevant to whether Lucas Homes Administration made payments of salary or wages to employees in 2013 and 2014.

Documentary evidence tendered by the Commissioner

First, the Commissioner pointed to a series of tax file number declarations, completed in hand by individuals who stated that they were in full time employment (in three cases) or casual employment (in one case) and either did (in two cases) or did not (in two cases) wish to claim the tax free threshold from their employer, Lucas Homes Administration. Each form was signed by Mr Naumcevski, between February and July 2015. Although tendered and relied on by the Commissioner, they do not directly relate to the dates on which, on the Commissioner's case, Lucas Homes Administration paid wages to employees. Indeed, on one view, they tend to support a conclusion that some or all of those four employees were not employed by Lucas Homes Administration in 2013 and 2014. One might expect such a form to be filled out when a person commenced employment, and certainly that at least those employees (two of the four) who elected to claim the tax-free threshold from Lucas Homes Administration would wish to have that form completed upon commencement of their employment (because it would entitle the employee to greater payments of salary or wages in the hand).
However, it is quite plain that there were many more employees of some company associated with "Lucas Homes" than the four whose names appeared on the declarations, and so these documents cannot be conclusive.
Secondly, there were a series of "PAYG payment summaries" for some 18 individuals. In each case, the form was completed in hand and an amount indicated against the box "TOTAL TAX WITHHELD". In many cases, the amounts were very small, but in each case, the document was signed by Mr Naumcevski. The documents are dated in 2014 and 2015. In some eight cases, an amended "PAYG payment summary" has been submitted for the same nominated payee.
To take the example that was the subject of oral submissions, Mr Naumcevski has signed a PAYG payment summary with the date 14 July 2014 indicating that a "total tax withheld" of $14,864 had been withheld during the period from 1 July 2013 to 30 June 2014, but an amended PAYG payment summary, also signed by Mr Naumcevski with a date of 12 March 2015, stated that "total tax withheld" of $3,882 had been withheld from payments made in the period 1 July 2013 to 30 September 2013 to the same employee. One of the periods during which the Commissioner alleged that Lucas Homes Administration had made payments to employees and came under an obligation to pay the amounts withheld was 1 July 2013-30 September 2013.
Thus, in the case of that particular employee, Mr Naumcevski, by his signed contemporaneous document provided to the Australian Taxation Office, confirmed not once but twice that she was paid, and amounts of tax were withheld from what had been paid to her, by Lucas Homes Administration.
Thirdly, the Commissioner relied upon records of three conversations with ATO officers and Mr Naumcevski, which appear to have related to the non-payment of Superannuation Guarantee liabilities. In each case, the document tendered by the Commissioner bears the hallmarks of a record made in real time by the officer to whom Mr Naumcevski spoke. An officer, who was cross-examined, gave evidence that although he had not been personally involved in the conversations, the system operating within the ATO did not permit any changes to the case notes to be made after they had been entered. In chronological order, the three that were the subject of oral submissions were as follows: 1. On 1 July 2015, Mr Naumcevski returned an ATO call, of which the following note was made: "I explained I am following up on SG obligations and asked if they had been met - that is SG contributions paid in full to the funds by the cut-off dates for the period 1/1/14 to 31/3/15. The client said he couldn't say they have been met as business is a struggle at times. I advised I would issue an audit letter and that if he has any questions to please give me a call …". 1. On 15 September 2015, there was once again an "inbound phone" conversation between Mr Naumcevski and an ATO officer concerning among other things "SG debt", which may be taken as a reference to superannuation guarantee debt. The note records: "Director advised that SGE amounts are incorrect, some employees are/were not employed. He intends to lodge objects, asked how to lodge an objection." 1. On 21 October 2015, a further phone call was received from Mr Naumcevski, and the note provides as follows: "Sash said he's gone through the SG assessments and we have doubled up on the super and charged him for when: he [sic] employees worked for his father and another firm. He said that they shared the works and when there's not enough work in one company, they work for the other and we have obviously charged him for it all. I advised the SG assessments are based on the payment summaries lodged - these have been lodged by his company &/or TAG and he will need to take it up with them if he believes they are wrong. Sash said that the PAYG withholding would show me how much he paid his workers …"
It will be seen that the second and third conversations contain admissions by Mr Naumcevski that Lucas Homes Administration employed employees at the relevant times. In each case, the conversation was directed to amounts of Superannuation Guarantee payments to be made by Lucas Homes Administration. The first conversation does not in terms record an admission by Mr Naumcevski that Lucas Homes Administration employees had been paid, but rather than denying that there were any employees which would generate superannuation guarantee contributions, Mr Naumcevski is recorded as saying that "business is a struggle at time".
Fourthly, the Business Activity Statements for the company disclosed positive amounts for "total salary, wages and other payments" and "amount withheld from payments shown at W1".
Fifthly, the annual taxation returns for Lucas Homes Administration for each of the three years in question were in evidence (at least, an electronic copy unsigned by either agent or director was in evidence). Wages were treated differently over the three years. 1. In the first two financial years, Lucas Homes Administration claimed as a deduction amount of "total salary and wage expenses" of $288,658 and $156,225 respectively. 2. In the third financial year, Lucas Homes Administration made no claim for a deduction for total salary and wage expenses, but did make a claim for "expenses from financial arrangements (TOFA)" in the amount of $251,601. However, the 2015 PAYG summaries, which were tendered by the Commissioner, for the ten employees concerned identified gross wages paid of $251,601 with a total amount withheld of $49,077. In each case, those deductions caused the company not to have any taxable income.
So far as I can see, had the deductions not been claimed, Lucas Homes Administration would have been liable to pay income tax.
Finally, the Commissioner relied upon a certificate under s 255-45 of Schedule 1 of the Taxation Administration Act, to the effect that Mr Naumcevski had a tax-related liability, namely penalties arising under s 269-20 of Schedule 1 to the Taxation Administration Act, in the amount of $156,257.88. Section 255-45 provides that a certificate stating various matters "is prima facie evidence of the matters or matters in a proceeding to recover an amount of a tax-related liability".

