PERDIKARIS v DFC of T (No 2)

Judges:
Graham J

Court:
Federal Court, Sydney

MEDIA NEUTRAL CITATION: [2007] FCA 2087

Judgment date: 21 December 2007

Graham J

1. By s 5(1) of the Income Tax Act 1986 (Cth) income tax was imposed in accordance with the Income Tax Act 1986 and at the relevant rates declared by the Income Tax Rates Act 1986 (Cth).

2. Section 7 of the Income Tax Act 1986 (Cth) levied the income tax imposed by s 5(1) as follows:

  • "7. The tax imposed by subsection 5(1) is levied, and shall be paid, for the financial year commencing on 1 July 1986 and for all subsequent financial years until the Parliament otherwise provides."

3. Under s 12(1) of the Income Tax Rates Act 1986 (Cth) the relevant rates of tax were as set out in schedule 7 to that Act. That schedule has been amended to record the prevailing rates from time to time.

4. At all material times s 166 of the Income Tax Assessment Act 1936 (Cth) ("the Assessment Act") has made provision for the Commissioner to make assessments of the amount of the taxable income of a taxpayer and of the tax payable thereon and s 174 has made provision for the Commissioner to serve notices of assessment in writing upon persons liable to pay the tax the subject of the assessments.

5. Section 177(1) of the Assessment Act provided for notices of assessment to have a conclusive evidentiary character both in respect of the due making of the assessment and that the amount and all the particulars of the assessment were correct. Section 177(1) provided:

  • "177(1)The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct."

6. The present proceedings are not proceedings under Part IVC of the Taxation Administration Act 1953 (Cth) ("the Administration Act").

7. In
McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 ("McAndrew") at 280-282 Taylor J said of s 177(1):

"... The purpose of that sub-section [s 177(1)], is, subject to an important qualification, to make the production of a notice of assessment in judicial proceedings conclusive evidence of the due making of the assessment and that the amount and all the particulars of the assessment are correct. The qualification is that upon proceedings on appeal against the assessment, the production of the assessment does not constitute conclusive evidence that the amount and all the particulars of the assessment are correct. It will be seen that the sub-section contains two limbs and that the second limb applies only in proceedings which are not appeals of the character specified. In all other proceedings both limbs apply. But although doubts may exist as to what is comprised in each limb, the existence of these doubts in no way requires a modification of the view previously expressed.

...

There seems no doubt that s.177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground and, accordingly, there is every reason for thinking that the second limb in s.177(1) covers all grounds upon which an assessment may be challenged other than those covered by the first limb. ... In my view s.170(1) (sic) should be understood as precluding a taxpayer in proceedings other than an appeal (or a reference [now a review]) under the Act from challenging an assessment on any ground. ..."

8. In
F. J. Bloemen Proprietary Limited v The Commissioner of Taxation of the Commonwealth of Australia 81 ATC 4280; (1981) 147 CLR 360 at 375 Mason and Wilson


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JJ cited with approval the observations of Taylor J in McAndrew.

9. In
Webb v Commissioner of Taxation (No 2) 93 ATC 5123; (1993) 47 FCR 394 at 400 Hill J said:

"... the giving to the taxpayer of a notice which stipulates the taxable income and the tax payable referable to that taxable income in the year (a positive figure) will be a notice of assessment attracting the provisions of the objection and appeals procedure and s 177."

His Honour then continued at 400-401 by saying:

"My view is consistent with the decision of Hunt J in
Deputy Commissioner of Taxation (Cth) v Clyne 82 ATC 4070; (1982) 60 FLR 45 and that of Enderby J in
Commonwealth v Opiel (1986) 86 ATC 5,013. The former case is not greatly different from the present. In that case Mr Clyne, who had received a notice of assessment showing a credit for provisional tax, sought to argue that the giving of that credit constituted an admission by the Commissioner that payment had been made for that amount or that a claim was no longer made in respect of that amount, or alternatively that the provisions of s 177 rendered there conclusive evidence that the amount was no longer claimed by the Commissioner. This somewhat audacious argument was rejected by Hunt J who regarded the particulars of assessment referred to in s 177 of the Act as constituting merely the two ingredients taxable income and the tax assessed with respect to that taxable income. The other material on the notice, including the credit, were, his Honour thought, particulars of the notice but not particulars of the assessment. The decision of Hunt J was followed by Enderby J in Opiel in holding that details of a refund stated in the assessment to be due to a taxpayer did not attract the conclusive evidentiary protection of s 177."

See also
Deputy Commissioner of Taxation of the Commonwealth of Australia v Richard Walter Pty Limited 95 ATC 4067; (1995) 183 CLR 168 ("Richard Walter").

10. To facilitate the recovery of income tax a system prevailed until 30 June 2000 under which employees were required to pay tax on their salary or wages income progressively as they earned it. The tax was paid through a tax instalment deduction system which employers were obliged to implement (the Pay-As-You-Earn or PAYE system) under the Assessment Act.

11. Traditionally, a Group Certificate was issued to an employee at the end of a given financial year and lodged with the Commissioner of Taxation ("the Commissioner") with the employee's income tax return so as to enable a credit to be claimed for the amount deducted by way of income tax under the PAYE system and remitted by the employer to the Commissioner. Such Group Certificates were signed by an authorised person on behalf of the "Employer" and recorded, amongst other things, the "Tax Instalments Deducted" in respect of the relevant "Employee".

12. As from 1 July 2000 a New Tax System (the Pay-As-You-Go or PAYG system) was put in place under which a payer was required to withhold amounts from salaries and wages paid to a payee which were then to be remitted by the payer to the Commissioner (see s 3AA of the Administration Act and Schedule 1 thereto) and the payee became entitled to a credit against his tax debts for the amounts collected under the new system. Under the new system a "PAYG payment summary - individual non-business" was issued by the payer to the relevant payee at the end of the financial year, in lieu of a Group Certificate. Such PAYG payment summaries were signed by an authorised person on behalf of the "Payer" and recorded, amongst other things, the "Total tax withheld" in respect of the relevant "Payee". They were then affixed by a taxpayer to his relevant income tax return to enable a credit to be claimed for the amount withheld by way of income tax under the PAYG system and remitted by the employer to the Commissioner.

13. Generally speaking all resident individuals were required to lodge annual income tax returns. Such returns were normally required to be lodged within four months after the end of the relevant financial year with the opportunity in some instances for returns to be lodged during the ensuing six months or so.

14. 


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This case is concerned with a taxpayer who claimed credits for amounts of tax said to have been deducted under the PAYE system or withheld under the PAYG system by a company of which he was a director where Group Certificates or PAYG Payment Summaries were said to have been issued to him by that company, but where no tax was ever remitted by the company in question or any other companies to the Commissioner.

15. The taxpayer, who is the applicant in these proceedings, did not lodge income tax returns for any of the eight years ended 30 June 1996, 30 June 1997, 30 June 1998, 30 June 1999, 30 June 2000, 30 June 2001, 30 June 2002 and 30 June 2003 until well after the times prescribed for doing so had expired. It would appear that returns for each of the eight years in question were forwarded to the Australian Taxation Office under cover of a letter dated 19 September 2005 from the applicant's tax agent, Gertos Savell Katos, on about 30 September 2005.

It is necessary to record certain information in relation to the 8 returns seriatim as follows:

16.  Year ended 30 June 1996

17.  Year ended 30 June 1997

18. 


ATC 5383

Year ended 30 June 1998

The attached " REASONS FOR DECISION " dealt compendiously with the PAYE credits claimed by the applicant for the years ended 30 June 1996, 30 June 1998, 30 June 1999 and 30 June 2000. It is unnecessary for present purposes to quote any more of the Reasons for Decision than have already been quoted at [16] above. It will be recalled that under the heading " Our Decision " the following relevantly appeared:

"Are you entitled to a PAYE credit of $32,448 for the year ended 30 June 1998?

No. "

19. 


