FEDERAL COURT OF AUSTRALIA Madera v Commissioner of Taxation [2004] FCA 1616 ADMINISTRATIVE LAW – request for reasons under s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) – whether decision to notify person of a penalty incurred under a self-executing statutory provision a 'decision under an enactment' ADMINISTRATIVE LAW – request for reasons under s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) – whether reasons provided satisfy requirements of s 13(11)(b) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) Acts Interpretation Act 1901 (Cth) s 33(1) Income Tax Assessment Act 1936 (Cth) Taxation Administration Act 1953 (Cth) ss 3A, Schedule 1 ss 12-40, 16-30, 16-45 Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 3, 13, 13(1), 13(4), 13(4A), 13(11)(1)(b), Schedule 2 Ansett Transport Industries (Operations) Pty Ltd v Wraith (1983) 48 ALR 500 discussed Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 discussed Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 cited Elias v Commissioner of Taxation (2002) 199 ALR 246 cited Elias v Commissioner of Taxation (2002) 123 FCR 499 cited Hutchins v Deputy Commissioner of Taxation (1996) 136 ALR 153 discussed May v Deputy Federal Commissioner of Taxation (1998) 98 ATC 4960 discussed McCormack v Commissioner of Taxation (2001) 114 FCR 574 cited Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 referred to MLC Investments Ltd v Commissioner of Taxation (2003) 205 ALR 207 cited In Re Clay, Clay v Booth [1919] 1 Ch 66 cited Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192 cited Temples Wholesale Flower Supplies Pty Ltd v Commissioner of Taxation (1991) 29 FCR 93 cited Trylow Pty Ltd v Federal Commissioner of Taxation (2004) ATC 4406 cited Aronson, Dyer and Groves, Judicial Review of Administrative Action, 3rd edition, 2004 NICK MADERA AND ORS v COMMISSIONER OF TAXATION N 1353 OF 2004 STONE J 8 DECEMBER 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1353 OF 2004 BETWEEN: NICK MADERA FIRST APPLICANT PETRONILLA MADERA SECOND APPLICANT LUIGI PORRO THIRD APPLICANT ELIZABETH PORRO FOURTH APPLICANT CLAUDIO BELLISSIMO FIFTH APPLICANT TERESA BELLISSIMO SIXTH APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: STONE J DATE OF ORDER: 8 DECEMBER 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The motion be dismissed. 2. The applicant pay the respondent's costs of and incidental to the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1353 OF 2004 BETWEEN: NICK MADERA FIRST APPLICANT PETRONILLA MADERA SECOND APPLICANT LUIGI PORRO THIRD APPLICANT ELIZABETH PORRO FOURTH APPLICANT CLAUDIO BELLISSIMO FIFTH APPLICANT TERESA BELLISSIMO SIXTH APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: STONE J DATE: 8 DECEMBER 2004 PLACE: SYDNEY REASONS FOR JUDGMENT introduction 1 This proceeding involves an application for review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ('ADJR Act') of two decisions affecting the applicants that are said to have been made by the respondent under the Taxation Administration Act 1953 (Cth) ('Taxation Administration Act'). On 1 November 2004 the applicants filed a notice of motion seeking interlocutory relief. It is this notice of motion with which I am presently concerned. 2 In the applicants' notice of motion the decisions that are the object of the application for review are expressed to be: '(a) the Respondent's decision to notify the applicants on 17 August 2004 that a penalty in the amount of $36,543.50 had been imposed on them under, and by force of, section 16-30 of Schedule 1 to the [Taxation Administration Act] ("the first decision"); (b) the Respondent's decision to remit only part of that penalty, and in particular, 25% of it, under section 16-45 of [Schedule 1 to the Taxation Administration Act], which was communicated to the applicants partly on 17 August 2004 (by a notice of penalty for failure to withhold amounts) and partly on 18 August 2004 (by a Review of Business Activity Statement) ("the second decision")'. I shall refer respectively to these decisions as the 'notification decision' and the 'remittal decision'. It is common ground between the parties that, in respect of these decisions, the applicants have no right of objection or appeal under the Taxation Administration Act. Background 3 Section 16-30 of Schedule 1 of the Taxation Administration Act provides that an entity that fails to withhold a required amount 'is liable to pay to the Commissioner a penalty … equal to' the amount that should have been withheld. Section 16-45 provides that the Commissioner may remit part or all of the penalty and, if he decides to remit only part of the penalty, he must give written notice of the decision to the relevant entity. 