Documentary evidence tendered by Mr Naumcevski

Mr Naumcevski caused a subpoena to issue to Westpac for copies of bank statements over the period. The terms of that subpoena do not appear to have been in evidence. Only a single account in the name of Lucas Homes Administration was produced. That account recorded no payments in the nature of wages. (There were debits for wages in April and May 2015, but that is after the period on which the Commissioner has sued.)
Mr Naumcevski also caused a subpoena to issue to the Commonwealth Bank of Australia, which produced bank statements for an account with number ending in 7751 in the name of "Relative Constructions Pty Ltd trading as Lucas Homes NSW". Those statements did include substantial amounts of debits described as "wages". (In large measure, these comprised entries described as "Multiple Transfer NetBank Wages" and a six digit identification number, made fortnightly, consistently with a single instruction to the bank causing a number of particular payments of salary or wages to be paid into employees' accounts.) In the period from 4 July 2013 to 27 September 2013, a total of $119,256.39 was paid from that account by debits which included the word "wages" on the face of the bank statement.
Mr Naumcevski also tendered a series of employment contracts with employees, some of whose names appear on the documents referred to above. Each contract was signed by Mr Naumcevski and accompanied by a letter on "Lucas Homes NSW" letterhead. The letterhead did not identify the particular company. However, in each case, the terms and conditions identified the employer as "Relative Constructions Pty Ltd".
Mr Naumcevski tendered some documents described as "Payroll Advice" for some employees, but they referred to payments of wages and tax withheld by Relative Constructions for the period 1 March 2012 until 31 January 2013.
Mr Naumcevski tendered letters of termination which attached final payslips and cheques for final pay and accrued annual leave to two employees of "Lucas Homes Constructions". The letters were dated 28 August 2014 and 9 October 2014 and in each case the cheques were drawn by Relative Constructions Pty Ltd trading as Lucas Homes.

