Deputy Commissioner of Taxation v Houston

1. [1]

   The Deputy Commissioner of Taxation (DCT) seeks payment in respect of tax-related liabilities.

2. [2]

   The plaintiff is the Deputy Commissioner of Taxation and is represented by C Melberzs, a solicitor, via AVL. The defendant is Mr John Houston. He is represented by K Woodforde of counsel. During the hearing, the defendant’s counsel submitted that the defendant neither consented nor opposed the orders sought. The defendant's counsel also submitted that the defendant had lodged Administrative Review Tribunal proceedings but they have been discontinued. At the conclusion of the plaintiff’s submissions, the defendant’s counsel had nothing to add.

3. [3]

   By statement of claim dated 29 January 2025, the plaintiff claims that the defendant was indebted to the Commonwealth of Australia for (the amount is as of 28 January 2025 and has been updated in a subsequent affidavit):

   1. (1)

      Income tax related liabilities in the sum of $3,336,266.91 (inclusive of general interest charge (GIC) to 28 January 2025) comprising income tax assessments and amended assessments made pursuant to the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) for the income years ended 30 June 2008, 30 June 2009, 30 June 2015 and 30 June 2016;

   2. (2)

      Shortfall interest charge in the sum of $64,341.16 (inclusive of GIC to 28 January 2025) assessed pursuant to section 280-100 in Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA) for the income years ended 30 June 2015 and 30 June 2016; and

   3. (3)

      Administrative penalties in the sum of $1,225,481.50 (inclusive of GIC to 28 January 2025) assessed pursuant to section 298-30 of Schedule 1 TAA to in respect of statement penalties under section 284-75 of Schedule 1 TAA.

4. [4]

   By defence filed 28 April 2025 at [12], the defendant pleads that there are a number of alleged items of taxation liability, general interest charge and administrative penalties subject of objections or requests for remissions.

5. [5]

   By Notice of Motion filed 27 October 2025, the plaintiff seeks summary judgment against the defendant for tax-related liabilities in the amount of $5,014,053.23 plus:

   1. (1)

      GIC pursuant to sections 5-15 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and Part IIA of the TAA at the rates prescribed in the TAA to the date of judgment; and

   2. (2)

      GIC pursuant to section 298-25 of Schedule 1 to the TAA and Part IIA of the TAA at the rates prescribed in the TAA to the date of judgment.

6. [6]

   The application is made under r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).

7. [7]

   The plaintiff relied on affidavits of Glen Dyer dated 27 October 2025 and dated 9 April 2026.

8. [8]

   The affidavits of Glen Dyer dated 9 April 2026 provided an up-to-date calculation of the amount sought by the plaintiff as follows:

   1. (1)

      the defendant's income tax liability, together with accrued GIC up to and including 9 April 2026, is in the sum of $3,799,880.93;

   2. (2)

      the defendant's shortfall interest charge liability, together with accrued GIC up to and including 9 April 2026, is in the sum of $73,282.04; and

   3. (3)

      the defendant's administrative penalties liability, together with accrued GIC up to and including 9 April 2026, is in the sum of $1,395,776.67.

9. [9]

   The defendant did not tender any affidavit evidence nor did he make any oral or written submissions.

Summary judgment

1. [10]

   Rule 13.1 of the UCPR provides that the Court may give judgment for the plaintiff in relation to the plaintiff’s claim for relief or any part of the plaintiff’s claim for relief if:

   1. (1)

      there is evidence of the facts on which the claim or part of the claim is based, and

   2. (2)

      there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim.

2. [11]

   The principles to be applied in respect of a summary judgment application are well established: Rory McDonnell v Mehanna Holdings Pty Ltd as trustee for the Mehanna Discretionary Trust [2019] NSWSC 1768 (McDonnell v Mehanna) at [108]-[110].

3. [12]

   First, the power to give summary judgment is one that must be exercised sparingly, and with exceptional caution: Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28 (Spencer) at [24].

4. [13]

   Secondly, the power should only be exercised in the clearest of cases, where there is a high degree of certainty about the ultimate outcome if the matter were allowed to go to trial: Spencer at [24] and [53].

