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03 Sep 08 Commissioner's statutory demands upheld by High Court - Broadbeach

The High Court (Gummow ACJ, Kirby, Heydon, Crennan and Kiefel JJ) has upheld the Commissioner's appeals from the decision of the Court of Appeal of the Supreme Court of Queensland, which had upheld the primary judge's decision to set aside, under s 459G of the Corporations Act 2001, statutory demands issued by the Commissioner upon 3 taxpayers. The statutory demands related to debts for income tax, GST and penalties assessed to the 3 taxpayers, and in respect of which the 3 taxpayers had commenced review proceedings in the AAT under Part IVC of the Taxation Administration Act 1953. The review proceedings before the AAT were and are still pending.

Contrary to the findings below, the High Court held that the pendency of the AAT proceedings (and whether or not the taxpayers had a reasonably arguable case) did not mean that there was a "genuine dispute" between the parties within the meaning of s 459H(1)(a) of the Corporations Act 2001. The High Court said, at paras 57-8"

"Section 459G applications by taxpayers are not Pt IVC proceedings and production by the Commissioner of the notices of assessment and of the GST declarations conclusively demonstrates that the amounts and particulars in the assessments and declarations are correct[47]. That being so, the operation of the provisions in the taxation laws creating the debts and providing for their recovery by the Commissioner cannot be sidestepped in an application by a taxpayer under s 459G of the Corporations Act to set aside a statutory demand by the Commissioner.

The matter was explained, with respect correctly, by Williams J in Bluehaven Transport Pty Ltd v Commissioner of Taxation[48]. The use by the Commissioner of the statutory demand procedure in aid of a winding up application is in the course of recovery of the relevant indebtedness to the Commonwealth by a permissible legal avenue. The phrase "may be recovered" in ss 14ZZM and 14ZZR of the Administration Act applies to the statutory demand procedure. That state of affairs places the existence and amounts of the "tax debts" outside the area for a "genuine dispute" for the purposes of s 459H(1) of the Corporations Act."

Although upholding the Commissioner's appeal, the High Court noted, without comment, a concession made by the Commissioner. The Court said, at para 13:

"Notwithstanding the presumption of insolvency that would apply under s 459C(2)(a), in written and oral submissions to this Court the Commissioner made an important concession. This was that upon the hearing of such winding up applications the court might properly have regard to whether the taxpayer had a "reasonably arguable" case in proceedings under Pt IVC of the Administration Act, if those proceedings then still be on foot; questions of the kind canvassed in General Steel Industries Inc v Commissioner for Railways (NSW)[10] might arise."

Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41 (High Court; Gummow ACJ, Kirby, Heydon, Crennan and Kiefel JJ; 3 September 2008).

For a copy of the decision, go here

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