Mr Naumcevski's testimonial evidence

Mr Naumcevski made affidavits seeking to explain the documents which pointed to Lucas Homes Administration having made payments to employees. He said that "at no point in time did [Lucas Homes Administration] have any employees whatsoever". His explanation was that the documents had been prepared, erroneously, by a company bookkeeper, and he had signed them without appreciating the error.
In particular, he said that Ms Mary Quan had been engaged by Relative Constructions to perform bookkeeping and the preparation of tax documents to provide to the accountant, and that as Chief Executive Officer of Relative Constructions, he was required to sign off on "a significant amount of documentation". He said that he would regularly sign documents prepared by Ms Quan while she waited, which he was not fully aware of, and some of which were not complete. He said that he trusted that Ms Quan was "only having me sign documents that properly represented the affairs of [Lucas Homes Administration]." He said that the documents signed by him indicating that Lucas Homes Administration had employees had been signed by him without realising that they said as much. He said that Lucas Home Administration never traded and never had any employees. He said that those forms were prepared or lodged by Ms Quan, and that he did not know why she had prepared the forms that said that Lucas Homes Administration had employees. He annexed a letter dated 30 July 2014 issuing Ms Quan with a formal warning.
Mr Naumcevski said that he had sought to contact Ms Quan for the purposes of his trial, but that the number had been disconnected. This Court was not taken to any other evidence as to the availability of Ms Quan, or steps taken to locate her.
Mr Naumcevski said: "At all times, all of the employees that the ATO says were employed by [Lucas Homes Administration] were employed by Relative Constructions Pty Ltd. … I was never a director of Relative, which is now in liquidation."
On the second day of the trial, shortly before he was cross-examined, Mr Naumcevski affirmed a further affidavit. He annexed to that affidavit an email received from the company accountant which attached "reports from the Lucas Admin MYOB file". The header to the email identified eight pdf documents which were attached. Mr Naumcevski's affidavit annexed two of those documents, balance sheets as at June 2014 and June 2015. Each balance sheet identified as a "current asset" an item "CBA CHQ 7751", with a negative balance of - $248,209.48 and - $284,549.38.
Mr Naumcevski said that Lucas Homes Administration never had a bank account with CBA at all, but that he was aware that Relative had a bank account with a number ending in 7751. He concluded his affidavit stating: "I verily believe that the bank account identified on the account records was incorrectly recorded as an asset of [Lucas Homes Administration]."
The Commissioner sought and obtained production of the other documents which had been sent to Mr Naumcevski but which had not been annexed to his affidavit. Profit and loss statements for the financial years ended June 2014 and June 2015, which were said to have been extracted from electronic records kept by Mr Naumcevski after the company was placed in liquidation, showed wages and salary expenses of $599,574.73 and $81,693.82 respectively. Those documents also included a profit and loss statement for the financial year ended June 2013, but that document only contained entries of $0.
Mr Naumcevski was cross-examined for the better part of two days. Broadly speaking, he accepted that he had signed all the documents which purported to have his signature on them. He maintained that they had been prepared by Ms Quan, and to the extent that they stated or implied that Lucas Homes Administration paid employees, they were wrong. He said that he might have signed some documents which had not been completed. A deal of his evidence was given pursuant to a certificate under s 128 of the Evidence Act 1995 (NSW).
He was asked about the amended PAYG payment summary mentioned above and said that the document had been prepared by the bookkeeper and could not recall why he did so, although he did not accept that it was signed in order to reduce the amount of tax which the Commissioner was being told had been withheld.
Mr Naumcevski was cross-examined about another amended PAYG payment summary. The individual, who worked as an in-house counsel, was said in the form dated 14 July 2014 and signed by Mr Naumcevski to have been paid $63,318 by Lucas Homes Administration over the period from 1 July 2013 until 30 June 2014, from which $12,247 had been withheld. The amended form was dated 12 March 2015, and stated that the individual had been paid $13,320 in the period from 1 July 2013 to 30 September 2013, from which $2058 had been withheld.
Mr Naumcevski gave a long answer in relation to these documents: "Q. Do you recall the circumstances in which you signed this and other forms that you have signed dated 12 March 2015? A. Like I said in my affidavit originally, Mary would bring me bundles of forms and papers that she would ask me to sign. I was guided by - and again, I - in her CV or in her documents she provided me she was a chartered accountant, a CPA or something like that. So I was led to believe that the person that is advising me on what forms are true and correct, I've gone down that path. I don't have that expertise to assess if she's telling me the thing. She would produce me an Excel spreadsheet that came out of MYOB and she would say, This is how I came up with it. Her English wasn't the best and we had a language barrier a lot of the time with Mary and it was probably a thing that we - you don't - we never wanted to discriminate anyone on their English or capabilities, it was more about them doing the work. But over a period of time, she kept making very serious and silly mistakes and then Peter had written to her a couple of times and had formal warnings with her because it was something that wasn't acceptable and it's all come out now in ..."
He accepted that the debits styled wages in Relative Construction's Commonwealth Bank statements fell short of the total amount of wages disclosed. The bank account debits totalled $119,256.39, while $156,225 had been claimed over the period. He was confronted with the difference: "Q. There's a disclosed salary and wage expense at page 2 of exhibit UG1 that shows the total salary and wages reported to have been paid by Lucas Homes Administration is $156,225? A. Yes. Q. Comparing the wages narrated from the Commonwealth Bank statement for Relative Constructions, one can appreciate, the amount of $119,256.39 is less than the amount of wages disclosed as having been paid by way of the salary and wages as gross salary and wages. You accept therefore, wouldn't you, the bank statements produced for that quarter by Relative Constructions do not show that the full amount of wages reported to have been paid by Lucas Homes Administration? A. Yeah. Q. Do you have an explanation for the difference? A. No."
Mr Naumcevski was cross-examined about the case note records of his conversations in the second half of 2015. Concerning that of October 2015, where he is recorded as saying that employees worked for both companies, depending on whether there was enough work, he gave the following evidence: "Q. You told the ATO, didn't you, that the ATO had doubled-up on assessments of super? A. Yes. Q. When you say, 'doubled-up' you're implying by saying that, aren't you, that the ATO had charged you for employees and then charged you again for employees who weren't employed by your company? A. Yes. Q. Inherent in that is the fact that you had employees of your company? A. No, I didn't have employees. Q. Mr Naumcevski, where in this narrative - and I think you would agree it's a fair narrative - do you say I didn't have any employees? A. Well, the conversation would have been a lot longer than ten lines. Q. When you say, 'they share the workers and when there's not enough in one company they work for the other'-- A. I - Q. -you're referring there, aren't you, to Lucas Homes Administration and Relative Constructions? A. Lucas Homes Administration has never employees, direct employees, or pay - Q. You just made a distinction there, 'employees' and 'direct employees'? A. Direct employees, employees, direct employees, no-one that's been paid a wage on a weekly basis. Q. Mr Naumcevski, I'm suggesting to you that in fact what you said to the ATO here is clearly that at some times employees were employed by your firm and at other times they were employed by your father's firm, which we can take to be Relative Constructions, and that you were complaining that there had been a doubling-up? A. I have rang the ATO to tell them they're doubling-up and charging me. Based on what Mary's provided, this is how the figures have come up. Q. You said there were no wages? A. No."
Mr Naumcevski maintained throughout that Lucas Homes Administration had no employees.
In re-examination, he was asked about the Westpac bank statements, which identified two miscellaneous payments in the nature of wages, for which an explanation was given. He was then asked: "Q: Are you aware of any other payments that might have been wages? A: No. No other payment's been made."
He was then permitted to be asked, over objection, how he could be aware of that, and gave this evidence: "WITNESS: Well, the bank statements, we subpoenaed the bank statements from Westpac for the period - for the whole period that the account was held and that was the only bank account that the company had held with Westpac and there was no other transactions for wages being made from the accounts that I could pay anyone wages." This was the "uncontested evidence" to which ground 1(c) of Mr Naumcevski's appeal referred.

