A taxpayer has been unsuccessful in seeking either an adjournment or stay order for matter involving a $1.8 million tax debt.
The facts were these.
- The tax-related liabilities, the subject of this recovery action resulted from default assessments to the Taxpayer’s 2009 to 2014 tax years, based on an assets betterment approach.
- The Taxpayer was vice-president of the Comancheros – an organisation that the Court called an ‘outlaw motor cycle gang’ (and which is widely known, to readers in Australia). He had not lodged tax returns (he said because of his ‘unhealthy lifestyle’).
- On 14 Feb 2014, the Taxpayer went to jail for about 10 months, for committing an offence.
- In about September 2015, the Commissioner started to audit his affairs.
- On 15 October 2015, he was shot, almost fatally, leaving him (he said) ‘physically, mentally, emotionally, psychologically and financially devastated’. He is on a disability pension and is likely to be so, for the rest of his life.
- The Taxpayer underwent rehabilitation for a long period.
- On 30 November 2015, the ATO issued the Taxpayer a ‘Position Paper’, outlining its proposed course of action after the audit.
- On 11 November 2016, the ATO issued the 2009 – 2014 default assessments for about $1.8m. There was primary tax, shortfall penalties and General Interest Charge (GIC).
- It was not until 2017, that the Taxpayer felt up to dealing with his affairs.
- On 23 June 2017, the ATO commenced these recovery proceedings.
- In July 2017, the Taxpayer instructed his current solicitors who advised him to lodge objections and request remissions of the penalties. The objections were to include explanations of which unexplained deposits were income and which were not.
- The ATO concerned about the safety of their officers and ultimately obtained orders (on 12 Feb 2018) to use pseudonyms for each deponent of affidavits relied on by the ATO. This was 8 months after commencing the proceedings..
- On 25 June 2018, the Taxpayer finally objected to the default assessments (1 year and 7 months after the assessments were issued).
The Taxpayer accepted that the amounts assessed were conclusively due (outside the objection process in Part IVC of the TAA53).
He sought either an adjournment or a stay of execution, the tests for which are very similar. The regime of the tax law is that the Commissioner can recover assessed debt, even when an objection has been lodged, or there are outstanding requests for penalties to be remitted. The onus is on the taxpayer to persuade the Court why there ought be either an adjournment or a stay of execution. In exercising its discretion, the Court may consider whether the objection or remission request has merit or not.
The Taxpayer argued:
- The Deputy Commissioner has duties as a model litigant and also under the Civil Procedures Act.
- That a stay for a few months, to allow the objection to be determined and remission requests be decided, would be consistent with those obligations.
- That he had no capacity to pay the claimed amount the ATO would bankrupt him, in practice removing his right to object.
The Taxpayer, however, failed on the basis of the Deputy Commissioner’s submissions:
48. The plaintiff submitted that the paucity of the defendant’s evidence before the Court is a matter clearly relevant to the exercise of the discretion whether or not to grant a stay. It is the defendant who bears the burden of satisfying the Court that the stay should be granted, and the absence of that evidence is a matter that should be taken into account in refusing to grant a stay of execution. In particular:
(a) there is no evidence as to the merits of any objection to the assessments beyond what is contained in the plaintiff’s position paper and the defendant’s bare assertions in his defence and affidavit;
(b) the evidence as to the defendant’s impecuniosity – that he is a pensioner – is contradicted by the searches undertaken by the plaintiff and referred to in the position paper showing that the defendant is the registered proprietor of properties at 11 Louise Baille Avenue, Narre Warren South, 1/11, 2/11 and 3/11 Parkwood Court, Deer Park;
(c) there is no evidence to support the assertion made by Counsel for the defendant that the defendant is not the beneficial owner of the properties;
(d) the material put before the Court by the defendant is insufficient to enable any conclusion about defendant being in a position of extreme hardship if the Court proceeds to enter judgment against him; and
(e) the bankruptcy, or threat of bankruptcy, itself cannot be the discretionary basis for a decision to stay these proceedings and, in any event, this Court is not the appropriate forum for raising that particular issue as a matter of discretion.
Judgment was given to the Deputy Commissioner and the taxpayer was ordered to pay costs.
(DCT v Marando  VSC 641, Supreme Court of Victoria, Derham AsJ, 26 October 2018.)
[LTN 215, 7/11/18; Tax Month – November 2018]
CPD questions (answers available)
- Had the Taxpayer been Vice-President of the Comancheros, and was he shot, nearly fatally, and recovering in rehab, whilst the ATO audited him?
- Was the Taxpayer on a disability pension since the shooting?
- Is this consistent with the audit finding that he had a series of properties registered in his name?
- Did the audit assess various unexplained deposits in his bank account(s)?
- Did the tax law make the claimed liabilities ‘conclusively’ payable (so there was no defence to them being paid)?
- What did he seek then?
- Was he successful?
- Was there a shortage of evidence as to the merits of the objection and the Taxpayer’s impecuniosity (and likelihood that ‘extreme hardship’ would result by deferring execution)?