4 By letter dated 16 September 2004 to the respondent, the solicitor for the applicants sought a written statement of the respondent's reasons for making the two decisions and said: 'Please treat this letter as a formal application for a statement of reasons for the two decisions the subject of the Application, which I make pursuant to sec 13(1) of the [ADJR Act], on which I propose that the taxpayers will rely in making their application for judicial review under that Act.' 5 In their reply dated 14 October 2004, the solicitors for the respondent advised that the respondent would not provide the requested statement because: 1. 'The [first] decision to notify the applicants of the penalty is not a decision under an enactment as there is no provision for notice to be given of the penalty.' 2. 'Notification of the [second] decisionwas also accompanied by a statement setting out findings of facts, referring to the evidence on which those findings were based and giving reasons for the decision.' The notice of motion 6 In their notice of motion the applicants seek 'an order in the nature of mandamus' requiring the respondent, within 7 days, to provide them with a written statement setting out findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving reasons for making the two decisions. 7 As their request quoted in [4] shows, the applicants rely on s 13 of the ADJR Act. In brief, s 13 imposes a statutory obligation on the person who makes a decision to which the section applies 'to furnish a statement in writing setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving reasons for the decision' within 28 days of being requested to do so. With exceptions that are not relevant here, the section applies to decisions to which the ADJR Act applies. Relevantly, the ADJR Act applies to a decision 'of an administrative character' made 'under an enactment'; s 3. The penalties imposed on the applicants arise under s 16-30 of the Taxation Administration Act and were partially remitted under s 16-45 of that Act. It is not in dispute that Taxation Administration Act is an enactment within the definition of 'enactment' in s 3 of the ADJR Act. 8 At the hearing of the notice of motion counsel for the applicants, Mr Johnson conceded that, despite the form of the motion put to the Court, the applicants were actually seeking a declaration under s 13(4A) of the ADJR Act that they were entitled to make a request for a statement of written reasons. If the Court were to make such a declaration the respondent would be obliged to provide the statement within 28 days after the Court's decision; s 13(4). The applicant did not request a formal amendment of the notice of motion and the respondent did not take issue with the formal deficiencies of the notice of motion. It was clear that both parties were fully aware of the issues in dispute and, in the circumstances, I am prepared to consider the substance of the applicants' claim without formal amendment of the notice of motion. submissions Notification decision 9 Despite the limit of the present enquiry, it should be noted that a declaration that, in respect of the notification decision, the applicants are entitled to a s 13 statement or a finding that the respondent is not obliged to supply such a statement because s 13(11)(1)(b) applies, necessarily implies that the applicants are entitled to review that decision under the ADJR Act. This is clear from the way in which the applicants formulated the questions for determination on this notice of motion. In relation to the notification decision these questions were said to be: (a) whether the respondent's decision to notify the applicants of the penalty imposed by s 16-30 is 'a decision of an administrative character under an enactment to which the ADJR Act applies within the meaning of s 3(1) of the ADJR Act'; and (b) if the answer to the above question is 'Yes' whether, pursuant to s 13 of the ADJR Act, the respondent is obliged to provide the applicants with a statement of reasons for that decision. Clearly if the answer to question (a) is 'No', there can be no question of any obligation to comply with s 13. 10 The applicants contend that the respondent's decision to notify them of the penalty incurred under the Taxation Administration Act was a decision made under that enactment. They submit that a taxpayer would be ignorant of the penalty unless and until notified by the respondent and would have no way of determining whether the objective basis for the imposition of a penalty by operation of the statute existed. Mr Bevan, counsel for the applicants, relied on Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192 ('Richardson'), Trylow Pty Ltd v Federal Commissioner of Taxation (2004) ATC 4406 ('Trylow') and Temples Wholesale Flower Supplies Pty Ltd v Commissioner of Taxation (1991) 29 FCR 93 in support of his submissions. 