Submissions

Mr Naumcevski's basic submission was that his sworn evidence that Lucas Homes Administration had no employees and the contemporaneous documents which showed substantial amounts by way of wages being paid by a different company, Relative Constructions, of which he was the CEO, sufficed to discharge his onus to demonstrate that Lucas Homes Administration had no employees.
There was debate between the parties, in oral and written submissions, as to the legal effect of the certificate under s 255-45. It was not suggested that the certificate was conclusive. The Commissioner did seek to rely upon the certificate to bolster the Commissioner's case, while Mr Naumcevski said that it was to be given little weight in a case such as this, essentially because the certificate was merely based on the documents otherwise in evidence.
Mr Naumcevski said, with some force, that there were no express findings by the primary judge as to the whether Lucas Homes Administration made payments to employees, or whether some other company did ("His Honour did not make any finding about that matter, having identified it was an issue"). There is force in the submission that the judgment, after a four day trial, is essentially a recitation of evidence and competing submissions, and falls short of making findings of primary fact as would support the ultimate conclusion.
However, it is quite clear that Mr Naumcevski's defence, that Lucas Homes Administration never made any payments to employees, was impliedly rejected by his Honour. It is also clear that the primary judge formed an unfavourable view of Mr Naumcevski's inability to reconcile documents signed by him with his case that Lucas Homes Administration never employed any employees.
Perhaps for this reason, Mr Naumcevski's submissions stressed the banking records. It is true that, in respect of the periods in 2013 and 2014 on which the Commissioner sued, the only documents which unequivocally showed payments of money to employees were the banking records, and these pointed unambiguously to payments being made by Relative Constructions. That accorded with Mr Naumcevski's sworn evidence of the position, and the contracts of employment which many individuals had entered into, as well as the two cases where final payments of wages and accrued leave were made. Mr Naumcevski submitted that it was not open, having regard to the way the case had been run, to the Commissioner to contend that Relative Constructions had made those payments as agent or trustee for Lucas Homes Administration.