ATC 5384

Year ended 30 June 1999

20.  Year ended 30 June 2000

21.  Year Ended 30 June 2001

22.  Year ended 30 June 2002

23.  Year ended 30 June 2003

Penalty in respect of the years ended 30 June 2001, 30 June 2002 and 30 June 2003

24. It may be observed that in respect of the Notices of Assessment for the years ended 30 June 2001, 30 June 2002 and 30 June 2003 no late lodgement penalty was included as it had been in the Notices of Assessment for the years ended 30 June 1996 - 30 June 2000 inclusive. The reason for this was that a separate "Notice of assessment and liability to pay penalty" was issued to the applicant on 5 December 2006 which relevantly provided as follows:

"This notice is to advise you that a penalty has been imposed in relation to your Income Tax Return because you have a shortfall amount. This occurs when the tax liability you previously worked out is less than it should have been, or your entitlement to a payment or credit is more than it should have been .


Income Year Penalty Amount Reason for penalty Due date for payment
2001 $11167.00 Lack of reasonable care
2002 $12285.00 Lack of reasonable care
2003 $12294.75 Lack of reasonable care
TOTAL $35746.75 29 Dec 06

This penalty has been recorded on your account. It is in addition to your liability to pay the shortfall amount and any interest charge, which are not shown on this notice.

..."

(Emphasis added)

The making of deductions and the remittance thereof to the Commissioner

25. In respect of the years ended 30 June 1996, 30 June 1997, 30 June 1998, 30 June 1999 and 30 June 2000 s 221C of the Assessment Act provided for regulations to be made prescribing the rates of deductions to be made by employers from payments of salary or wages that employees receive or are entitled to receive in respect of a week or part of a week.

26. By s 221C(1A) of the Assessment Act employers were to make deductions under the PAYE system. Section 221C(1A) relevantly provided:

  • "221C(1A) Where an employer pays to an employee salary or wages [before 1 July 2000], the employer shall, at the time of paying the salary or wages, make a deduction from the salary or wages at such rate (if any) prescribed in accordance with subsection (1) as is applicable. ..."

(The words in square brackets were introduced into the Assessment Act effective 22 December 1999)

27. At all material times the Assessment Act has made provision for the payment to the Commissioner of amounts deducted by employers from salaries or wages paid to employees in accordance with s 221C(1A) of the Assessment Act. Until 30 June 1998 the relevant obligation to remit the amounts deducted to the Commissioner was to be found in s 221F of the Assessment Act. In respect of


ATC 5390

the period 1 July 1998 - 30 June 2000 the relevant obligation was to be found in Division 1AAA of Part VI of the Assessment Act. Needless to say, strict time limits were imposed upon employers to make payments of amounts deducted from the salaries or wages of employees in accordance with s 221C(1A) of the Assessment Act.

28. In relation to the PAYG system, corresponding provisions required employers as "entities" (see s 960-100 of the Income Tax Assessment Act 1997 (Cth)) to withhold amounts from salaries and wages paid to individuals as employees (see section 12-35 and 15-10 of Schedule 1 to the Administration Act).

29. A corresponding provision in respect of the remittal of amounts withheld under the PAYG system to the Commissioner was to be found in section 16-70 et seq of Schedule 1 to the Administration Act. Once again there were strict time limits imposed within which amounts that had been withheld were to be paid to the Commissioner.

30. Under section 16-20 of Schedule 1 to the Administration Act an entity that withheld amounts as required by Division 12 of Schedule 1 from the salary or wages of an employee was discharged from "all liability to pay or account for that amount to any entity except the Commissioner".

31. There was no comparable provision to that contained in section 16-20 of Schedule 1 to the Administration Act in the Assessment Act in respect of deductions made by an employer from the salary or wages of an employee as required by s 221C(1A) of the Assessment Act under the PAYE system.

32. At no material time was there a requirement that employers retain amounts deducted or withheld under the PAYE system or the PAYG system in some identifiable form. Although the provisions of the relevant legislation assumed that the relevant employer would have sufficient funds to pay the Commissioner the amount of the deductions or amounts withheld as required, the employer was never obliged to pay those amounts into a trust account or any other separate bank account or to deal with them in a way which separated those amounts from its other monies (see per Ormiston J in
Deputy Federal Commissioner of Taxation v Sargon (1985) 85 ATC 4206 at 4209).

33. In respect of the audits of the applicant's claim for credit in respect of PAYE tax instalment deductions referred to in his tax return for the year ended 30 June 1997 and his claims for PAYG withholding credits as referred to in his tax returns for the years ended 30 June 2001, 30 June 2002 and 30 June 2003, the letters initiating them were two letters from the Deputy Commissioner of Taxation to the applicant dated 17 March 2006. The letter in respect of the year ended 30 June 1997 included the following:

"... we sometimes check the accuracy of information given to us in tax returns. As part of this process, we are reviewing the amount of Pay As You Earn (PAYE) Tax Instalment Deductions (TIDs) paid by CP Agents Pty Ltd during the year ended 30 June 1997.

We have no record of the company remitting PAYE TIDs or lodging a Reconciliation Statement in respect of group certificates for the period 1 July 1996 to 30 June 1997. Therefore, we are unable to confirm if any PAYE TID credit is available for the employees of the company.

In order that we can consider your claim for PAYE TID credit, please provide details of the amount of all salary and wages paid and PAYE TIDs deducted from such payments during the year ended 30 June 1997. You should also provide any documentary evidence that is available to support your entitlement to PAYE TID credit.

If the PAYE TIDs have been remitted, please provide full details of the name of the entity including the Group Employer Number under which these documents have been lodged and details of any payments that have been made.

If you are unable to provide evidence that the salary and wages payments have been made and PAYE TIDs deducted, then we may be unable to allow any PAYE TID credit claimed by you in your income tax return. ...

Please note, we have sent you a separate letter requesting information about the amount of Pay As Yo (sic) Go (PAYG)


ATC 5391

Total Tax Withheld paid by Clean Fast Pty Ltd for the years ending 30 June 2001 till 2003."

34. The "separate letter" referred to was the second letter from the Deputy Commissioner of Taxation to the applicant dated 17 March 2005 (sic). It related to the applicant's claims for PAYG withholding credits as referred to in his tax returns for the years ended 30 June 2001, 30 June 2002 and 30 June 2003. In its terms it mirrored the other letter dated 17 March 2006. It included the following:

"... we are reviewing the amount of Pay As You Go (PAYG) Withholding paid by Clean Fast Pty Ltd for the income years 30 June 2001 till 2003.

We have no record of Business Activity Statements (BAS) or a Payment Summary Statement being lodged by the company for the income years 1 July 2001 till 30 June 2003. Therefore, we are unable to confirm if any PAYG Withholding credit is available for employees of the company.

In order that we can consider your claim for PAYG Withholding credit, please provide details of the amount of all salary and wages paid to you and PAYG Withholding deducted from such payments for the income years 30 June 2001 till 2003. You should also provide any documentary evidence that is available to support your entitlement to PAYG Withholding credit.

If you are unable to provide evidence that the PAYG Withholding has been deducted from your salary and wages payments, then we may be unable to allow the PAYG Withholding credit claimed by you in your income tax return. Penalties may also be applied where a shortfall amount results from the disallowance of a PAYG Withholding credit. Our decision will be based on your particular circumstances so you should provide an explanation and supporting evidence as to why any mistake has occurred.

If the company has lodged its BAS and remitted PAYG Withholding, please provide full details of the name of the entity including the Australian Business Number (ABN) under which these documents have been lodged and details of any payments that have been made. If the company has not lodged its BAS and Payment Summary Statement, you should ensure that any outstanding Business Activity Statements and Payment Summary Statement are lodged immediately.

..."

35. By a letter dated 3 April 2006, the applicant's tax agents responded to the letters of 17 March 2006 directed to the applicant, the second of which was referred to as a letter of 17 March "2005". The relevant letter was headed:

"Re: Cleanfast Property Maintenance Agents Pty Ltd

ABN: 29 078 361 369"

Inter alia, it provided:

"I understand you seek clarification on Pay As You Go credits paid by the above mentioned company.

Our office has also received correspondence from yourself in regards to CP Agents Pty Ltd. There seems to be a misunderstanding. CP Agents Pty Ltd does not exist.

The trading entity has always been Cleanfast Property Maintenance Agents Pty Ltd.

In the 1997 period Cleanfast Property Maintenance Agents Pty Ltd was trading as CP Agents. A registered trading name belonging to the above company.

