Reported Decision : 63 ACSR 604 New South Wales Supreme Court CITATION : Kiss Corp Pty Ltd v Deputy Commissioner of Taxation [2007] NSWSC 1021 HEARING DATE(S) : 10/09/07 JUDGMENT DATE : 12 September 2007 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Dismissed with costs CATCHWORDS : CORPORATIONS - winding up - statutory demand - application for order setting aside - default assessments for superannuation guarantee charge - allegation of genuine dispute as to existence of debt - whether grounds sufficiently raised in supporting affidavit - evidentiary effect of notices and certificate issued by Deputy Commissioner of Taxation LEGISLATION CITED : Corporations Act 2001 (Cth), ss.459G, 459H(1)(a) Superannuation Guarantee (Administration) Act 1992 (Cth), ss.36, 37, 40, 41, 42, 75 DP Excavation & Haulage Pty Ltd v Commissioner of Taxation (2005) 54 ACSR 274 Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 CASES CITED : Hansmar Investments Pty Ltd v Perpetual Trustee Company Pty Ltd [2007] NSWSC 103 Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 19 ACSR 125 Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 21 ACSR 449 PARTIES : Kiss Corp Pty Ltd - Plaintiff Deputy Commissioner of Taxation - Defendant FILE NUMBER(S) : SC 3076/07 COUNSEL : Mr J. Dai, Solicitor - Plaintiff Ms L. Goodchild - Defendant SOLICITORS : Hancocks Solicitors - Plaintiff ATO General Counsel - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J WEDNESDAY, 12 SEPTEMBER 2007 3076/07 KISS CORP PTY LTD v DEPUTY COMMISSIONER OF TAXATION JUDGMENT 1 The plaintiff, Kiss Corp Pty Ltd, makes application under s.459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant, Deputy Commissioner of Taxation. 2 The statutory demand is dated 11 May 2007 and relates to several distinct items of indebtedness. Each debt is for superannuation guarantee charge for a particular calendar quarter together with interest thereon. The total amount is $35,114.67. The relevant calendar quarters are the successive quarters in the period 1 October 2003 to 30 September 2004. 3 The plaintiff's application is advanced on the ground that there is a genuine dispute as to the existence of each of the debts: s.459H(1)(a). The affidavit filed in compliance with s.459G(3)(a), being the affidavit of Mr Kiss sworn on 7 June 2007 (the day on which the originating process was filed), contains the following statement of the basis for the contention that there exists a genuine dispute of the kind which s.459H(1)(a) is concerned: "3. I dispute the amount claimed by the Defendant. I have authorised access to the books and records of the Plaintiff and have reviewed these documents upon receiving this Statutory Demand. Based upon those books and records together with the advice of the Plaintiff's accountant, I deny that the amount claimed are [sic] due and owing. 4. Due to the scaling down of its business, the Plaintiff did not employ the number of employees as it had done in previous years. I have advised the Defendant by telephone and by letter on a number of occasions that the amounts claimed to be outstanding for the Superannuation Guarantee Charge are incorrect. Despite my protestation, the Deputy Commissioner has refused to amend the amount alleged to be outstanding. 5. I believe that the Deputy Commissioner of Taxation in its calculation has made an administration error." 4 The other affidavit relied on by the plaintiff is an affidavit of Mr Kiss sworn on 17 August 2007, that is, after the end of the period of 21 days referred to in s.459G(3)(a). In that affidavit, Mr Kiss refers to the periods for which relevant persons had been employed by the plaintiff and says that, in all cases but one, employment had ended on 2 July 2004. Mr Kiss further deposes in respect of the persons whose employment had come to an end that the plaintiff "has discharged all of its superannuation liabilities for the employees in their respective periods by a lump sum payment at the end of their employment"; and that on or about 2 July 2004 the plaintiff "drew cheques to each employee for their superannuation entitlement". In relation to the remaining employee (Ms Lidgard), Mr Kiss says that her "superannuation entitlement was paid on 11 October 2005 by way of a cheque to Superannuation Trust of Australia". 5 Having regard to the "Graywinter Principle" emerging from Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452, recently analysed and discussed by White J in Hansmar Investments Pty Ltd v Perpetual Trustee Company Pty Ltd [2007] NSWSC 103, it is not open to the plaintiff to rely on the grounds stated in or implied by the affidavit of 17 August 2007 unless those grounds are also discernible from the supporting affidavit filed in accordance with s.459G(3)(a), being the affidavit of 7 June 2007. 