Disposition of the appeal

I agree that the Commissioner may not be permitted in this Court to advance a case that Relative Constructions was a trustee or an agent for Lucas Homes Administration. It is for this reason that it is not necessary to consider the construction of s 12-35 of Schedule 1 of the Taxation Administration Act. However, even so I am not persuaded that the appeal should be allowed.
Mr Naumcevski was the sole director and shareholder of Lucas Homes Administration. He personally caused that company to file tax returns, Business Activity Statements and PAYG payment summaries which unambiguously stated that Lucas Homes Administration was paying significant amounts of wages and salary to employees, and was withholding significant amounts of money.
To the extent that there was confusion caused by Mr Naumcevski being Chief Executive Officer of a company owned by his father which traded under a strikingly similar name, that is a consequence of the structure which Mr Naumcevski established. He could have chosen a different name for his company. He could also have chosen different names for the other "Lucas Homes" companies of which he was a director. Having established a structure with multiple easily confused separate corporate entities, which no doubt was done with some perceived advantage in mind, it was for him to be careful when complying with the obligations he owed as sole director of Lucas Homes Administration not to confuse the position.
The Commissioner relied on what was referred to as the "avalanche" of contemporaneous documents, signed by him, which were formal statements of the financial position of Lucas Homes Administration made with a view to determining, among other things, that company's taxation obligations.
Even so, if this were a case where Mr Naumcevski could demonstrate that a sustained mistake had been made, and that in actual fact, despite the Business Activity Statements, tax returns and PAYG payment summaries signed by him, Relative Constructions had actually paid the amounts which gave rise to the Commissioner's litigation, then I might have reached a different view. If there were a genuine mistake, the fact that it was repeated on dozens of occasions and in a variety of ways might not necessarily stand in the way of the correct position prevailing in proceedings such as those brought by the Commissioner. It is not only because of the sheer volume of documents that I have concluded that Mr Naumcevski has not established the case he propounds.
First, Mr Naumcevski candidly disavows any suggestion that Relative Constructions itself paid the Commissioner the amounts for which he is sued.
Secondly, there is the absence of other witnesses. If indeed Ms Quan or other company bookkeepers were mistaken in preparing forms which Mr Naumcevski signed, they were not called, and there is no good evidence explaining why that did not occur.
Thirdly, nothing like a complete picture of what occurred within what might be called the "Lucas Homes group of companies" has been presented to the Court. There is precious little evidence of the affairs of Relative Constructions at all. While there is a body of evidence to the effect that Relative Constructions paid amounts of salary and wages to employees, that of itself does not determine that Lucas Homes Administration made no payments. Much more would be required to draw that inference. 1. One matter is the nature of the work undertaken by the particular employees. I would infer that it would have been open to Mr Naumcevski, had he chosen to do so, to describe the tasks performed by the various individuals named in the documents signed by him and supplied to the Commissioner, with a view to explaining why those documents should not be treated as probative evidence of what they on their face disclosed (namely, payments of salary and wages to employees of Lucas Homes Administration). But this did not occur. 2. Similarly, Mr Naumcevski might have adduced evidence of the work done by each of the "Lucas Homes" companies, and contrasted it with the work done by Relative Constructions, with a view to demonstrating why in fact Lucas Homes Administration made no payments of wages or salary. This was not done. 3. I turn to the financial records of all companies in the group which maintained bank accounts. Not all were in evidence, and although it was accepted that the Westpac account (of which statement numbers 19 and 20 alone were in evidence) did not disclose any debits attributable to salary or wages, it is far from clear that that was the only Westpac account maintained by Lucas Homes Administration or that there were no other payments of wages and salary by that company. The reason that only two statements were in evidence was that they falsified Mr Naumcevski's claim that Lucas Homes Administration never paid any wages to employees, because amounts described as "PAYMENT wages" of $8,094.75 and $9,283.65 had been debited from that account on 24 April 2015 and 1 May 2015. 4. There is also the striking fact that Mr Naumcevski signed documents stating that very precise amounts of wages were paid by Lucas Homes Administration to employees. In principle, it would have been possible to identify through other records how those amounts had been derived. For example, Mr Naumcevski tendered some payroll records, but for the wrong period, and not for the employees whom he said had received precise amounts of salary or wages from Lucas Homes Administration in relevant years. 5. The fact that, during the middle of the trial, Mr Naumcevski was able to obtain access to internal records, some of which (those which favoured him) were annexed to a late affidavit, others of which (those which did not assist him) were obtained and tendered by the Commissioner, confirmed that at no stage did Mr Naumcevski attempt to place all of the contemporaneous financial information which bore upon the issue before the Court.
None of the foregoing should be understood as altering the legal burden of proof of the elements of the Commissioner's claims against Mr Naumcevski. That is borne by the Commissioner. The foregoing reflects the forensic reality that, faced with a multitude of formal signed documents which were inconsistent with his case, it fell to Mr Naumcevski to explain why those documents should be disregarded.
Fourthly, there is no plausible explanation at all for the case notes recorded by the Commissioner of conversations with Mr Naumcevski to the effect that Lucas Homes Administration did at least from time to time have employees. He was given a fair opportunity to give an explanation, not only in affidavits but also in cross-examination. Mr Naumcevski accepted that the notes accurately recorded his conversations. He provided no explanation which is consistent with his case, and his answers in cross-examination were non-responsive. His admissions, made at a time when he was contesting the Superannuation Guarantee liability of Lucas Homes Administration, are powerful evidence that the company had employees.
Fifthly, I would infer from the Lucas Homes Administration documents that this is not a case simply of one company being confused with another. The amended PAYG payment summaries disclose a striking picture. Seven are dated 12 March 2015 (the eighth is a few days later). In each case, the effect of the amendment was to assert to the Australian Taxation Office that a particular employee was employed by Lucas Homes Administration only between 1 July 2013 and 30 September 2013 (in one case, the final date was 4 September 2013). In each case, the effect of doing so was to reduce the amount which Lucas Homes Administration told the Commissioner it had withheld from payments of salary or wages made to that employee.
The significance of that for present purposes is that Mr Naumcevski's explanation was that Ms Quan and perhaps also himself were confused as between Lucas Homes Administration and Relative Constructions which traded as Lucas Homes Construction and Lucas Homes NSW. But if there was any such confusion, that is not the explanation for the series of amended documents lodged with the Australian Taxation Office in March 2015.
It fell to Mr Naumcevski to provide such an explanation. Failing any such explanation, the documents provide powerful evidence that Lucas Homes Administration made payments of salary or wages to, and withheld amounts from, employees, at least for the period 1 July 2013 to 30 September 2013.
None of the above turns on the certificate. A certificate under s 255-45 does not alter the legal burden of proof, although it may be determinative where the taxpayer does not go into evidence: see R v Hush; Ex parte Devanny (1932) 48 CLR 487 at 507-508; [1932] HCA 64, Ex parte Ryan; Re Johnson (1944) 44 SR (NSW) 12 at 17 and Trimcoll Pty Ltd v Deputy Commissioner of Taxation [2007] NSWCA 307 at [45]. However, this was a case where both sides adduced testimonial and documentary evidence on the critical issue. The result in such a case is not determined by the certificate, but by the court's evaluation of the competing evidence.

