On 3 September 2008, the High Court allowed the commissioner’s appeal in
Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd.1 The court held that the taxpayers’ objections against, and review of, the commissioner’s tax assessments were not a valid basis to have the commissioner’s statutory demands against the taxpayers to pay the tax assessed set aside.
The commissioner issued statutory demands against the taxpayers for outstanding GST and interest and penalties. The taxpayers objected to the assessments, and review proceedings under Part IVC of the
Taxation Administration Act 1953 (Cth) (Act) were pending at the time the commissioner issued the statutory demands. Generally, the court may set aside a statutory demand where there is a ‘genuine dispute’ regarding the existence or amount of the debt. However, the High Court relied upon the legislative policy authorising the recovery of tax debts regardless of pending Part IVC proceedings: that policy (reflected in sections 14ZZM and 14ZZR of the Act) presumes the validity of tax assessments in recovery proceedings between the commissioner and taxpayer. Accordingly, despite the outstanding challenges to the commissioner’s assessments, the commissioner’s statutory demands were upheld. The High Court noted that while the operation of the provisions may be harsh, they implement a longstanding policy to protect the interests of the revenue.
As a result of the validity of, and the taxpayers failure to satisfy, the statutory demands, the commissioner could apply to have the taxpayers wound up, at which time the taxpayers would be presumed to be insolvent. It was argued that there would be major disruption to the taxpayers and their creditors and contributors if the taxpayer would be wound up. There was no suggestion that the commissioner would suffer any prejudice if left to other remedies. However, the High Court held that this was not relevant to the current proceedings relating to the statutory demands, but suggested that such considerations could be relevant, if at all, at the later stage of the hearing of any winding up application. For further information see the judgment.
2
Endnotes
1. Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd
2. Ibid
This article was written by Hugh Paynter, Senior Associate, and Wenonah Tenedero, Solicitor, Sydney.
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