6 The affidavit of 17 August 2007 advanced for the first time the proposition that the plaintiff had made payments the effect of which was to forestall the creation of debts for superannuation guarantee charge. That proposition cannot be gathered in any way from the earlier affidavit. In fact, the whole content of that earlier affidavit amounts to no more than an assertion of the existence of dispute and a denial of liability, without any attempt at explanation or statement of grounds or contentions. The Graywinter Principle precludes reliance by the plaintiff upon the matters of payment referred to in the affidavit of 17 August 2007. 7 This is sufficient to dispose of this case by way of an order dismissing the plaintiff's claim with costs. I nevertheless record my conclusion that, even if it were open to the plaintiff to rely on the grounds emerging from the 17 August 2007 affidavit, it would fail in its attempt to establish a genuine dispute of the kind contemplated by s.459H(1)(a). 8 This is because of the way in which debts for superannuation guarantee charge arise under the relevant Commonwealth legislation. A summary of the workings of that legislation works appears at paragraphs [13] to [20] of my judgment in DP Excavation & Haulage Pty Ltd v Commissioner of Taxation (2005) 54 ACSR 274: "[13] It is necessary, at this point, to say more about the superannuation guarantee charge legislation. If an employer fails to provide a prescribed minimum level of superannuation support for an employee in a particular calendar quarter (by making contributions to a superannuation scheme for the benefit of the employee), the employer has an 'individual superannuation guarantee shortfall' in respect of that employee for that quarter. This is the effect of s 19 of the Superannuation Guarantee (Administration) Act . If the employer has one or more 'individual superannuation guarantee shortfalls' for a particular quarter, the employer has, for that quarter, a 'superannuation guarantee shortfall' calculated in accordance with s.17. It is the aggregate of three things. The first is the total of the employer's 'individual superannuation guarantee shortfalls' for the quarter. The second is the employer's 'nominal interest component' for the quarter — essentially, an interest element calculated under s.31. The third is the employer's 'administration component' for the quarter. Under s.32, this is currently a 'base amount' of $50 plus $20 per relevant employee. [14] Under Pt 4 of the Superannuation Guarantee (Administration) Act , provision is made for the assessment of 'superannuation guarantee shortfall', that is, the composite sum for a quarter made up of the aggregate of individual superannuation guarantee shortfalls for the quarter, the nominal interest component and the administration component. The Superannuation Guarantee Charge Act 1992 (Cth) imposes 'charge' on any 'superannuation guarantee shortfall' of an employer for a quarter. It is relevant to quote ss.5 and 6 of that Act: '5. Imposition of charge Charge is imposed on any superannuation guarantee shortfall of an employer for a quarter. 6. Amount of charge The amount of superannuation guarantee charge payable on a superannuation guarantee shortfall of an employer for a quarter is an amount equal to the amount of the shortfall.' [15] Section 46 of the Superannuation Guarantee (Administration) Act specifies the day on which superannuation guarantee charge 'is payable'. Collection and recovery of superannuation guarantee charge are dealt with in Pt 5 of the Superannuation Guarantee (Administration) Act and Pt 4-15 of Sch 1 to the Taxation Administration Act 1953 (Cth). It is sufficient to note that charge that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner and may be recovered by the Commissioner or a Deputy Commissioner by action in a court of competent jurisdiction: cl 255-5 of Sch 1 of the Taxation Administration Act . [16] The Taxation Administration Act makes provision, in ss 8AAA–H, for the charging and recovery of interest on overdue tax amounts. Overdue superannuation guarantee charge is within these provisions. Interest thus levied is referred to as 'general interest charge'. [17] Once received or recovered by the Commissioner, a particular amount of charge (and, if general interest charge or penalty has been attracted, that charge or penalty) must be dealt with in accordance with Pt 8 of the Superannuation Guarantee (Administration) Act . Part 8 requires calculation of the 'shortfall component' of the amount received or recovered. This 'shortfall component' is calculated in relation to each relevant employee. The method of calculation is set out in ss.64A and 64B. In somewhat simplified terms, the 'shortfall component' of a particular employee is that employee's proportion (according to respective individual superannuation guarantee shortfalls) of so much of the amount received or recovered by the Commissioner as is equal to the employee's individual superannuation guarantee shortfall, the general interest charge component of the amount and the nominal interest component. The 