Conclusion and orders

For those reasons, Mr Naumcevski has failed to establish the necessary finding he seeks, namely, that Lucas Homes Administration made no payments by way of salary or wages to employees in the periods for which he has been sued by the Commissioner. Accordingly, it is unnecessary to address whether if Lucas Homes Administration withheld or purported to withhold amounts under Div 12 it was obliged to ensure that it paid the amounts withheld to the Commissioner, even if it did not in fact pay salary and wages. It follows that the appeal must be dismissed. There is no reason of which I am presently aware to depart from the ordinary rule that costs follow the event.
There are two final points. First, so far as I can see, Mr Naumcevski has achieved a personal benefit from the tax returns that he has signed on behalf of Lucas Homes Administration. He was at relevant times the sole shareholder of Lucas Homes Administration. That company did not pay income tax for the financial years ended 2013, 2014 or 2015, but only because of substantial deductions claimed by it for salary and wages (for 2013 and 2014) and another amount which corresponds to salary and wages (for 2015). Had those claims not been made, the company of which he was sole director and shareholder would have been liable to pay many thousands of dollars of tax. It is not clear to me whether, in those circumstances, it would be appropriate to permit Mr Naumcevski to depart from what he told the Commissioner which had the effect of achieving a negative taxable income of his company in order to permit him to run an inconsistent case in answer to his personal liability for his company's failure to make withholding tax payments.
The second point is that at one stage during the hearing of the appeal, the Deputy Commissioner of Taxation embraced a suggestion from the Bench to the effect that the deemed assessment of the company's Superannuation Guarantee liabilities included a deeming provision as to the particulars comprising those liabilities, with the effect that there was conclusive evidence that the company had employed employees throughout the period. Mr Naumcevski submitted that the conclusive evidence provisions did not have so wide an operation.
It is not necessary to resolve either point, because Mr Naumcevski's case fails on the merits, and for the further reason that neither was the subject of a pleading, or submissions, or findings by the primary judge, and therefore could not be argued for on appeal, even if there had been a notice of contention.
I propose that the appeal be dismissed with costs.
PAYNE JA: I agree with Leeming JA.
WHITE JA: The respondent (a Deputy Commissioner of Taxation) sued the appellant in the District Court for penalties he claimed the appellant was liable to pay pursuant to s 269-20(1) of Schedule 1 to the Taxation Administration Act 1953 (Cth) ("the TAA") in respect of amounts claimed to have been withheld by a company now known as Lucas Homes Administration Pty Ltd ("Lucas Homes Administration") under Div 12 of Sch 1 to the TAA. The respondent alleged that Lucas Homes Administration failed to meet its obligations under subdivision 16-B of Sch 1 to the TAA to pay each amount withheld to the Commissioner.
The respondent alleged that amounts totalling $107,148 were withheld for the periods from 1 April 2013 to 30 June 2013, 1 July 2013 to 30 September 2013, and 1 July 2014 to 30 September 2014.
The appellant pleaded in his defence that Lucas Homes Administration did not withhold any amounts, and did not have any obligation to withhold any amounts because it did not have any employees and did not pay any salary or wages.
It is not in dispute that the appellant was a director of Lucas Homes Administration. It is not in dispute that if Lucas Homes Administration were required to remit amounts withheld during the three quarterly periods in question, the appellant is liable for the penalties claimed.
Section 12-35 of Schedule 1 of the TAA is quoted at [6] of the reasons for judgment of Leeming JA. Section 12-1 contains exceptions to s 12-35, but none is presently relevant. Section 12-35 is in Div 12 of Sch 1.
Section 16-70(1) (in Subdivision 16-B of Div 16 of Sch 1) relevantly provides: "16‑70 Entity to pay amounts to Commissioner (1) An entity that withholds an amount under Division 12 must pay the amount to the Commissioner in accordance with this Subdivision."
Division 269 of Sch 1 is headed "Penalties for directors of non-complying companies." Section 269 relevantly provides that directors of a company have a duty to ensure that the company either meets its obligations under subdivision 16-B to pay withheld amounts to the Commissioner or goes promptly into voluntary administration or liquidation. Section 269-15 relevantly provides: "269‑15 Directors' obligations Directors' obligations (1) The directors (within the meaning of the Corporations Act 2001) of the company (from time to time) on or after the initial day must cause the company to comply with its obligation. (2) The directors of the company (from time to time) continue to be under their obligation until: (a) the company complies with its obligation; or (b) an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or (c) the company begins to be wound up (within the meaning of that Act)."
Section 269-20 provides in substance that a director is liable to pay a penalty equal to the amount of the company's liability under its obligation if the director has not discharged his or her obligation by the due day.
Section 269-10 contains an important provision as to the scope of Division 269.
It relevantly provides: "269‑10 Scope of Division (1) This Division applies as set out in the following table: Obligations that directors must cause company to comply with Item Column 1 Column 2 This Division applies if, on a particular day (the initial day), a company is a company registered under the Corporations Act 2001, and on the initial day … and the company is obliged to pay to the Commissioner on or before a particular day (the due day) … 1 the company withholds an amount under Division 12 that amount in accordance with Subdivision 16‑B.

... (2) This Division applies in relation to an amount that the company purports to withhold under Division 12, but is not required to withhold, as if the company were required to withhold the amount."