11 At the hearing the respondent maintained the position expressed in its letter of 14 October and submitted that the notification given simply informed the applicants of a liability imposed by the Taxation Administration Act. Whether the applicants are liable to pay a penalty under s 16-30 depends on whether the conditions referred to in that section have been met; the section is self-executing and does not require, or indeed allow for, any reviewable decision by the Commissioner. The respondent submits that there is no statutory obligation on the respondent to notify and, in particular, that the process of notification of the penalty does not involve any decision 'under an enactment' that is reviewable under the ADJR Act. Therefore, the respondent submits, there can be no entitlement to request reasons under s 13(1) of the ADJR Act. 12 In the alternative the respondent submits that, even if the notification involves a decision to which the ADJR Act applies, s 13 does not apply because paragraph (f) of Schedule 2 to the ADJR Act applies. Schedule 2 lists classes of decisions to which s 13 does not apply including in paragraph (f): 'decisions in connection with the institution or conduct of proceedings in a civil court, including decisions that relate to, or may result in, the bringing of such proceedings for the recovery of pecuniary penalties arising from contraventions of enactments…' The respondent submits that 'as a matter of practicality' proceedings will not be commenced until a liability has been communicated and not met and therefore the decisions involved in notification is 'in connection with' proceedings for recovery of the penalty if not paid. Remittal decision 13 It is not in contention that the remittal decision is a decision to which the ADJR Act applies. In relation to that decision the applicants identify the issues arising under their notice of motion as (a) whether the Commissioner's summary of business activity statement ('BAS') revisions and administrative penalties ('Penalty Statement') fulfils the requirements of s 13(11)(b) of the ADJR Act and, (b) if the answer to question (a) is 'No', whether the Respondent is obliged to supply a statement of reasons that meets the requirements of s 13(1). I understand the issue in (b) as being, more precisely, whether paragraph (f) of Schedule 2 to the ADJR Act applies as, in relation to the remittal decision, this is the only other element of the respondent's defence. 14 Section 13(11)(b) of the ADJR Act states that, for the purposes of s 13, the phrase 'decision to which this section applies' does not include: 'a decision that includes, or is accompanied by a statement setting out, findings of facts, a reference to the evidence or other material on which those findings were based and the reasons for the decision'. It is accepted by both parties that the notice of penalty dated 17 August 2004, in which the respondent advised the applicants that the penalty had been incurred, does not purport to provide any reasons. The respondent submits however, that the Penalty Statement meets the requirements of s 13(11)(b) because it refers to the facts upon which the decision was based, explains why the decision was made and allows the applicants to see that a reasoned decision was made. 15 The applicants' position is that the Penalty Statement does not have sufficient detail to comply with the requirements of s 13(11)(b). They submit that, to satisfy s 13(11)(b), a statement of reasons has to be such as would satisfy s 13(1). They referred to the obiter comments of Woodward J in Ansett Transport Industries (Operations) Pty Ltd v Wraith (1983) 48 ALR 500 at 507 ('Ansett') as to the obligations imposed on a decision-maker. The applicants also referred to a number of authorities concerning notices issued under s 264 of the Income Tax Assessment Act 1936 (Cth) that, it was said, showed the degree of detail needed for a s 13(1) statement and, in comparison with which, the information set out in the Penalty Statement was demonstrably inadequate. Those authorities included May v Deputy Commissioner of Taxation (1998) 98 ATC 4960 ('May'); McCormack v Commissioner of Taxation (2001) 114 FCR 574 ('McCormack'); Elias v Commissioner of Taxation (2002) 123 FCR 499; Elias v Commissioner of Taxation (2002) 199 ALR 246; and MLC Investments Ltd v Commissioner of Taxation (2003) 205 ALR 207. 16 The respondent also placed considerable reliance on the fact that the applicant had taken advantage of the offer of informal review extended to him in the respondent's letter of 29 September 2004. It was submitted that in undertaking that 'voluntary review' the Commissioner had agreed to re-exercise the power to remit in s 16-45 of the Taxation Administration Act and, according to s 33(1) of the Acts Interpretation Act 1901 (Cth), he was entitled to do so. Any decision made pursuant to that voluntary review would be a decision under an enactment and would replace the remittal decision and therefore a declaration pursuant to s 13(4A) would be premature and futile. Consideration The notification decision 17 In my view the cases to which the applicants referred (see [10] above) in support of their claim that the notification decision is a decision under an enactment within the meaning of s 3 of the ADJR Act, do not support that proposition. While those cases all concern circumstances in which a penalty (or 'additional tax' as in Richardson) is imposed by force of a statute rather than by an administrative decision, they are not concerned with whether the Commissioner's notification of the imposition of the penalty is a decision in and of itself. Rather, in these cases, the courts were concerned with the question of whether the penalty imposed by operation of a statute could be indirectly reviewable in the context of an application to review the decision of the Commissioner to remit part or all of the penalty. 