'administration component' is thus left out of the calculation of an employee's 'shortfall component' of a particular amount received or recovered by the Commissioner but interest elements are included. [18] After the 'shortfall component' referable to a particular employee has been ascertained, it must, in most cases, be applied by the Commissioner for the employee's benefit in accordance with s.65 of the Superannuation Guarantee (Administration) Act . This must be done, in general terms, by means of payment for the benefit of the employee into a retirement savings account under the Retirement Savings Accounts Act 1997 (Cth), an account with a complying superannuation fund or an account with a complying approved deposit fund. There are, however, exceptions relevant to employees over the age of 65, employees who have retired because of permanent incapacity or invalidity and employees who have died. [19] The system based on quarterly payments has prevailed only since 1 July 2003. Before that date, annual payments were required but the operation of the system was otherwise the same [20] The legislative provisions with respect to superannuation guarantee charge are somewhat complex but the underlying principle is straightforward. If an employer does not voluntarily make in respect of an employee the specified minimum superannuation contribution, the employer becomes liable to pay an amount equal to that contribution to the Commissioner, together with interest and an administration charge; and the Commissioner, having received that aggregate, must apply all of it except the administration charge for the benefit of the employee in essentially the way that the employer would have applied it had the employer elected to make the contributions necessary to avoid the imposition of the charge. It is against that background that I approach the questions relevant to the claims for the second and third declarations sought in these proceedings." 9 Leaving to one side the case of Ms Lidgard, the evidence adduced by the plaintiff, taken at its highest, shows that, on or about 2 July 2004, the plaintiff "drew cheques to each employee for their superannuation entitlement" (emphasis added). Under the statutory scheme, the making of a payment by an employer to an employee does not forestall the creation of a debt of the employer for superannuation guarantee charge referable to that employee. Creation of such a debt is forestalled only by the employer's making of a payment by way of contribution to a superannuation scheme for the benefit of the employee. In the cases other than that of Ms Lidgard, there is simply no evidence that the plaintiff made a payment by way of contribution to a superannuation scheme in relation to any employee. The most the evidence could show is that the plaintiff made payments direct to the employees themselves. 10 In the case of Ms Lidgard, there is evidence (in the form of a letter) suggesting that the plaintiff sent a cheque for $1,567.27 to "Superannuation Trust of Australia" on 11 October 2005, "being for Jacqueline Lidgard's super". But there is no evidence of the period to which the sum related or the way in which it was calculated. There is accordingly no basis on which it could be contended that that payment (assuming it was made to a superannuation fund for the benefit of Ms Lidgard) had forestalled the creation of any particular debt for superannuation guarantee charge and, if so, the quantum of the debt and the period to which it related. 11 The plaintiff's inability to demonstrate the existence of a genuine dispute as to the existence of the several debts specified in the statutory demand becomes even more pronounced when regard is had to evidence adduced by the defendant in the form of notices served by the defendant on the plaintiff and a certificate. 12 Each notice served by the defendant on the plaintiff is expressed to relate to an assessment or amendment of assessment under s.36 or s.37 of the Superannuation Guarantee (Administration) Act 1992 (Cth). Section 36 empowers the Commissioner to make an assessment of an employer's superannuation guarantee shortfall for a quarter where the employer has not lodged a relevant statement for the quarter and the Commissioner is of the opinion that the employer is liable to pay superannuation guarantee charge for the quarter. The provision adopts a "default assessment" approach. Section 36(3) says that superannuation guarantee charge in relation to such a default assessment is payable on the day the assessment is made. Section 37 empowers the Commissioner to amend an assessment. Section 37(7) says that superannuation guarantee charge under an amended assessment is taken to have become payable on the day on which charge under the original assessment became payable. Section 40 of the Act provides: " Notice of assessment or amendment As soon as practicable after an assessment is made under section 36 or is amended under section 37, the Commissioner must give written notice of the assessment or amendment (as the case may be) to the person liable to pay the superannuation guarantee charge." 