Section 11-1 of Sch 1 describes the objects of Pt 2-5 as ensuring the efficient collection of, amongst other things, income tax and the Medicare levies.
As is apparent from the pleadings summarised above, the respondent alleged that Lucas Homes Administration withheld amounts under Div 12. The appellant denied this and denied that Lucas Homes Administration was liable to withhold amounts under Div 12.
In opening the appeal Mr Wood who appeared with Mr Cleary for the appellant submitted that the appellant's "... central contention is that if a company other than Lucas Homes Administration actually paid the employees, then Lucas Homes Administration isn't liable for the withholding and its director cannot be liable for the relevant penalty".
However, the issues raised are not merely whether Lucas Homes Administration had employees and paid their salaries and wages. The first issue is whether it withheld or purported to withhold amounts under Div 12. If it did, the appellant was obliged to ensure that it paid the amounts withheld, irrespective of whether Relative Constructions paid salary and wages and was obliged to withhold amounts.
Although the appellant's argument proceeded on the basis that Lucas Homes Administration was only obliged to remit an amount to the Commissioner if it paid salary or wages, that was not the position of the respondent. Rather, the respondent identified the "essential questions to be determined" as including whether the appellant made good his "... substantive defence relied on: establishing either that [Lucas Homes Administration] did not pay wages or withhold amounts or nor was it liable to the superannuation guarantee charge".
Counsel for the respondent submitted that "the Appellant needed to prove that the Company did not pay wages or withhold tax".
The primary judge found: "I have also been asked to draw certain conclusion and make certain orders that the evidence of the plaintiff, being evidence prepared for the Company and signed by the defendant personally over a number of years, is contrary to the defendant's contentions as set out in his amended defence and in his served evidence that the Company did not trade, had no employees and was not therefore required (and in fact did not) withhold or remit the PAYG or SGC amounts. I do think that is contrary to the contentions advanced by the defendant." (Emphasis added.)
The respondent supported that finding on appeal.
It was the respondent's case both at trial and on appeal that Lucas Homes Administration was liable to remit amounts withheld under Div 12 either if it in fact withheld amounts under Div 12, or if it were liable to do so.
It is unnecessary to decide whether a payer withholds an amount of PAYG tax merely if it pays an employee salary or wages calculated net of tax (Commissioner of Taxation v Sargon (1985) 75 FLR 394 at 397, 403-4; Transtar Linehaul Pty Ltd v Deputy Commissioner of Taxation [2011] FCA 856 at [122]-[123]), or whether there must be some form of actual withholding either by quarantining of money in a bank account or by the making of appropriate accounting entries (Cassaniti v Commissioner of Taxation (2010) 188 FCR 480; [2010] FCA 641 at [163]-[165], [173]; Christis v Deputy Commissioner of Taxation [2011] NSWCA 310 at [4]). In Cassaniti v Commissioner of Taxation, Edmonds J said: "167 Where there is a controversy about the occurrence of a withholding the surrounding circumstances may either support or detract from the drawing of an inference that a withholding was in fact made. There are a number of reporting requirements where an employer makes a PAYG withholding. In particular, pursuant to s 16-150 of Sch 1 to the TAA the payer is required to give notification to the Commissioner of the amounts it was required to pay to the Commissioner under s 16-70(1) on or before the day on which the amount is due to be paid (regardless of whether it is paid). 168 The notification must be in the "approved form" and lodged with the Commissioner. This will usually be by way of lodgement of the Business Activity Statements ('BAS'). Further, pursuant to s 16-153(2) the payer is required to give an annual report to the Commissioner in the 'approved form' being a summary of payments withheld not later than 14 August after the end of the financial year. 169 These provisions govern and describe the obligations of the payer of salary and wages. Compliance with those provisions will constitute contemporaneous documentary evidence from which it may be inferred that a withholding has occurred. Conversely, where there has been little or no compliance with those provisions, it may be an open question whether in fact a withholding was made. 170 In the normal course, it could be expected that a payer of salary of wages who was making withholdings at the required rate would have in its possession, accounting and wage records showing an arithmetic subtraction from a gross amount and payment of the net amount, or alternatively records showing that the amounts withheld had been set aside for payment to the Commissioner. 171 If a payer was to rely upon accounting records to show that a withholding had occurred in relation to a particular employee it would be necessary to show that an arithmetic subtraction had been made in respect of that employee. This follows from the terms of s 12-35. 172 A payer of salary and wages who was complying with the requirements of the TAA could be also expected to keep records showing a global amount deducted in respect of all employees in a reporting period in order to complete its BAS (s 16-150 of Sch 1 to the TAA), and to keep records enabling it to report annually the total amount of PAYG withholding (subs 16-153(2)). The absence of such records may inferentially lead to the conclusion that no amount was withheld."
What is at least clear from the authorities is that the occurrence of a "withholding" is a fact that is capable of being proven and that it is not necessarily a concomitant of the existence of a liability to withhold under Div 12. In the present case Lucas Homes Administration apparently did comply with its reporting obligations. The respondent's claim is based on what the company reported in its Business Activity Statements which, for the latter quarters, were substantially corroborated by its payment summaries of amounts withheld.
Mr Naumcevski deposed that Lucas Homes Administration never traded and never had any employees. For the reasons given by Leeming JA, the primary judge did not err in rejecting that evidence.
The amounts of director penalties referable to Lucas Homes Administration's failure to remit withholdings claimed by the respondent were based on Business Activity Statements it lodged. The Business Activity Statements recorded PAYG tax withheld of $46,647 for the quarter 1 April 2013 to 30 June 2013 in respect of total salary, wages and other payments of $288,657; $30,092 for the quarter 1 July to 30 September 2013 in respect of total salary wages, and other payments of $156,225 and $30,409 for the quarter 1 July to 30 September 2014 in respect of total salary wages and other payments of $161,990.
Evidence that Lucas Homes Administration withheld amounts of tax payable on salary or wages of individuals is also contained in payment summaries signed by Mr Naumcevski and lodged with the Australian Taxation Office.