We possess no records in relation to the company. ...

..."

36. It will be recalled that on 8 October 1993 Clean Fast Pty Limited was registered with the ACN 062 002 019 and that it changed its name to C P Agents Pty Limited on 29 April 1997. On the same day, namely 29 April 1997, Cleanfast Property Maintenance Agents Pty Limited was registered with the ACN 078 361 369 and ABN 29 078 361 369. That company, in turn, changed its name to C P Jiff Pty Limited on 6 April 2004.

37. Between 29 April 1997 and 31 October 1997 the sole director and secretary of Cleanfast Property Maintenance Agents Pty Ltd was Scott Van Houten. Between 31 October 1997 and 22 February 1999 the sole director and secretary of Cleanfast Property Maintenance Agents Pty Limited was the


ATC 5392

applicant. Between 22 February 1999 and 1 July 2000 the sole director and secretary of Cleanfast Property Maintenance Agents Pty Limited was Con Mitropolos. On 1 July 2000 the applicant again became the sole director of Cleanfast Property Maintenance Agents Pty Limited, later C P Jiff Pty Limited.

38. On 11 May 2004 C P Jiff Pty Limited, formerly Cleanfast Property Maintenance Agents Pty Limited, was wound up under a Creditors' Voluntary Winding Up, Christopher Damian Darin becoming the liquidator of the company on that day. On 12 July 2007 C P Jiff Pty Limited (in liquidation) was deregistered. The applicant was the sole shareholder of C P Jiff Pty Limited, formerly known as Cleanfast Property Maintenance Agents Pty Limited, with two shares on which a total of $2 had been paid.

39. On 6 December 2005 Mr Constantine Savell, a partner in the accountancy firm Girtos Savell Katos, who were the applicant's tax agents, telephoned Mr Mario Tomaras, an Active Compliance Officer in the Micro Enterprises and Individuals business line of the Australian Taxation Office. According to paragraph 6 of an affidavit sworn by Mr Savell on 14 May 2007 he provided Mr Darin's details to Mr Tomaras. By 6 December 2005 Mr Darin had become the liquidator of both C P Agents Pty Limited, formerly known as Clean Fast Pty Limited, and also C P Jiff Pty Limited, formerly known as Cleanfast Property Maintenance Agents Pty Limited. In paragraph 6 Mr Savell said that on or about 6 December 2005 he provided Mr Tomaras with "the details of the Liquidator who had the carriage of the matter to wind up CP Agents Pty Ltd (1996-1997 year) and Clean fast Property Maintenance Agents Pty Ltd A.C.N. 078 361 369 (Years ending 30th June 1998-2001, 2002 and 2003)".

40. In response to Mr Savell's evidence, Mr Tomaras, in paragraph 50 of his affidavit sworn 3 October 2007 said:

"... While I admit Mr Savell gave me the details of Christopher Darin being the liquidator of C P Agents (formerly known as Clean Fast Pty Limited) at no time did he:

  • 50.1 mention the company name Cleanfast Property Maintenance Agents Pty Limited or provide me with the ACN 078 361 369; or
  • 50.2 suggest that Cleanfast Property Maintenance Agents Pty Limited was the payer of salary and wages to the Applicant in respect of the years of income ended 30 June 2001 to 2003; or
  • 50.3 suggest that Cleanfast Property Maintenance Agents Pty Limited had withheld PAYG amounts in respect of any payments made to the Applicant in respect of the years of income ended 30 June 2001 to 2003; or
  • 50.4 tell me that Christopher Darin 'had carriage of the matter to wind up Cleanfast Property Maintenance Agents Pty Limited ACN 078 361 369'

..."

41. Mr Tomaras was not challenged in respect of this evidence, which I accept as correct. In my opinion Mr Savell's evidence goes no further than establishing that he provided Mr Darin's details to Mr Tomaras. The words "who had the carriage of the matter to wind up CP Agents Pty Ltd (1996-1997 year) and Clean fast Property Maintenance Agents Pty Ltd A.C.N. 078 361 369 (Years ending 30th June 1998-2001, 2002 and 2003)" are nothing other than commentary. They do not provide evidence as to the words that were used by Mr Savell when he provided Mr Tomaras with Mr Darin's details.

42. The "second" audit in respect of the applicant's claims for credits in respect of PAYE tax instalment deductions said to have been made for the years ended 30 June 1996, 30 June 1998, 30 June 1999 and 30 June 2000 was initiated by a letter from the Deputy Commissioner of Taxation to the applicant dated 28 September 2006. Inter alia, that letter stated:

"In order that we can consider your claim for PAYE TIDs, please provide details of the amount of all salary and wages paid and PAYE TIDs deducted from such payments during the years ended 30 June 1996, 1998, 1999 and 2000. You should also provide any documentary evidence that is available to support your entitlement to PAYE TIDs.

If you have remitted PAYE TIDs, please provide full details of the name of the entity including the Group Employer Number under which these documents have been


ATC 5393

lodged and details of any payments that have been made.

If you are unable to provide evidence that the salary and wages payments have been made and PAYE tax instalments deducted, then we may be unable to allow any PAYE TID credit claimed by you in your income tax returns. ..."

43. In a facsimile sent on 1 November 2006 to the Australian Taxation Office by Mr Tsoukatos of Gertos Savell Katos, the applicant's tax agents, he said:

"Further to our telephone conversation today, we confirm that we are in receipt of your letters dated 28 September 2006 that relate to the income tax audit of Mr Perdikaris for the years 1996 to 2003 inclusive.

We note that the letters had specified a past due date for the return of any additional information to substantiate the taxpayer's withholding credits.

The process of sourcing this additional information is a lengthy process, given the age of the records, access to archives and access to records held by the liquidator of the taxpayer's former employer.

This is an onerous task that cannot be completed by the due dates imposed in your letters, and for this reason, we respectfully request that you defer the issue of any assessments, allowing the taxpayer sufficient time to table the substantiating records. We trust that the taxpayer will have additional information provided to you on or before 10 November 2006.

..."

44. By a letter dated 10 November 2006 to the Deputy Commissioner of Taxation, the applicant's tax agents said in respect of the applicant:

"We refer to the Income Tax Returns lodged for the years ending 30 June 1996, 1997, 1998, 1999, 2000, 2001, 2002 and 2003 wherein the Taxpayer claimed credits pursuant to PAYG amounts withheld (sic) from his salary.

We understand the basis to defer assessment of the Income Tax Returns lodged was that there was no evidence that the relevant employer had set aside payments for services having the character of wages and salaries.

It is submitted that the relevant issue at law is whether the characterisation of the payments received by the Taxpayer is in consideration for services provided by the Taxpayer in his capacity as an employee .

The following documents are submitted in support of the claim that the Taxpayer received or was entitled to receive payments in his capacity as an employee.

  • a) Duty Statement
  • b) Inchoate Group Certificates and PAYG Payment summaries

..."

(Emphasis added)

No "additional information to substantiate the taxpayer's withholding credits" was forthcoming.

45. The evidence does not sheet home any responsibility whatsoever to the Australian Taxation Office for any understanding that the applicant's tax agents may have had in relation to the deferral of assessment of the applicant's income tax returns.

46. Notwithstanding the identification of the applicant's employer as Clean Fast Pty Limited in each of the applicant's tax returns for the years ending 30 June 1998, 30 June 1999 and 30 June 2000, the applicant's tax agents, who prepared those returns, said in their letter to the respondent of 10 November 2006:

"1998, 1999 and 2000 Group Certificates were issued showing the employer as Clean Fast Pty Ltd ACN 062 002 019. It is observed that the identity of the employer was in fact Cleanfast Property Maintenance Agents Pty Ltd ACN 078 361 369.

This error was made presumably by a member of the staff of Cleanfast Property Maintenance Agents Pty Ltd ACN 078 361 369, who appears to have copied the ACN of the former employer, probably believing that a name change had occurred and not the creation of a new company that was made on the 29/04/1997."