13 It is also relevant to quote ss.41 and 42: "41 Validity of assessment The validity of an assessment is not affected because any provision of this Act has not been complied with. 42 Objections against assessment An employer who is dissatisfied with an assessment may object in the manner set out in Part IVC of the Taxation Administration Act 1953 ." 14 The certificate upon which the defendant relies is dated 18 July 2007. It is a certificate by which the Deputy Commissioner of Taxation certifies "in accordance with section 75 of the Superannuation Guarantee (Administration) Act 1992" that notices of specified assessments "were, or are taken to have been, served on Kiss Corp Pty Ltd" and that "as at 18 July 2007, the sum of $35,917.75 is a debt due and payable to the Commonwealth by Kiss Corp Pty Ltd in relation to the tax liability referred to in this certificate." 15 It is relevant to set out sub-ss.(1) and (4) of s.75: " Evidence (1) The mere production of: (a) a notice of assessment; or (b) a document signed by the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of a notice of assessment; is 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 amounts and all of the particulars of the assessment are correct. … (4) A certificate signed by the Commissioner, a Second Commissioner or a Deputy Commissioner certifying that a sum specified in the certificate was, on the day of the certificate, payable by a person in relation to an amount of superannuation guarantee charge or by way of penalty under section 49 or Part 7, is prima facie evidence of the matters stated in the certificate." 16 Several aspects of the statutory provisions just mentioned and their application to this case should be noted. First, the notices served by the defendant on the plaintiff make it clear that the defendant purported to resort to the statutory powers conferred by ss.36 and 37 of the Superannuation Guarantee (Administration) Act 1992. Second, the plaintiff has taken no action under the taxation legislation to object to the defendant's assessments. Third, sums assessed under s.36 and sums under assessments amended pursuant to s.37 are, by force of statute, "payable" on the day the assessment was made (see ss.36(3) and 37(7)). Fourth, notice of an assessment or amendment is always given after the assessment or amendment is made (see s.40) and, except in a case where it is given on the actual day of assessment or amendment, will therefore always be given after the relevant sum has become payable. Fifth, in light of s.75(1), there is before the court (in the form of the several notices) "conclusive evidence" of the making of all relevant assessments (and hence that all assessed amounts are "payable") and that the amounts and all particulars of the assessments "are correct". Sixth, there is before the court (in the form of the certificate of 18 July 2007) prima facie evidence that a sum of $35,917.75 (slightly more than the total in the statutory demand) was, on that day, payable by the plaintiff in relation to the superannuation guarantee charge. 17 The statutory provisions, considered in the light of the documents the defendant has put before the court, seem to me put beyond argument the conclusion that the plaintiff has failed to make out its case of genuine dispute within s.459H(1)(a) of the Corporations Act. 18 The plaintiff's solicitor sought to rely on Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 21 ACSR 449 and statements there about processes by which income tax is assessed and becomes payable. He also referred to the earlier decision of the Full Federal Court in Hoare Bros Pty Ltd v Deputy Commissioner of Taxation (1996) 19 ACSR 125 and the observation that a genuine dispute about the validity of a notice of assessment for income tax might amount to a genuine dispute as to the existence of the debt arising by reason of the assessment. It was suggested on behalf of the plaintiff that, because each of the notices in the present case specified, as the date on which superannuation guarantee charge was payable, a date before the date the notice itself bore, there was such a defect. 19 That ground of challenge was in no way foreshadowed by either of the affidavits relied on by the plaintiff and is therefore unavailable because of the Graywinter Principle. But even if it were open to the plaintiff to pursue such an argument, the aspects of the statutory scheme reflected in ss.36(3) and 37(7) would make the argument altogether untenable. The processes of assessment in relation to income tax differ from those related to superannuation guarantee charge. 20 The plaintiff has not made out its case based on s.459H(1)(a). The originating process is dismissed with costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.