18 Section 3A of the Taxation Administration Act provides that the Commissioner 'has the general administration of this Act'. The provision does not, however, convert any decision made by the Commissioner into a decision made under the Act. In Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 ('Bond') at 337, Mason CJ considered the nature of a reviewable decision under the ADJR Act. His Honour commented that the policy considerations and the textual and contextual considerations both lead to the same answer: 'That answer is that a reviewable "decision" is one for which provision is made by or under a statute. That will generally, but not always, entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration. A conclusion reached as a step along the way in a course of reasoning leading to an ultimate decision would not ordinarily amount to a reviewable decision, unless the statute provided for the making of a finding or ruling on that point so that the decision, though an intermediate decision, might accurately be described as a decision under an enactment.' 19 In Hutchins v Deputy Commissioner of Taxation (1996) 136 ALR 153 ('Hutchins') the majority of the Full Federal Court held that the Deputy Commissioner's decision to vote against a proposed composition of the appellant's debts was not reviewable under the ADJR Act. Lockhart J, referring to s 8 of the Income Tax Assessment Act 1936 (Cth) which is the equivalent of s 3 of the Taxation Administration Act, said at 160: 'Section 8 is a section of the most general kind, authorising the Commissioner of Taxation's general administration of the Assessment Act. In the course of administering the Assessment Act, the Commissioner makes numerous decisions of many kinds.' His Honour accepted that the decision to vote against the proposed composition was provided for by s 8 in combination with s 208 and that, read in conjunction, these sections impliedly authorised the Commissioner to take the reasonably necessary steps to recover tax due to the Commonwealth. Nevertheless, the Deputy Commissioner's decision was not reviewable because 'there was nothing final, or operative, or determinative' about the decision. It was simply a step taken in the course of the Commissioner's execution of his duties to recover tax owing by the appellant. 20 Black CJ also accepted that a decision might be impliedly authorised by an enactment but still not be a decision made under an enactment and observed at 157: 'The recovery of income tax is a vital function of the Commissioner and it can readily be accepted that s 8 in combination with s 208 of the Act impliedly authorises the Commissioner to do what is reasonably necessary to recover the income tax that is a debt due to the Commonwealth and payable to the Commissioner. The authorisation is very general and the acts so authorised will necessarily include decisions to recover tax by proving in the estates of bankrupt taxpayers and decisions made to attend and vote at meetings of creditors where tax is owed by the debtor. In my view, however, the combination of ss 8 and 208, although authorising the decision in question, does not "make provision" for it in the sense in which that expression was used by Mason CJ in Bond. The relationship between the text of the sections, even in combination, and the decision that is said to have been made "under' them is, in my opinion, too remote and non-specific for it to be said that provision is made for such a decision by the Income Tax Assessment Act.' His Honour added, towards the end of his judgment at 158, that the decision was also not reviewable under the ADJR Act 'because it was not of a substantive nature', a quality identified by Mason CJ in Bond at 337, as essential to a reviewable decision. 