No errant "member of the staff of Cleanfast Property Maintenance Agents Pty Ltd ACN 078 361 369" provided any evidence to the Deputy


ATC 5394

Commissioner to support the applicant's tax agents' speculation. Furthermore, no Group Certificates issued by Cleanfast Property Maintenance Agents Pty Limited ACN 078 361 369 in respect of salary or wages paid by that company to the applicant and deductions therefrom, were ever submitted to the respondent.

47. In respect of the years ended 30 June 2001, 30 June 2002 and 30 June 2003 the applicant's tax agents said in their letter of 10 November 2006:

"It is observed in respect of these years that name of the employer is in error and that there is no ACN stated in the PAYG Payment Summary. The correct name is Cleanfast Property Maintenance Agents Pty Ltd and the ACN is 078 361 369."

Once again it may be observed that no evidence was provided to the Deputy Commissioner to support the tax agents' assertion that there had been an error made in the preparation of the relevant PAYG payment summaries. No evidence was provided to the Deputy Commissioner by the "authorised person" who issued the payment summaries on behalf of Clean Fast Pty Limited to establish that he or she had inadvertently referred to the wrong company when nominating Clean Fast Pty Limited as the relevant payer. Furthermore, no evidence was provided to explain the omission by the relevant authorised person of the "Payer's ABN or withholder payer number" from the relevant PAYG payment summaries. In addition, no PAYG payment summaries issued, if at all, by Cleanfast Property Maintenance Agents Pty Limited ACN 078 361 369 in respect of tax withheld from salary or wages paid by that company to the applicant, were ever submitted to the respondent.

48. The so called "Duty Statement" referred to in the tax agents' letter would appear to have been a document signed by the applicant and dated 9 November 2006 which relevantly provided as follows:

"1, Chris Perdikaris ... hereby declare that I was employed by Clean Fast Pty Ltd (ACN 062 002 019) as a Working Director and General Manager during the period October 1993 to April 1997 and by Cleanfast Property Maintenance Agents Pty Ltd (ACN 078 361 369) as a Working Director and General Manager during the period July 1997 to April 2004.

..."

The declaration was silent in relation to, firstly, the making by Clean Fast Pty Limited of deductions from any salary or wages that may have been paid by it to the applicant in the years of income ended 30 June 1996 and 30 June 1997, secondly, the making by Cleanfast Property Maintenance Agents Pty Limited of deductions from any salary or wages that may have been paid by that company to the applicant in the years of income ended 30 June 1998, 30 June 1999 and 30 June 2000 and thirdly, the withholding of any amounts by Cleanfast Property Maintenance Agents Pty Limited from any salary or wages that may have been paid by it to the applicant in the years of income ended 30 June 2001, 30 June 2002 and 30 June 2003.

49. Somewhat curiously, the applicant's income tax return for the year ended 30 June 1997, signed against the date 15 September 2005 and apparently lodged on 30 September 2005, was accompanied by one only Group Certificate which was purportedly issued on 9 August 1997 in respect of the whole of the period from 1 July 1996 to 30 June 1997 and not just 1 July 1996 to April 1997. Furthermore, the assertion in the applicant's declaration of 9 November 2006 that his service was as a "Working Director and General Manager" for the two different companies mentioned in the financial years ended 30 June 1997 and 30 June 1998 respectively, does not sit comfortably with his identification of himself in his tax return for the year ended 30 June 1997 as an "administrative officer" of "C P Agents Pty Limited" and in his return for the year ended 30 June 1998 as an "administrative officer" of Clean Fast Pty Limited.

50. On the applicant's own evidence the conclusion is inescapable that, in the eight relevant years of income, he derived assessable income as disclosed by him in the several returns which he lodged, declaring the information therein to be "true and correct". Whether he received the whole of his assessable income from his employment with whomsoever may have been his employer in cash or in some other form is irrelevant. This case is only concerned with his entitlement to credits against his tax liability for deductions said to have been


ATC 5395

made or amounts said to have been withheld by his relevant employer.

51. The applicant submitted that the respondent's "decisions were that the particular amounts claimed to have been deducted [or withheld] were not deducted [or withheld]" i.e. the decisions were "that these amounts were in fact paid by the employer and received by the employee". The applicant further submitted that the taxpayer's returns were not admissions that he received the gross amounts.

52. As previously explained (at [5]-[9]) the notices of assessment that are in evidence have a conclusive evidentiary character both in respect of the due making of the assessments and that the amounts and all the particulars of the assessments were correct.

53. The declarations by the applicant in the returns in question that he derived assessable income by way of salary or wages as an "administrative officer" in the amounts of $76,804, $79,508, $79,404, $81,640, $83,720, $92,092, $101,296 and $101,400 in the respective years of income, cannot be disputed in these proceedings. A finding that the applicant derived the income which he said he derived and thus that his taxable income was as returned in each of the years of income, did not require the respondent to draw any inferences from any rejection of claims that amounts said to have been deducted or withheld by the applicant's employer from his salary or wages had in fact been deducted or withheld.

54. Whilst it may be accepted, as the applicant submitted, that "in general a false denial that a fact occurred does not provide evidence that it did occur" (per Clarke JA, with whom Gleeson CJ and Studdert J agreed, in
R v Heyde (1990) 20 NSWLR 234 at 241-2), here, there was "evidence aliunde" to support the Commissioner's assessments (cf
Edmunds v Edmunds and Ayscough (1935) VLR 177 at 186-7). Furthermore, it was not necessary for the respondent to draw any inferences from circumstantial evidence to found her assessments.

55. The deduction of amounts under the PAYE system and the withholding of payments under the PAYG system are relevant to the discharge by a taxpayer of his or her liability to pay tax under a notice of assessment, not to the making of the assessment of the amount of a taxpayer's taxable income and of the tax payable thereon.

56. The applicant effectively argues that the respondent can't accept that the taxpayer derived the assessable income by way of salary or wages, which he declared that he had derived, unless the respondent also accepted that the company said to have paid that salary or wages, deducted or withheld the amounts said to have been deducted in the relevant group certificates/payment summaries.

57. Putting it another way, the applicant submits that, if the respondent accepts that the taxpayer derived the assessable income by way of salary and wages which he said that he derived in a given tax return, then the respondent must accept that the company whose group certificate/payment summary was attached to that return, as lodged, in fact deducted/withheld the amounts said to have been deducted/withheld from the relevant salary or wages.

58. Whether these propositions bear analysis or not will depend in part on the utility of placing reliance upon:

59. The relevant background facts having been stated, attention should now be given to the circumstances in which a taxpayer is entitled to a credit in respect of tax that is payable by him, by reference to deductions he believed that his employer may have made from his salary or wages under the PAYE system or to amounts he believed that his employer may have withheld from his salary or wages under the PAYG system.

60. In respect of the eight tax years presently under consideration there were three different statutory regimes. The relevant provisions for the years ended 30 June 1996, 30 June 1997, 30 June 1998 and 30 June 1999 were to be found in the Assessment Act, as were the relevant provisions for the year ended 30 June 2000. In respect of the years ended 30 June 2001, 30 June 2002 and 30 June 2003 the relevant provisions were to be found in the Administration Act. The provisions were as follows:

Years of income ended 30 June 1996 - 30 June 1999 inclusive

61. Section 221H of the Assessment Act relevantly provided:

  • "221H(2) Subsections (3) to (5) apply if:
    • (a) an employer has made any deductions in respect of an employee under this Division ... during a year of income; and
    • (b) an assessment has been made of the tax payable ... by the employee ... in relation to the year of income
  • (3) If the sum of the deductions ... is less than or equal to the tax payable, the Commissioner must credit the sum in payment or part payment of the tax.
  • (4) If the sum is more than the tax, the Commissioner must:
    • (a) credit so much of the sum as is required in payment of:
      • (i) firstly, the tax; and
      • (ii) secondly, any other liability of the employee ... that arises under or because of an Act of which the Commissioner has the general administration; and
    • (b) pay to the employee ... an amount equal to any excess.
    • ...

  • (4B) The employee ... is taken to have paid any amount credited by the Commissioner in payment of the tax or other liability, at the time at which the Commissioner credits the sum or at any earlier time that the Commissioner determines.
  • (5) If the ... sum credited ... by the Commissioner exceeds the amount to which the employee ... is entitled, the Commissioner may recover the excess as if it were income tax due and payable by the employee ..."