On 20 August 2014 Lucas Homes Administration lodged forms entitled "PAYG payment summary - individual non-business" in respect of 27 employees for the income year ended 30 June 2014. Not all of the forms covered the whole period. All forms were signed by Mr Naumcevski. They identified the total tax withheld in respect of each individual payee and named Lucas Homes Administration as the payer.
In the case of one employee (KB) a form dated 14 July 2014 covering the full 12-month period to 30 June 2014, stated that total tax of $14,869 was withheld from gross payments of $68,419 made by the company. On 12 March 2015 an amended payment summary in relation to KB was signed by Mr Naumcevski stating that for the period from 1 July 2013 to 30 September 2013 the total tax withheld was $3,882 and gross payments totalled $18,234. In the case of another employee (ZZ) the payment summary stated that in the period from 1 July 2013 to 30 September 2013 Lucas Homes Administration withheld total tax of $5,679 from gross payments of $22,560.
In response to evidence adduced by the respondent of the payment summaries lodged by Lucas Homes Administration Mr Naumcevski deposed that he had searched for records relating to matters arising from it. He annexed amended PAYG payment summaries prepared by Ms Quan.
Included in the documents tendered through Mr Naumcevski was a PAYG Payment Summary statement for the year ended 30 June 2014 that was dated 14 August 2014 and signed by him. The statement was for Lucas Homes Administration. It included a statement "Amendment The originals were wrong!!!" It stated that for the year in question payment summaries had been issued for 15 individuals, that gross payments for the year totalled $156,221 and the total amount of tax withheld was $30,092. This is in accordance with Lucas Homes Administration's BAS for the quarter from 1 July to 30 September 2013.
The copies of the electronic individual PAYG summaries Mr Naumcevski annexed to his affidavit are instructive. They identify the payer's name as Relative Constructions. But they are all for periods that commence no earlier than 1 October 2013.
Thus, Lucas Homes Administration amended its returns to the Australian Taxation Office to provide that for the financial year ended 30 June 2014, it paid salaries or wages and withheld tax from the salaries or wages paid in the first quarter, but not in the later quarters. This shows that particular attention was given in late 2014 and 2015 as to which company paid wages and withheld tax. No amendment was made to the BAS for the last quarter of the 2013 financial year.
For the financial year ended 30 June 2015 Mr Naumcevski signed PAYG Payment Summaries for 10 employees. They are dated 14 July 2015 and thus postdate the amendments to the 2014 payment summary. The summaries are for the whole financial year, not only for the first quarter to 30 September 2014. They show total tax withheld of $87,693. They are consistent with Lucas Homes Administration's BAS for the first quarter of the 2015 financial year and are inconsistent with Mr Naumcevski's case that the company did not withhold tax and did not pay salary or wages.
Thus, irrespective of the identity of the company from whose bank account moneys were withdrawn to pay the wages or salaries, the evidence demonstrates that Lucas Homes Administration withheld the amounts of PAYG tax and Medicare levy. The appellant was obliged to ensure that Lucas Homes Administration paid the amounts it withheld to the Commissioner, even if it were Relative Constructions, and only Relative Constructions, who paid the salaries or wages and was obliged to withhold amounts under s 12-35 (TAA, s 269-10(2)).
The same documents that show that Lucas Homes Administration withheld amounts of PAYG tax record that it paid the individuals' wages and salaries. But the appellant submitted that it should be inferred that the payments were made from Relative Constructions' bank account and hence Relative Constructions was the payer under s 12-35.
The evidence said to support such an inference was not clear. The appellant gave evidence that Lucas Homes Administration had only one account with Westpac Bank. There was no apparent payment of wages or salaries from that account. The appellant did not give evidence that Lucas Homes Administration had no accounts with any other bank or financial institution. The amounts paid from Relative Constructions' bank account for the period from 2 July 2013 to 30 September 2013 described in the banks statements as "Multiple Transfer NetBank Wages" or "Transfer to other Bank NetBank Wages" totalled $119,256.39 which was slightly less than the wages and salaries Lucas Homes Administration reported as having paid in the quarter from 1 July to 30 September 2013 of $156,225, from which it withheld $30,092 ($126,133). Nor can it be inferred that the payments did not comprise or include payment of wages to employees of Relative Constructions.
That raises the question: how did Lucas Homes Administration pay its employees? The respondent did not adduce evidence of the source of payments made by Lucas Homes Administration.
The fact that Lucas Homes Administration's income tax returns and draft profit and loss statements record substantial expenses for wages does not mean that payment of wages came from its accounts with banks or other financial institutions.
If Relative Constructions paid the salary or wages of employees of Lucas Homes Administration, then Relative Constructions would have been obliged to withhold amounts of PAYG tax and Medicare levies (s 12-35). This would be so even if the payments were made at the express or implied request or direction of Lucas Homes Administration which thereby incurred a debt to Relative Constructions equal to the moneys paid (Transtar Linehaul Pty Ltd v Deputy Commissioner of Taxation at [102]).
In many contexts if A directs B to pay C, both the immediate payer (B) and the person directing the payment (A) can be regarded as the payer (Commissioner of Taxation v Rozman (2010) 186 FCR 1; [2010] FCA 324 at [23] per Perram J; Capital Securities SV Pty Ltd v Calleja [2018] NSWCA 26 at [106] per Leeming JA). Where payments of salary or wages are made by bank transfer, the context and purpose of s 12-35 dictate that the bank or banks involved would not be regarded as the payer within the meaning of that section. Whether only the immediate payer (Relative Constructions) or both it and the employer on whose request or direction it made the payment (Lucas Homes Administration) would be payers within the meaning of s 12-35 may be an important question. It is not necessary to decide that question. Because the evidence establishes that Lucas Homes Administration withheld the relevant amounts, the appellant was required by s 269-10(2) and s 269-15 to ensure that it remitted the amounts withheld to the Commissioner, even if Relative Constructions were the only party liable to withhold the amounts under s 12-35.
For these reasons I agree with the orders proposed by Leeming JA.

Amendments 16 June 2020 - NSWLR citation to Trimcoll Pty Ltd v Deputy Commissioner of Taxation deleted in [69] and list of cases cited 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: 16 June 2020

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