21 In my view the reasoning in Bond, applied in Hutchins, leads inexorably to the conclusion that the notification decision, even if authorised by the Taxation Administration Act, is not a decision made under an enactment. The position is aptly summarised in a passage from Aronson, Dyer and Groves, Judicial Review of Administrative Action, 3rd edition, 2004 cited by the respondent. At 57 the authors state: 'Tax Office demands for payment of taxes and penalties are not made "under an enactment" for ADJR purposes. Even if they were to be characterised as having been made under an enactment, they are not ADJR decisions, because they do not affect the taxpayer's obligations.' The decision to notify the appellants of their liability to a penalty under s 16-30 is such a decision and, in my view, it is not reviewable under the ADJR Act. 22 It does not follow from this conclusion that a taxpayer has no defence to a demand for payment of a penalty allegedly imposed by s 16-30. Such a demand is premised on the view that the taxpayer has failed to withhold amounts from salary and wages in accordance with his or her legal obligations. The demand can be met by evidence that there had been no failure to withhold. Whether a notification of liability not followed by a demand for payment could be challenged in proceedings for a declaration that the liability has not arisen is more problematic. The answer would depend, inter alia, on whether the court's jurisdiction is enlivened by a real controversy between the parties; In Re Clay, Clay v Booth [1919] 1 Ch 66; Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 at 355. That issue does not arise here, however, and it is not necessary for me to consider it further. 23 In the light of the conclusion expressed above it is not necessary for me to address the argument referred to in [12] above. The remittal decision 24 The principal issue in relation to the remittal decision is whether the Penalty Statement meets the requirements of a statement referred to in s 13(11)(b). If it does, then it follows that it is not necessary for the respondent to supply an additional statement. 25 It must be emphasised that it is not part of my present concern to make any evaluation of the Commissioner's reasons for concluding that the applicants are in default of their legal obligations to withhold payments. Nor am I concerned with the cogency of the Commissioner's reasons to remit only 25 per cent of the penalty. I express no opinion on these issues. My examination of the reasons given in the Penalty Statement is solely for the purpose of determining whether the Penalty Statement supplied by the Commissioner sets out, 'findings of facts, a reference to the evidence or other material on which those findings were based and the reasons for the decision' so as to fall within s 13(11)(b) of the ADJR Act. 26 The words of s 13(1) and s 13(11)(b) are not identical but the differences seem to be formal rather than substantive. The similarities between them are such that I see no relevant difference in the requirements of the two sections although it is necessary to recognise that a statement provided in response to specific questions formulated by an applicant is likely to be organised in a manner that is more accessible to that applicant. 27 In Ansett at 507, Woodward J considered what was necessary for a statement of reasons to comply with s 13(1) and said: '[Section] 13(1) of the Judicial Review Act requires the decision-maker to explain his decision in a way which will enable a person aggrieved to say, in effect: "Even though I may not agree with it, I now understand why the decision went against me. I am now in a position to decide whether that decision has involved an unwarranted finding of fact, or an error of law, which is worth challenging. This requires that the decision-maker should set out his understanding of the relevant law, any findings of fact on which his conclusions depend (especially if those facts have been in dispute), and the reasoning processes which led him to those conclusions. He should do so in clear and unambiguous language, not in vague generalities or the formal language of legislation. The appropriate length of the statement covering such matters will depend upon considerations such as the nature and importance of the decision, its complexity and the time available to formulate the statement. Often those factors may suggest a brief statement of one or two pages only.' The standard of explanation to which Woodward J refers in relation to s 13(1) applies equally, in my view, to a statement that it alleged to comply with s 13(11)(b). 