Year of income ended 30 June 2000

62. Section 221H of the Assessment Act relevantly provided:

  • "221H(2) If:
    • (a) an employer has made any deductions in respect of an employee under this Division during a year of income; and
    • (b) an assessment has been made of the tax payable ... by the employee in relation to the year of income;
    • the employee is entitled to a credit equal to the sum of the deductions.

    • ...

  • (4B) The employee ... is taken to have paid any amount credited by the Commissioner in payment of the tax or other liability, at the time at which the Commissioner credits the sum or at any earlier time that the Commissioner determines.
  • (5) If the ... sum credited ... by the Commissioner exceeds the amount to which the employee ... is entitled, the Commissioner may recover the excess as if it were income tax due and payable by the employee ..."

Years of income ended 30 June 2001 - 30 June 2003 inclusive

63. Section 18-15 of Schedule 1 to the Administration Act relevantly provided:

  • "18-15(1) A person is entitled to a credit equal to the total of the *amounts withheld [amounts that the entity withheld from payments under Division 12 in Schedule 1 to the Administration Act] from *withholding payments [payments from which amounts must be withheld under Division 12 in Schedule 1 to the Administration Act (even if the amount is not withheld)] made to the person during an income year if:
    • (a) an assessment has been made of the income tax payable by the person for the income year; ..."

    ATC 5397

(The words in square brackets have been derived from the applicable definitions in s 995-1 of the Income Tax Assessment Act 1997 (Cth).)

The application

64. Following the institution of proceedings in the Federal Magistrates Court of Australia in 2006 (
Perdikaris v Deputy Commissioner of Taxation SYG 3824 of 2006) leave was granted to the applicant to discontinue those proceedings noting an agreement between the parties dated 27 February 2007. The agreement provided:

  • "1 the Applicant will discontinue these proceedings and commence fresh proceedings in the Federal Court of Australia within 28 days of today.
  • 2. the respondent consents to such extension of time as may be required for the commencement of these proceedings in the Federal Court in relation to the subject matter of these proceedings and in relation to the 1997, 2001, 2002 and 2003 income years.
  • 3 the parties agree that the costs of these proceedings will be costs in the cause in the Federal Court proceedings, and that the right of each party to contend in the Federal Court that those costs or any part thereof should be allowed or disallowed is expressly reserved, save that no objection will be made that such costs are not costs of the Federal Court proceedings. These costs are to be party/party costs as agreed or taxed.
  • 4 In consideration of these terms the respondent agrees to make no application under Federal Magistrates Court Rule 13.02."

65. The proceedings in this Court were instituted by the applicant on 27 March 2007 by the filing of an "Application for an Order of Review".

The application was formulated as one under Order 54 of the Federal Court Rules i.e. one in which relief was sought under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the "ADJR Act"). It is clear from paragraphs 1, 2 and 3 of the Application for an Order of Review that the applicant seeks relief in respect of what he claims to be "a decision to which this Act applies' within the meaning of s 5(1) of the ADJR Act, relief in respect of conduct in which the respondent is said to have engaged for the purpose of making a decision to which the ADJR Act applies within the meaning of s 6(1) of the ADJR Act and relief in respect of an alleged failure by the respondent to make a decision to which the ADJR Act applies within the meaning of s 7 of the ADJR Act.

66. Paragraphs 1 - 3 of the Application for an Order of Review were expressed as follows:

  • " 1. Application to review the decision of the respondent that the Applicant:
    • (a) is not entitled to PAYE credit of $31,252 for the year ended 30 June, 1996.
    • (b) is not entitled to PAYE credit of $32,448 for the year ended 30 June, 1998.
    • (c) is not entitled to PAYE credit of $33,592 for the year ended 30 June, 1999.
    • (d) is not entitled to PAYE credit of $34,476 for the year ended 30 June, 2000.
    • (e) is not entitled to PAYE credit of $33,436 for the year ended 30 June, 1997.
    • (f) is not entitled to a PAYG withholding credit of $44,668 for the year ended 30 June, 2001.
    • (g) is not entitled to a PAYG withholding credit of $49,140 for the year ended 30 June, 2002.
    • (h) is not entitled to a PAYG withholding credit of $49,179 for the year ended 30 June, 2003.
    • (i) is to be visited with tax shortfall penalties (in respect of 2001-2003) and general interest charges arising out of the above matters.

      ATC 5398

  • 2. Further, or in the alternative, Application to review the conduct of the respondent under which:
  • the respondent has made the determinations referred to in par. 1 (a) to (h) above for the purpose of making decisions under s.221H of the Income Tax Assessment Act, 1936 and Sch. 1, Pt. 2-5 of the Taxation Administration Act, 1953 and Pt IIB of the Taxation Administration Act, 1953 to refuse to credit the Applicant and to refuse to credit the Applicant's running balance account with the said amounts and for the purpose of making findings and decisions concerning tax shortfall amounts and for the purpose of making decisions concerning the application of general interest charges.

  • 3. Further, or in the alternative, Application to review the failure of the respondent to:
  • credit the amounts mentioned in par. 1(a) to (h) above pursuant to s. 221H(2) of the Income Tax Assessment Act, 1936 and Sch. 1, Pt. 2-5 of the Taxation Administration Act, 1953 and Pt. IIB of the Taxation Administration Act, 1953.

67. The applicant claimed to be aggrieved by the decision of the respondent or conduct or proposed conduct of the respondent or failure of the respondent because:

"1.The respondent has proceeded on the basis that the applicant received the amounts the subject of his claims for PAYE and PAYG credits and has refused to make the said credits and has made entries on the applicant's running balance account and has imposed penalties and interest accordingly."

68. The relief sought by the applicant was expressed as follows:

" The applicant claims -

  • 1. Orders pursuant to s. 16 of the Administrative Decisions (Judicial Review) Act, 1977 that the said decisions be quashed or set aside and that the matters be referred to the respondent for determination according to law.
  • 2. Further, or in the alternative, an Order pursuant to s. 16 of the Administrative Decisions (Judicial Review) Act, 1977 that the respondent do make decisions, or give further consideration, pursuant to s. 221H of the Income Tax Assessment Act, 1936 and Sch. 1, Pt. 2-5 of the Taxation Administration Act, 1953 and Pt IIB of the Taxation Administration Act, 1953 and sub-div. 284B of Sch. 1 of the Taxation Administration Act, 1953 concerning the applicant's claimed entitlements to credits, and concerning his liability to tax shortfall penalties and concerning his liability to interest.
  • 3. An Order that time for the commencement of this Application be extended until the date of filing hereof.
  • 4. Costs
  • In the alternative to the foregoing relief, the Applicant claims:

  • 5. An order of certiorari, that the said decisions of the respondent be quashed and that the matters be remitted to the respondent for determination according to law.
  • 6. Further or in the alternative to par. 4, an order of prohibition against the respondent, prohibiting the respondent from acting on or proceeding further on the said decisions.
  • 7. Costs.
  • 8. Such further or other order as to the Court seems fit."

69. It may be observed that in paragraphs 5-8 constitutional writ relief is sought in the alternative to the prayers for relief under the ADJR Act.

Under s 39B(1) of the Judiciary Act 1903 (Cth) (the "Judiciary Act") the original jurisdiction of the Federal Court of Australia includes jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth (see also ss 75(v) and 77(1) of the Constitution of the Commonwealth).

70. The application for an order of review included a series of grounds, nos 3 and 5(a) of which were abandoned by the applicant on 24 October 2007. The remaining grounds were as follows:

  • "1. The respondent misdirected herself in that the procedures required by law to be observed in connexion with the making of the decisions, or in connexion with the conduct, were not observed in that it was a condition of the power, or alternatively, was a legal requirement to be observed in exercising the power, to make the decisions to make or not make the credit, that before the decision is made the Commissioner must first have made an assessment of the tax payable by the applicant or must be satisfied that no tax is payable, and the respondent proceeded without first making an assessment of the tax payable and the respondent did not determine that she was satisfied that no tax was payable.

  • ATC 5399

    2. The respondent misdirected herself in that she failed, in connexion with the making of the decision, or in connexion with the conduct, to ask herself and determine what were the assessable wages or salary of the applicant during the income years in question and whether the amounts of the credits claimed were or were not part of those assessable wages or salaries.
  • ...