5. [14]

   In O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71, MacFarlan JA, with whom Beazley P agreed (See further, Ward JA at [66]-[67]), considered the statements of the High Court in Spencer on the summary judgment test in s 31A of the Federal Court Act 1976 (Cth) (FCA Act). His Honour stated at [3]:

6. [15]

   The traditional reluctance of Courts to enter summary judgment has diminished to some extent by the enactment of the Civil Procedure Act 2005 (NSW) (McDonnell v Mehanna at [123], referring to the observations of Beazley JA (with whom Basten and Hoeben JJA agreed) in State of New South Wales v Plaintiff A [2012] NSWCA 248 at [17]). However, it is not yet established whether the test itself has softened, or if the difference is to be found in the circumstances in which a court might refuse summary judgment on discretionary grounds (see Shaw v State of New South Wales (2012) 219 IR 87; [2012] NSWCA 103 at [133]).

7. [16]

   As to the type of response required of a defendant to an application for summary judgment, in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; [1983] HCA 25 at p 98, the High Court observed that a defendant seeking to show cause why summary judgment should not be entered against them must “condescend upon particulars” (citing Wallingford v Mutual Society (1880) 5 App. Cas. 685 at p 704).

8. [17]

   Similarly, in Jefferson Ford Pty Ltd v Ford Motor Co of Australia Ltd (2008) 167 FCR 372; [2008] FCAFC 60, Gordon J said at [127]:

Recovery of tax-related liabilities

1. [18]

   Sch 1, 255-5(1) of the TAA reads:

Prima facie evidence provisions

1. [19]

   In a proceeding to recover an amount of a tax-related liability:

   1. (1)

      a statement or averment about a matter in the plaintiff’s complaint, claim or declaration is prima facie evidence of the matter: TAA, Sch 1, s 350-20(1). Evidence given in support or rebuttal of the matter must be considered on its merits: TAA, Sch 1, s 350-20(4);

   2. (2)

      evidence may be given by the DCT by way of affidavit: TAA, Sch 1, s 350-25(a); and

   3. (3)

      the production of an evidentiary certificate signed by the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner that states that, from the time specified in the certificate, an amount is payable under a taxation law to the Commissioner, is prima facie evidence that the amount is payable from that time and that the particulars stated in the certificate are correct: see s 350-10(3) and 350-12 of Schedule 1 to the TAA.

2. [20]

   The use of evidentiary certificates and reliance on prima facie provisions in Commonwealth taxation legislation has been widely accepted by the courts (see Lee v Deputy Commissioner of Taxation; Silverbrook v Deputy Commissioner of Taxation [2020] NSWCA 95 at [75]-[79]).

3. [21]

   In Deputy Commissioner of Taxation v Lewer [2001] VSC 114 at [6], Bongiorno J considered the application of s 255-55 of Sch 1 to the TAA (the statutory precursor to s 350-12) and explained the position of the Commissioner in such cases as follows:

4. [22]

   Those observations were cited with approval in Deputy Commissioner of Taxation v Raskovic (2009) 75 ATR 359; [2009] NSWSC 281 at [22].

5. [23]

   A certificate under s 350-10(3) of Sch 1 to the TAA (and similar prima facie evidentiary provisions) is not conclusive of liability for the amount claimed, and does not alter the legal burden of proof which rests on the DCT, although it may be determinative where the taxpayer does not go into evidence (see, for example, Naumcevski v Deputy Commissioner of Taxation [2019] NSWCA 72 at [69]). Further, in DCT v Epov [2008] NSWSC 1085 at [32] it was stated that a defendant must do more than simply plead that the quantum of the tax debt is incorrect in order to displace the prima facie evidence.

Defendant’s liability for tax-related liabilities

1. [24]

   Under s 166 of the ITAA 1936, the Commissioner may assess income tax as follows:

2. [25]

   Section 167 of the ITAA 1936 empowers the Commissioner to make a default assessment of an entity’s taxable income in certain prescribed circumstances as follows:

3. [26]

   Section 170 of the ITAA 1936 empowers the Commissioner to amend assessments within certain prescribed time limits. An amended assessment is an “assessment” for the purposes of the ITAA 1936: see s 173 of the ITAA 1936.

4. [27]

   The term, “assessment”, is defined in s 6(1) of the ITAA 1936 to mean, in part, “[t]he ascertainment of the amount of taxable income (or that there is no taxable income) and of the tax payable on that taxable income (or that no tax is payable)…”

5. [28]

   Under s 174(1) of the ITAA 1936, the Commissioner must serve a notice of assessment as soon as convenient after an assessment is made. Service of the notice of assessment on the taxpayer fixes the ascertainment of the amount of the taxable income and the amount of the tax payable by the taxpayer and brings to an end the process of assessment: Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243; [1963] HCA 51 at p 252.

6. [29]

   Section 5-5 of the ITAA 1997 specifies when income tax is due and payable. Where income tax that is due and payable remains unpaid, GIC accrues on the unpaid amount: s 5-15 of the ITAA 1997 and Part IIA of the TAA.