28 The decision of Goldberg J in May (see [15] above), to which the applicant referred me, concerned the Commissioner's decision under s 264 of the Income Tax Assessment Act 1936 (Cth) requiring the applicant to supply information about employee share plans and employee benefit trusts. In the context of the applicant's request for review of that decision under s 5 of the ADJR Act, the applicant requested that the Commissioner supply a s 13(1) statement. The applicant's request sought information in respect of the decisions to require the applicant (a) to furnish the information and (b) to furnish it by a stated time. In his reasons for decision, Goldberg J quoted in detail the Commissioner's response provided under s 13(2) of the ADJR Act. The response was lengthy but, in brief, it merely stated that the applicant had been asked to supply certain information; the information supplied was 'considered unsatisfactory' and therefore the Commissioner had decided to compel the provision of the information by serving a notice pursuant to s 264. It cited as evidence for the finding the dates of correspondence and interviews between the Commissioner's officers and the applicant and listed the Commissioner's reasons for requiring the information. In summary, those reasons amounted to statements in respect of each category of information sought that the Commissioner considered it necessary for the proper administration of the Income Tax Assessment Act 1936 (Cth). 29 Goldberg J did not comment on the adequacy of that response although there is no suggestion that he regarded it as inadequate. Rather, his Honour was concerned with the adequacy of the notice served under s 264 as clarified by the response to the s 13(1) request. His Honour took the view that a s 264 notice requiring the recipient to supply information must be sufficiently clear to convey to the recipient what is required for compliance. His Honour expressed his concurrence with the oft-stated proposition that in construing the words of administrative decision makers it is not appropriate to subject those words to minute analysis of grammar or logic; see for instance Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259. 30 Those general principles are relevant to the questions under consideration here however it is difficult to see how adequacy or otherwise of the statement in May can assist in answering the question under consideration here. In May, McCormack and the other cases to which the applicants referred, and which are listed in[15] above, the Court quoted the statement of reasons supplied in each case by the Commissioner. None of those cases involved a refusal to supply reasons as required under s 13 of the ADJR nor was the adequacy of the reasons supplied an issue in any of those cases. As Woodward J recognised in Ansett, a s 13(1) statement must be tailored to the specific matter. The length and detail required will depend on the nature of the decision in respect of which information is sought. For this reason I do not regard those decisions as being of significant assistance here except insofar as they affirmed the general principles articulated by Woodward J in Ansett. The Penalty Statement 31 The Penalty Statement not only deals with the imposition of the penalty by operation of s 16-30 of the Taxation Administration Act but also with the Commissioner's reasons for review of the applicants' business activity statements for the period 1 July 2000 to 31 December 2003. As a result of that review the Commissioner revised the activity statements and advised the applicants that they are obliged to pay an additional $80,797 tax, a penalty amount of $103,010.30 and a general interest charge. Those charges are not a matter of present concern. However the remittal decision is directly related to some aspects of the decision to revise the applicants' business activity statements and therefore the reason for the latter decision is essential to an understanding of the remittal decision. 32 The imposition of a s 16-30 penalty is a result of failing to withhold a required amount from the wages of employees or, as it is put in the Penalty Statement, for incorrectly reporting PAYG withholding obligations for the relevant tax period. The Commissioner's reasons for concluding that the applicants had incorrectly reported their PAYG obligations were stated as follows: 'You initially claimed that you had no employees. Following our visit to your premises we observed three employees which you claimed had only just started. You further asserted that they only worked Friday, Saturday and Sunday. We collected wage records from you on 17 February 2004 which showed employees only working on Friday, Saturday and Sunday. Subsequently we visited your business on a Tuesday and Friday and each time observed that you had one delivery driver working. Your pattern of purchases shows that your business has traded at a consistent level for the past four years. The balance of probabilities is that you would have needed the same level of employees to operate the business all through that time.' 33 There followed a table setting out the estimated number of staff for each day of the week and the estimated hours of work. Taken in isolation those reasons would not, in my view, be adequate to meet the requirements of s 13. They must, however, be read in the context of other aspects of the Penalty Statement. 