  • 4. The respondent acted on no evidence in concluding that the applicant had received the amounts of the claimed PAYE and PAYG deductions.
  • 5. The respondent denied procedural fairness to the applicant in that the respondent in making the decision:
  • ...

  • (b) did not identify and call for comment by the applicant on the material evidence that the respondent proposed to take into account, so far as it was considered to be adverse to him; and
  • (c) did not identify the material issues in relation to the decisions or conduct, and did not call upon the applicant to address them.
  • 6. The respondent took into account an irrelevant consideration, namely, that information available within the Tax Office that the employer company has not fulfilled its obligation to deduct and remit the amounts of PAYE deductions during the years ending 30 June, 1996-2000.
  • 7. The respondent took into account an irrelevant consideration, namely, that information available within the Tax Office that the employer company has not fulfilled its obligation to report and remit the amounts of PAYG withholding deductions during the years ending 30 June, 2001-2003.
  • 8. The aforementioned grounds consequentially affected the respondent's determination (in relatin (sic) to the imposition of tax shortfall penalties) of the existence of shortfall amounts, false or misleading statements, want of reasonable care and want of a reasonably arguable position.
  • 9. Further, or in the alternative, the respondent misdirected herself as to the meaning or application of the concept "want of reasonable care" in sub-div. 284B of Sch. 1 of the Taxation Administration Act, 1953, in that she failed to consider whether or not it was reasonable to claim the credits on the basis that that (sic) the credited income to which it referred was included as income in the group certificates and had not been received from the employer by the applicant.
  • 10. Further, or in the alternative, the respondent misdirected herself in that table item 4 of s. 284-80(1) of sub-div. 284B of Sch. 1 of the Taxation Administration Act, 1953 was not capable of application in the circumstances."

Jurisdiction

71. On 5 April 2007 the respondent filed a "Notice of Objection to Competency" which provided as follows:

"The Respondent objects to the jurisdiction of this Court to try this application to the extent that it seeks an order under the Administrative Decisions (Judicial Review) Act 1977 on the grounds that:

  • 1. The application is incompetent because it seeks review under the Administrative Decisions (Judicial Review) Act 1977 (the ADJR Act) of alleged decisions that are not 'decisions to which this Act applies', as defined in s.3 of the ADJR Act.
  • 2. The alleged 'decisions' do not exhibit the criteria of a 'reviewable decision':
    • (a) as stated by Mason CJ in
      Australian Broadcasting Tribunal v Bond [1990] 170 CLR 321 at 337 in that the 'decisions' are not decisions 'for which provision is made by or under a statute' or decisions 'which are final or operative or determinative, at least in a practical sense...', nor

    • ATC 5400

      (b) as stated by Gummow, Callinan and Heydon JJ in
      Griffith University v Tang [2005] 221 CLR 99 at [89], namely:
      • i. the decision(s) must be expressly or impliedly required or authorised by the enactment; and
      • ii. the decision must itself confer, alter or otherwise affect legal rights or obligations, and in that sense the decision must derive from the enactment.
  • 3. In respect of the years of income ended 30 June 1996 to 30 June 2000 inclusive, section 221H (2) of the Income Tax Assessment Act 1936 itself prescribes the consequences that apply if a taxpayer's employer has in fact made instalment deductions from the taxpayer employee's income.
  • 4. In respect of the years of income ended 30 June 2001 to 30 June 2003 inclusive, section 18-15 of Schedule 1 of the Taxation Administration Act 1953 itself prescribes the consequences that apply if a taxpayer's employer has in fact withheld amounts (i.e. income tax instalment deductions) from the taxpayer employee's income.
  • 5. The Respondent has merely informed the Applicant of the consequences of the application of those provisions in the absence of evidence that the Applicant's employer did:
    • 5.1. make instalment deductions (in respect of the years ended 30 June 1996 to 30 June 2000 inclusive); or
    • 5.2. withhold amounts (in respect of the years of income ended 30 June 2001 to 30 June 2003 inclusive)
    • from the Applicant's income in each of the relevant years of income.

  • 6. The Respondent has not made reviewable decisions to which the ADJR Act applies."

72. Putting to one side whether any ground was established or whether any relief would be futile or should be refused on some other basis, the respondent conceded that the Court had jurisdiction to deal with the application under s 39B of the Judiciary Act (see Richard Walter).

73. In relation to the prayers for relief under the ADJR Act the respondent submitted that the Court was without jurisdiction for the following reasons:

  • • "No alleged decision of the respondent, referred to in these proceedings, was a 'decision' to which the ADJR Act applies, as it had neither of the indicia of such a decision identified in
    Griffith University v Tang (2005) 221 CLR 99 per Gummow, Callinan and Heydon JJ at [89]. '.. See also
    Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 337.. Section 221H of the Income Tax Assessment Act 1936 ('ITAA 36') does not 'require or authorise' a decision (to use the language of Griffith University) or provide for the making of a decision (to use the language of Bond) that alters or affects legal rights or obligations. It is section 221H itself that has that effect; not any decision made by the respondent. The fact that the respondent, as a practical matter, forms a view as to how that section applies to the applicant and acts upon that view does not mean that the respondent is making a 'decision...under an enactment'. The position is comparable with
    Century Yuasa Batteries Pty Ltd v FC of T (1997) 143 ALR 477 at 487 (lines 40-47). The respondent's point is not that the decision is excluded by Sched 1 of the ADJR Act (as to which see
    Coco v Commissioner of Taxation (1993) 42 FCR 219;" (Footnotes omitted)
  • • "Nor was it 'conduct' to which section 6 of the ADJR Act applies, as it was not for the purpose of making any 'decision' to which that Act applies;"
  • • "Equally, there cannot here be said to have been any failure to make a 'decision' to which the ADJR Act applies, such as might be actionable under section 7 of that Act, because there was no relevant duty: The alleged 'decision' which the applicant claims was not made was not one to which the ADJR applies - see (a) above."

74. In
Griffith University v Tang (2005) 221 CLR 99, Gummow, Callinan and Heydon JJ said at [89]:

  • "89 The determination of whether a decision is 'made ... under an enactment' involves two criteria: first, the decision must be expressly or impliedly required or authorised by the enactment; and, secondly, the decision must itself confer, alter or otherwise affect legal rights or obligations, and in that sense the decision must derive from the enactment. A decision will only be 'made ... under an enactment' if both these criteria are met. It should be emphasised that this construction of the statutory definition does not require the relevant decision to affect or alter existing rights or obligations, and it will be sufficient that the enactment requires or authorises decisions from which new rights or obligations arise. Similarly, it is not necessary that the relevantly affected legal rights owe their existence to the enactment in question. Affection of rights or obligations derived from the general law or statute will suffice."

    ATC 5401

Inquiries

75. The respondent's records revealed that C P Agents Pty Limited was not registered with the respondent as a group employer in respect of the years of income ended 30 June 1996 to 30 June 2000 or for any other years of income.

76. The respondent's ATO matching system records indicated that the company with the ABN 29 078 361 369 did not report or pay any amounts for PAYG withholding to the respondent for any period subsequent to 1 July 2000.

77. After receiving a letter from the applicant's tax agents, Gertos Savell Katos, dated 24 November 2005, Mr Tomaras had a conversation with Mr Savell in which conversation to the following effect took place:

Tomaras: "We have received your letter and supporting documentation. I have looked at the information you have sent me but you have sent the payee copies and not the payer copies of the relevant group certificate and payment summaries."
Savell: "This is all the information that I have on file for Mr Perdikaris and the company. All the other information in respect of the company is with the liquidator ..."

78. On 27 February 2006 Christopher Darin said to Mr Tomaras "I've searched through all the records for the companies and Mr Perdikaris for 1997, 2001, 2002 and 2003 years as to whether any group tax has been paid to the Tax Office but I can't find any documents. I assume that none of the documents have been sent to the ATO and no group tax has been paid".