7. [30]

   Under s 175A(1) of the ITAA 1936 a taxpayer who is dissatisfied with an assessment may lodge an objection against it in the manner set out in Part IVC of the TAA.

8. [31]

   Pursuant to ss 14ZZM and 14ZZR of the TAA, the fact that a review or appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473; [2008] HCA 41 at [43]-[45].

9. [32]

   Two critical provisions facilitate the Commissioner’s capacity to recover income tax which is due and payable.

10. [33]

    Firstly, s 175 of the ITAA 1936 states that “[t]he validity of any assessment shall not be affected by reason that any of the provisions of [the ITAA 1936] have not been complied with.” The effect of s 175 is to enlarge the field within which the Commissioner may validly act: Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146; [2008] HCA 32 at [24] (Futuris).

11. [34]

    Secondly, s 350-10(1), item 2 of Schedule 1 to the TAA gives effect to s 175 by giving conclusive evidential force to notices of assessment under a taxation law. Section 350-10(1) Item 2 reads:

12. [35]

    Section 350-10(1) is substantively identical, in language and effect, to former s 177 of the ITAA 1936: Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation (2017) 105 ATR 35; [2017] NSWCA 17.

13. [36]

    The leading authority on the application of s 175 and former s 177 of the ITAA 1936 is the decision of the High Court in Futuris, where a majority of the High Court held, in summary, that:

    1. (1)

       where s 175 is read with ss 175A and 177(1) of the ITAA 1936, it is clear that the validity of an assessment is not affected by failure to comply with any provision of the ITAA 1936, but a dissatisfied taxpayer may object to the assessment in the manner set out in Part IVC of the TAA (Futuris at [24]);

    2. (2)

       in review or appeal proceedings under Part IVC of the TAA, the amount, and all the particulars of the assessment, may be challenged by the taxpayer but with the burden of proof provided in ss 14ZZK and 14ZZO of the TAA (Futuris at [24]);

    3. (3)

       the protection afforded by s 175 of the ITAA 1936 encompasses all errors in the process of assessment, such as, a failure to take into account a material factor; taking into account an extraneous factor; or, an error in the calculation of tax due. Those matters may be challenged only in the context of Part IVC proceedings (Futuris at [45]); and

    4. (4)

       only two categories of jurisdictional error remain outside the scope of s 175 of the ITAA 1936; namely, where a purported assessment is “tentative or provisional”, or where the Commissioner has not acted in good faith in assessing a taxpayer to tax (Futuris [24]-[25] and [49]-[56]).

14. [37]

    Futuris is consistent with a well-established line of authority to the effect that, absent jurisdictional error of the kind described in Futuris, s 177 of the ITAA 1936 (and by parity of reasoning, s 350-10(1) Item 2) will protect assessments from challenge outside Part IVC proceedings. In FJ Bloemen v Federal Commissioner of Taxation (1981) 147 CLR 360; [1981] HCA 27 at p 375, Mason and Wilson JJ, with whom Stephen and Aickin JJ agreed, stated:

15. [38]

    The full effect of the conclusive evidence provision in s 350-10(1), and the authorities that have considered it, is that the defendant in these proceedings does not have any means, legal or factual, to resist judgment. For a recent application of these principles see Supreme Court of New South Wales in Lamont v Deputy Commissioner of Taxation [2019] NSWCA 221 at [11].

16. [39]

    In respect of the income tax liabilities, the DCT relies on:

    1. (1)

       the notices of assessment and notices of amended assessment which are at pages 11 to 22 of exhibit GD-1 to the Glen Dyer affidavit dated 27 October 2025. Those assessments are given conclusive evidentiary force by operation of the principles set out at paragraphs 28 to 32 above; and

    2. (2)

       the evidentiary certificate issued under s 353-10(3) of Schedule 1 to the TAA, which is at page 7 of Exhibit GD-2 to the Glen Dyer affidavit dated 9 April 2026.

17. [40]

    As a result of the Commissioner amending the defendant's income tax assessments for the years of income ending 30 June 2015 and 30 June 2016 to include additional amounts of income tax, the defendant became liable to pay shortfall interest charge (SIC) on the additional assessed amounts.

18. [41]

    Sch 1, s 280-100 of the TAA reads:

19. [42]

    The amount and rate of SIC is calculated under Sch 1, s 280-105 of the TAA.