34 The 'pattern of purchases' in the last paragraph quoted in [33] is a reference to an earlier part of the Penalty Statement in which, in the context of calculating the goods and services tax payable by the applicants, the Commissioner gave reasons for concluding that the applicants had under-reported the volume of sales made from their restaurant. Based on the Commissioner's estimate of the true volume of sales and the observation that this volume was consistent over the four-year period, the Commissioner extrapolated from the number of applicants' employees at the time of the investigation to determine the number of employees the applicants had over the relevant period. 35 The Penalty Statement explains that the adjusted sales figures were based on estimates made taking into account the information provided by the applicants and the views they expressed in interviews with the Commissioner's officers and in correspondence. The Commissioner explained the basis of the calculations that gave rise to the estimates. The elements of the calculation included the average price of pizzas sold, the number of pizzas sold based, inter alia, on the number of pizza boxes purchased and sales of drinks and other items. These elements were discussed in some detail and included such factors as an allowance for wastage and personal use of pizza boxes, an increase in menu prices over the period, the distinction between eat-in and take away sales and other menu items. Where the Commissioner did not accept the figures supplied by the applicants, the basis of substitute figures was provided. The Commissioner stated that the adjusted sales figures were confirmed by analysis of the applicants' bank accounts, credit card statements, life style and investment purchases. 36 As the reasons quoted in [33] show, the Commissioner based his conclusion, that the applicants had more employees that they admitted, partly on these adjusted sales figures as well as on observations made during visits to the applicants' business premises. Given his conclusion about the number of employees needed to operate the business, the Commissioner was able to calculate the wages paid to employees and, on that basis, the Commissioner concluded that the amount of tax withheld from wages under s 12-40 of the Schedule 1 of the Taxation Administration Act was less than was legally required. Those calculations were set out in a table in the Penalty Statement. 37 The Penalty Statement explains that the penalty for failure to withhold tax is equal to the amount of tax that was not withheld and referred to the Commissioner's power to remit all or part of the penalty. The criteria by which the Commissioner determines the percentage of the penalty to be remitted were also set out including the criterion that 25 per cent of the amount not withheld would be remitted where the shortfall resulted from the taxpayer's 'intentional disregard'. The statement continued: 'Your behaviour is regarded as intentional disregard. … The following factors were considered in the determination that you acted with intentional disregard. You failed to register for PAYG withholding You failed to withhold on payments made to employees. You did not have Tax File number declarations in place for employees you were paying when we visit [sic] your business. The base penalty will be remitted by 25% of the amount not withheld.' 38 The Penalty Statement explains why the Commissioner came to the view that the applicants had failed to withhold tax from the wages paid to their employees. There are necessarily some gaps in the factual basis that have been filled by the Commissioner extrapolating from the known to the unknown. With their intimate knowledge of their own business, the applicants may well be able to fill those gaps. In any event, the Penalty Statement acknowledges the gaps and explains the basis of the calculation made to fill those gaps. The Commissioner may be incorrect in his calculations but this is not the issue here. For present purposes what is necessary is that the Penalty Statement explains the conclusions to which the Commissioner came and refers to the evidence on which the Commissioner based those conclusions. It is not necessary for the statement to set out the evidence in detail. 39 In my view, the Penalty Statement adequately discloses the Commissioner's finding of facts, refers to the evidence or other material on which those findings were based and gives the reasons for the conclusions to which the Commissioner came. I find, therefore, that the Penalty Statement meets the requirements of s 13(11)(b) and consequently, the remittal decision is not a section to which s 13 applies. 40 For these reasons the applicants' motion is rejected. The applicants must pay the respondent's costs of and incidental to the applicants' motion. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone. Associate: Dated: 8 December 2004 Counsel for the Applicants: Mr CJ Bevan Solicitor for the Applicants: John C Raneri Counsel for the Respondent: Mr GT Johnson Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 25 November 2004 Date of Judgment: 8 December 2004