79. On 6 March 2006 Mr Tomaras had a further conversation with Mr Savell in which conversation to the following effect took place:

Tomaras: "I rang in relation to Mr Perdikaris' matter. I have spoken with the liquidator and he says he doesn't have any documents that give me any information or any proof that the PAYE tax for the year ended 1997 and the PAYG Withholding for the years ended 30 June 2001, 2002 and 2003 for the companies concerned has been paid to the Tax Office or document have been lodged."
Savell: "We don't hold any documents. They should all be with the liquidator. I will contact the liquidator to see what he has got on file or what information he has in relation to Mr Perdikaris. I will also contact Mr Perdikaris to see whether he has any information or proof that PAYG Withholding or group tax has been paid by the companies that issued the payment summaries and group certificates. I'll get back to you."

Consideration

80. It is clear that proper enquiries were made by the respondent of the applicant in relation to evidence that might have established that PAYE deductions had been made by the applicant's employer in respect of the applicant in relation to the years of income ended 30 June 1996, 30 June 1997, 30 June 1998, 30 June 1999 and 30 June 2000, and further, that PAYG amounts had been withheld by the relevant payer from amounts paid to the applicant in respect of the years of income ended 30 June 2001, 30 June 2002 and 30 June 2003 (see the letters from the respondent to the applicant of 28 September 2006 and 17 March 2006 (two letters) referred to above).

81. 


ATC 5402

It will be recalled that in her first-mentioned letter the respondent said:

"In order that we can consider your claim for PAYE TIDs, please provide details of the amount of all salary and wages paid and PAYE TIDs deducted from such payments .... You should also provide any documentary evidence that is available to support your entitlement to PAYE TIDs.

...

If you are unable to provide evidence that the salary and wages payments have been made and PAYE tax instalments deducted, then we may be unable to allow any PAYE TID credit claimed by you in your income tax returns. ..."

82. In the first letter of 17 March 2006 referred to above the respondent had said to the applicant:

"We have no record of the company remitting PAYE TIDs or lodging a Reconciliation Statement in respect of group certificates for the period 1 July 1996 to 30 June 1997. Therefore, we are unable to confirm if any PAYE TID credit is available for the employees of the company.

In order that we can consider your claim for PAYE TID credit, please provide details of the amount of all salary and wages paid and PAYE TIDs deducted from such payments during the year ended 30 June 1997. You should also provide any documentary evidence that is available to support your entitlement to PAYE TID credit.

...

If you are unable to provide evidence that the salary and wages payments have been made and PAYE TIDs deducted, then we may be unable to allow any PAYE TID credit claimed by you in your income tax return."

83. The second letter of 17 March 2006 the respondent had said to the applicant:

"We have no record of Business Activity Statements (BAS) or a Payment Summary Statement being lodged by the company for the income years 1 July 2001 till 30 June 2003. Therefore, we are unable to confirm if any PAYG Withholding credit is available for employees of the company.

In order that we can consider your claim for PAYG Withholding credit, please provide details of the amount of all salary and wages paid to you and PAYG Withholding deducted from such payments for the income years 30 June 2001 till 2003. You should also provide any documentary evidence that is available to support your entitlement to PAYG Withholding credit.

If you are unable to provide evidence that the PAYG Withholding has been deducted from your salary and wages payments, then we may be unable to allow the PAYG Withholding credit claimed by you in your income tax return. ..."

84. The respondent's "Reasons for Decision" forwarded to the applicant under cover of the respondent's letters dated 30 November 2006 and 28 September 2006 (two letters) make it clear that the paucity of relevant information in relation to the making of PAYE deductions and the withholding of PAYG payments, provided by the applicant, told against his claims for credits.

85. It will be recalled that the in the "Reasons for Decision" accompanying the respondent's letter of 30 November 2006 the respondent said:

"We requested from you the employer copies of your group certificates for the years ending 30 June 1996, 1998, 1999 and 2000. Other than the employee copies of your group certificate for 1996 - 2000, you have not provided any evidence to support your contention that PAYE was deducted from payments of salary and wages made to you. "

(Emphasis added)

86. Similarly, in the respondent's "Reasons for Decision" forwarded to the applicant under cover of the respondent's letters of 28 September 2006 the respondent said:

"We contacted your tax agent by phone on 1 December 2005 requesting payer copies of the above [the applicant's group certificate for the year ended 30 June 1997]. He was unable to assist us, as all the information was with the liquidator, so on 6 December 2005 we contacted the liquidator's office by phone requesting the above and asking for evidence that PAYE was withheld (sic) from


ATC 5403

payments of salary and wages paid to you for the year ended 30 June 1997. ...

Other than the payee copies of your group certificate for 1997 and payment summaries for 2001 - 2003 years, you have not provided any other evidence to support your contention that PAYE was deducted from payments of salary and wages made to you.

...

We contacted your tax agent by phone on 1 December 2005 requesting payer copies of the above [the applicant's payment summaries for the years ended 30 June 2001, 30 June 2002 and 30 June 2003]. He was unable to assist us, as all the information was with the liquidator, so on 6 December 2005 we contacted the liquidator's office by phone requesting the above and asking for evidence that PAYGW was withheld from payments of salary and wages paid to you during the years ended 30 June 2001 to 30 June 2003 inclusive.

You have not provided any other evidence to support your contention that PAYGW was deducted from payments of salary and wages made to you.

..."

(Emphasis added)

87. In the respondent's "Reasons for Decision" forwarded under cover of her letter dated 30 November 2006 she also said:

"Information available within the Tax Office supports the conclusion that the company has not fulfilled its obligation to deduct and remit the amounts of PAYE deductions during the years ending 30 June 1996 - 2000."

(Emphasis added)

88. I do not consider that, by using the expression "deduct and remit", the respondent was asserting that the applicant's employer had failed to relevantly make PAYE deductions as required. Rather, the respondent was focussing upon the failure of the applicant's employer to discharge its remittal obligation. A failure to remit will not, of itself, establish that there was a failure to make the requisite PAYE deductions, but a non-remittal will legitimately put into question whether deductions were made.

89. Similarly, in the respondent's Reasons for Decision forwarded under cover of her letters of 28 September 2006 she said:

"The issue of a group certificate is not conclusive evidence that PAYE deductions have been deducted from payments of salary and wages. Information available within the Tax Office supports the conclusion that the company has not fulfilled its obligation to deduct and remit the amounts of PAYE deductions during the year ended 30 June 1997. ...

...

The issue of a Payment Summary solely is not conclusive evidence that PAYGW has been deducted (sic) from payments of salary and wages. Information available within the Tax Office supports the conclusion that the company has not fulfilled its obligation to report and remit the amounts of PAYGW during the years ended 30 June 2001 to 30 June 2003."

(Emphasis added)

90. Similar comments may be made in respect of these Reasons as were made in respect of the reasons previously considered at [88]. In relation to the three PAYG years, it may be observed that the respondent's reasons do not deal with the applicant's employer's obligation to "withhold and remit" but rather, the payer's obligation to "report and remit".

91. The fact that the respondent forwarded letters to the applicant dated 30 November 2006 and 28 September 2006 reporting upon its audits, before the eight notices of assessment were issued on 28 December 2006, is of no moment.

92. Under the relevant legislation set out at [61] above the Commissioner was not obliged to credit any sum in payment or part payment of the relevant tax unless, firstly, the relevant employer had made PAYE deductions from which the sum of the deductions could be derived and, secondly, the Commissioner had assessed the amount of tax payable by the relevant employee, to the payment or part payment of which the sum of the deductions could be applied.

93. 


ATC 5404

Plainly, until the relevant notices of assessment were issued, the occasion for the Commissioner to credit sums could not have arisen. But this did not preclude the respondent from addressing, before the notices of assessment were issued, whether the relevant employer had "made any deductions" in respect of the relevant employee in the years in question.

94. Under the relevant legislation set out at [62] above, the respondent had no obligation to "credit" any sums. The imperative "must credit" was not employed. The legislation simply "entitled" an employee to a credit equal to the sum of the deductions that had been made in respect of the employee. It was then for the Commissioner to credit the relevant sum of the deductions.

95. Under the relevant legislation applicable to the PAYG regime, set out at [63] above, the imperative "must credit" was not used to impose an obligation upon the Commissioner rather, the legislation simply "entitled" an employee to a credit equal to the total of the amounts withheld by the relevant payer from payments made to the relevant employee.

