A taxpayer has been charged with offences after losing a Victorian Court of Appeal case in which the taxpayer argued that the Australian Taxation Office (ATO) could not prove service of a final notice requiring him to lodge four outstanding income tax returns by a specified date.

The case is a timely reminder to all taxpayers that notices by the ATO must be regarded seriously and that mailing addresses should be kept up to date. Otherwise, taxpayers may risk criminal offences against them as in this case.

In the case of Guss v Storace (Australian Taxation Office) [2017] VSC 396, the Victorian Court of Appeal found that service of a Final Notice by post was proven and that there was no error on the part of the Magistrate in arriving at her earlier decision.

The taxpayer had not lodged income tax returns from 2009 to 2013. The Commissioner proceeded to issue a Final Notice dated 5 March 2014 by way of mail at an address retrieved from the ATO’s records. The Final Notice required the taxpayer to lodge the outstanding tax returns by 16 April 2014.

Failure to adhere to a Final Notice is an offence of absolute liability under the Taxation Administration Act 1953 and is a criminal offence.

The taxpayer failed to lodge the four income returns by the required date and argued that he had not received the Final Notice as there was no proof of service by post. The taxpayer argued that the ATO had no evidence that his letter was among the items that were collected by an ATO employee and handed to Australian Post for delivery. Whilst the witnesses confirmed they had no knowledge that the letter had been posted, the Magistrate found that the procedures and processes followed were sufficient to warrant service by post.

On this point the Magistrate relied on evidence provided by three witnesses, specifically:

an ATO employee gave evidence that she had prepared the draft Final Notice requiring the taxpayer to give the Commissioner the relevant tax returns. She obtained the address for the notice from the ATO systems at that time. She then forwarded the draft notice to her supervisor for approval on 5 March 2014 and on 2 May 2014 she checked that the notice had not been returned to the sender (the ATO).
The ATO supervisor gave evidence that he received and approved the draft notice. He confirmed that the notice was printed, folded, and placed in a window-faced envelope which he then sealed and placed in the out-going mail tray in the office.
The office assistant gave evidence that she had been responsible for general mail duties for external mail. Firstly, she would tender a mail delivery check sheet which showed that she had collected the outgoing mail. Secondly, another document, ‘Daily Mail Statistics’, was prepared to show the number of outgoing mail collected and charged to an account. Thirdly, a ‘mailing statement’ bearing the logo of Australia Post was tendered, which matched the number of outgoing mail ‘lodged’, and provided to Australia Post.

The Magistrate rejected evidence that the taxpayer had failed to receive the Final Notice. Her Honour was also satisfied that service of the Final Notice had been proved. In forming this view, the Magistrate commented that all responsibilities, procedures, and duties had been followed and were all performed by persons who had authority to do so. Specifically:

there was no dispute that the ATO supervisor had placed the letter in the outgoing mail tray,
the person who collected the outgoing mail, being the office assistant, was authorised to do so, and
the office assistant delivered the mail to an authorised person of Australia Post

Given the ATO is a process driven organisation, this case shows that it would be difficult to successfully argue a notice served by the ATO by mail will not have been properly served, where all procedures and processes have been followed.

This case is therefore a good reminder to all taxpayers that notices from the ATO will be deemed to be served on them when posted out by the ATO. It is therefore essential for all taxpayers to ensure that their mailing addresses are kept up-to-date and that your tax agent informs you of all ATO correspondence. Failure to adhere to ATO notices may prove to be an offence.

To discuss this article, or for any further information regarding tax disputes and resolution please contact:

Neil Brydges
Special Counsel | Accredited specialist in Tax Law
Sladen Legal
M +61 407 821 157 | T +61 3 9611 0176
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: nbrydges@sladen.com.au

Kelvin Yuen
Lawyer
Sladen Legal
T +61 3 9611 0177
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: kyuen@sladen.com.au