20. [43]

    The Commissioner was required to give the defendant a notice stating the amount of SIC that the defendant was liable to pay for the period applicable under s 280-100: s 280-110 of Sch 1 to the TAA. Pursuant to s 990-5(1) of Sch 1 to the TAA, the notice may be included in or with any other document that the Commissioner gives under a taxation law.

21. [44]

    Pursuant to s 280-110(3) of Schedule 1 of TAA, the production of notices stating the amount of the SIC that the defendant is liable for is prima facie evidence of the matters stated in those notices. Accordingly, the principles set out above relating to prima facie evidence in proceedings to recover tax-related liabilities apply in the context of proceedings to recover SIC.

22. [45]

    Pursuant to s 5-10 of the ITAA 1997, SIC is due and payable 21 days after the day on which the Commissioner gave the defendant notice of the charge.

23. [46]

    Where SIC that is due and payable remains unpaid, general interest charge accrues on the unpaid amount of the SIC: s 5-15 of the ITAA 1997 and Part IIA of the TAA.

24. [47]

    In respect of the SIC, the DCT relies on:

    1. (1)

       the notices issued pursuant to s 280-110(1) of Schedule 1 to the TAA, which are at pages 15 to 22 of Exhibit GD-1 to the Glen Dyer affidavit dated 27 October 2025; and

    2. (2)

       the evidentiary certificate issued under s 353-10(3) of Schedule 1 to the TAA, which is at page 8 of Exhibit GD-2 to the Glen Dyer affidavit dated 9 April 2026.

25. [48]

    Sch 1, s 298-30(1) of the TAA reads:

26. [49]

    The Commissioner is required to give written notice to the defendant of the defendant’s liability for administrative penalties: s 298-10 of Sch 1 to the TAA.

27. [50]

    The administrative penalties become due on the date specified in the notices. In accordance with s 298-15 of Sch 1 to the TAA, that date must be at least 14 days after the notice was given to the taxpayer.

28. [51]

    By operation of s 298-25 of Sch 1 to the TAA, GIC accrues on unpaid administrative penalties from the date on which they were due and payable.

29. [52]

    The principles set out in paragraph 24 above apply equally to assessments of administrative penalties.

30. [53]

    Pursuant to ss 14ZZM and 14ZZR of the TAA, the fact that a review or appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473; [2008] HCA 41 at [43]-[45].

31. [54]

    Further s 350-10(1) item 2 of Sch 1 to the TAA applies to give conclusive evidential force to assessments of administrative penalties.

32. [55]

    In Deputy Commissioner of Taxation v Katalina Park Pastoral Pty Ltd (2005) 61 ATR 298; [2005] FCA 1800 at, which considered the effect of the conclusive evidence provision relating to administrative penalty assessments in former s 298-10(3), Sundberg J drew a comparison between the evidentiary force of former s 177 of the ITAA 1936 and comparable provisions, stating at [22]:

33. [56]

    In respect of the Division 284 Administrative Penalties, the DCT relies on:

    1. (1)

       the notices of assessment which are at pages 25 to 40 of Exhibit GD-1 to the Glen Dyer affidavit dated 27 October 2025. Those assessments are given conclusive evidentiary force by operation of the principles; and

    2. (2)

       the evidentiary certificate issued under s 353-10(3) of Schedule 1 to the TAA, which is at page 9 of Exhibit GD-2 to the Glen Dyer affidavit dated 9 April 2026.

Resolution

1. [57]

   The defendant pleads in his defence that there are a number of alleged items of taxation liability, general interest charge and administrative penalties subject of objections or requests for remissions. The defence is a bare denial defence. In addition, the defendant has not tendered any evidence in opposition to the DCT's claim. The defendant’s defence is hopeless. There were no affidavits filed by the defendant in support of his allegations. The plaintiff is entitled to summary judgment.

The result

1. [58]

   The result is that Judgment is entered in favour of the plaintiff in the sum of $5,268,939.64 pursuant to rule 13.1 of the Uniform Civil Procedure Rules 2005 (NSW).

Costs

1. [59]

   Costs are discretionary. Costs usually follow the event. The defendant is to pay the plaintiff's costs of the proceedings including the plaintiff's Notice of Motion filed 29 January 2025 on an ordinary basis.

Judgment

1. [60]

   The defendant is to pay the plaintiff in the sum of $5,268,939.64 pursuant to rule 13.1 of the Uniform Civil Procedure Rules 2005 (NSW).

The Court orders that

1. [61]

   The defendant is to pay the plaintiff's costs of the proceedings, including the plaintiff’s Notice of Motion filed on 27 October 2025, on an ordinary basis.