96. The obligatory crediting of the sums of the deductions in payment or part payment of the tax payable under an assessment, the entitlement of an employee to a credit equal to the sum of the deductions under the PAYE system and the entitlement of an employee to a credit equal to the total of the amounts withheld under the PAYG system did not form part of the assessment process. They were matters which were consequential upon the making by the Commissioner of assessments of the employee's taxable income and of the tax payable thereon. They were germane to the discharge by taxpayers, who had been employees in receipt of salaries or wages, of their tax liabilities, not to the determination of the relevant tax payable.

97. True it is that a determination that an employer has not made PAYE deductions or that a payer has not withheld PAYG amounts from payments made to an employee will negate any obligation on the Commissioner to credit the sum of the deductions in payment or part payment of the relevant tax or deny the entitlement of the employee to a credit equal to the sum of the deductions or the total of the PAYG amounts withheld, but such a determination will not constitute a decision made under an enactment.

98. In my opinion, the determinations did not answer the description of being decisions made under an enactment in the requisite sense as explained by Gummow, Callinan and Heydon JJ in
Griffith University v Tang (see [74] above). They did not, in my opinion, by themselves confer, alter or otherwise affect legal rights or obligations and in that sense derive from the relevant enactment.

99. Were the respondent to bring recovery proceedings against the applicant, the applicant would not be precluded by the determinations from asserting that his employer had made the relevant PAYE deductions or withheld the relevant PAYG amounts, for which he contends. All that the determinations do is deny the applicant the credits which he contends the Commissioner must make or to which he submits that he has become entitled, unless and until he establishes, he carrying the onus of proof, that his employer made the deductions or withheld the payments as claimed.

100. Nothing that was said by Adams J in
Laurent v The Law Society of New South Wales [2000] NSWSC 1103 ("Laurent") assists the applicant in the present case. In Laurent the plaintiffs sought to set aside a decision of the Council of the Law Society of New South Wales in relation to a claim made against the Solicitors' Fidelity Fund. Section 80 of the Legal Profession Act 1987 (NSW) ("the Legal Profession Act") made provision for claims against the Fidelity Fund to be made in writing in the form approved by the Law Society. Section 80(3) provided for the Law Society to investigate claims made against the Fidelity Fund and to determine the claims by wholly or partly allowing, compromising, settling or disallowing them. For there to be a successful claim against the Fidelity Fund it was necessary that there be a "dishonest default" or a failure to account within the meaning of the Legal Profession Act. Absent a conviction, it was necessary for the Council of the Law Society to make a finding of dishonesty before a claim could be allowed on either basis.

Plainly, determinations made by the Council of the Law Society under the Legal Profession Act had an entirely different character from


ATC 5405

determinations made by the respondent in respect of PAYE deductions said to have been made by an employer during a year of income and PAYG amounts said to have been withheld from payments by way of salary or wages made to a person such as the applicant during a year of income.

101. Were the determinations of the respondent open to review it could not be said that the respondent failed to accord the applicant procedural fairness. The applicant was afforded an opportunity to put information and submissions to the respondent in support of an outcome that supported his interests. In my opinion it was not incumbent upon the respondent to afford the applicant an interview before making the determinations which she made.

102. Natural justice and fairness are not to be equated. In the context of administrative decision-making it is more appropriate to speak of a duty to act fairly or to accord procedural fairness (per Mason J, as his Honour then was, in
Kioa v West (1985) 159 CLR 550 at 583).

103. In most cases the critical question is not whether the principles of natural justice apply. It is: what does the duty to act fairly require in the circumstances of the particular case? (see per Kitto J in
Mobil Oil Australia Proprietary Limited v The Commissioner of Taxation (1963) 113 CLR 475 at 504, per Mason J in
Kioa v West at 585 and per Ellicott J in
Finch v Goldstein (1981) 36 ALR 287).

104. The expression "procedural fairness" more aptly conveys the notion of a flexible obligation to adopt fair procedures which are appropriate and adapted to the circumstances of the particular case. The statutory power must be exercised fairly, i.e. in accordance with procedures that are fair to the individual in the light of the statutory requirements, the interests of the individual and the interests and purposes, whether public or private, which the statute seeks to advance or protect or permits to be taken into account as legitimate considerations (per Mason J in
Kioa v West at 585 cf
Salemi v MacKellar [No. 2] (1977) 137 CLR 396 at 451 per Jacobs J).

105. Fairness is not an abstract concept. It is essentially practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice (per Gleeson CJ in
Re Minister for Immigration and Multicultural and Indigenous Affairs;
Ex parte Lam (2003) 214 CLR 1 ("Lam") at [37]).

106. The content of the requirement for procedural fairness may fluctuate during the course of particular administrative decision-making (per Gaudron and Gummow JJ in
Re Refugee Review Tribunal;
Ex parte Aala (2000) 204 CLR 82 ("Aala") at [62]; see also per McHugh and Gummow JJ in Lam at [48]).

107. Insofar as the determinations of the respondent may have constituted decisions, it is clear that the respondent did not identify a wrong issue, ask herself a wrong question, ignore relevant material, rely on irrelevant material to make an erroneous finding or reach a mistaken conclusion. Furthermore there was no question of Wednesbury unreasonableness (see
Williams v Minister for Justice and Customs of the Commonwealth of Australia [2007] FCAFC 33 at [32]-[39]). There was no jurisdictional error.

108. In considering the respondent's determinations, it is not in point to ask whether her factual conclusions were right. The relevant question related to the respondent's processes, not her actual decision.

109. The determinations of the respondent in this case were not determinations as to the time at which amounts credited by the Commissioner should take effect within the meaning of s 221H(4B) of the Assessment Act as in force in the years of income ended 30 June 1996 - 30 June 2000 inclusive. Determinations under s 221H(4B) are predicated upon an obligation or entitlement to a credit of the sum of the deductions made by an employer, in payment or part payment of the relevant tax.

Discretion

110. Were the applicant otherwise entitled to Constitutional writ relief, in the circumstances of the present case, as recorded above, I would consider the matter to be one where, it would be appropriate for the Court, in the exercise of its discretion, to decline to order the relief sought (see generally per Gaudron and Gummow JJ in Aala at [43]-[62] and, in particular, [53]).

Decision

111. For the reasons indicated above, grounds 1, 2, 4, 5(b), 5(c), 6 and 7 fail. It follows that grounds 8, 9 and 10 also fail.

112. 


ATC 5406

Furthermore, it should be observed in relation to the applicant's challenges to the assessment of penalties in respect of the years of income ended 30 June 2001, 30 June 2002 and 30 June 2003 that such challenges were restricted by s 298-30 of Schedule 1 to the Administration Act to proceedings under Part IVC of the Administration Act on a review or appeal relating to the assessment. The application for an order for review presently before the Court is not such a proceeding. Section 298-30 provided:
  • "298-30(1) The Commissioner must make an assessment of the amount of an administrative penalty under Division 284.
  • (2) An entity that is dissatisfied with such an assessment made about the entity may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.
  • (3) The production of a notice of such an assessment, or of a copy of it certified by or on behalf of the Commissioner, is conclusive evidence of the making of the assessment and of the particulars in it.
  • (4) Subsection (3) does not apply to proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment."

113. In an affidavit of Mr Savell sworn 2 April 2007 he referred to a printout which he caused to be made on 21 February 2007 of what he described as "the running balance of the Applicants intergrated account (sic)" which commenced 1 November 2006. The evidence of Farisha Ali, a Tax Technical Officer in the Micro Enterprises and Individuals business line of the Australian Taxation Office, was that the document in question, to which Mr Savell referred, was "an itemised statement of account and not an RBA [a Running Balance Account under the Administration Act]". Given the findings which have been made, it is unnecessary to make any finding as to whether or not the account to which Mr Savell referred was a Running Balance Account, or as to the consequences which may have flowed from it being such an account.

114. In my opinion the application should be dismissed with costs which will, of course, include the costs of the proceedings in the Federal Magistrates Court of Australia SYG 3824 of 2006, subject to the agreement of the parties in relation thereto, to which reference has been made.


 

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