The Deputy Mayor of Sydney’s Auburn City Council, Salim Mehajer, has refused to repay more than $1 million that one of his failed companies owes the tax office, despite allegedly having personally pocketed much of that money owed.
The latest twist in the saga involving Mr Mehajer comes as Auburn’s “super six” councillors — including Mr Mehajer and others with close property development ties — voted last night to oppose the NSW government’s move to suspend the council before a public inquiry.
In a statement of defence lodged with the NSW Supreme Court last month by Mr Mehajer’s lawyer, his sister Zenah Osman, the councillor and property developer claims that he had been unaware his failed SM Project Developments had owed the tax office money, despite those debts being recorded in accounts filed by the company itself.
SM Project Developments, Mr Mehajer’s first business, collapsed in 2013. Liquidator Anthony Elkerton of Dean Willcocks Advisory alleges that Mr Mehajer and his business partner withdrew for themselves several hundred thousand dollars in five payments, via “unreasonable director-related transactions”.
SM Project Developments had built nine apartments in a complex at Livingstone Road, Auburn, and collected $352,000 in GST from buyers of those units, but did not pass any of that money to the Australian Taxation Office, Mr Elkerton alleges. Instead, Mr Mehajer and fellow director Min Hua — the brother-in-law of current Auburn Mayor Le Lam — withdrew almost $1m, which meant the ATO could not recover any money it was owed, leading it to place SM Project Developments in liquidation.
Following the collapse of SM Project Developments, Mr Mehajer has continued his property development operations via other companies he controls.
Evidence filed with the NSW Supreme Court shows SM Project Developments lodged a business activity statement for the period May 1 to May 31, 2010, claiming no GST was payable for the period. It later filed a BAS correctly stating GST of $315,183 was payable on the settlement of the nine units.
Mr Mehajer told the court the false BAS had been lodged unknown to him by his accountant, “with no authority”. That unpaid GST debt grew and along with penalties, by July 2012, SM Project Developments owed the tax office $832,970. With interest that figure is now more than $1m.
The court heard the ATO provided SM Project Developments with several audits, a “notice of assessment” and a “running balance account statement”, and had written to the company telling it that its request for leniency in paying interest in its debts had been denied. Despite the correspondence, Mr Mehajer has told the court he was unaware SM Project Developments had owed the ATO money and he further claimed to have been unaware that SM Project Developments was being placed in liquidation at the time it occurred.
Mr Mehajer’s extravagant August wedding, which involved an unauthorised road closure and included a jet flyover and an entourage of $50m worth of sports cars, attracted widespread media attention and led to revelations of alleged improper conduct at Auburn council.
The Australian has revealed undisclosed conflicts of interest among councillors allegedly worth hundreds of thousands of dollars, and that at least three councillors stood to gain collectively more than $30m on the back of council approved land re-zonings.
Last week, NSW Local Government Minister Paul Toole announced a wide-ranging public inquiry into the council.
He said the council would be suspended within 14 days if the council was unable to make a convincing case for why it should remain in place.
North Sydney Council must also show cause why it should not be suspended.
Auburn’s “super-six” councillors, who almost always vote in a bloc, are opposed by a group known as the “poor four”, who have raised concerns over the nexus between property development and the council.
Last night the “poor four” put forward a motion in support of the state government inquiry, but calling for those four councillors to remain in place during the inquiry.
That motion was rejected.
A motion calling for the council to reject the suspension was approved by the “super six” councillors, with each of the “poor four” against the move.
It will now be up to the council to come up with a satisfactory explanation for why it should not be suspended, within the original 14-day deadline.
Poor four councillor Irene Simms said the inquiry had “nothing to do” with Mr Mehajer’s flamboyant wedding, rather “much more which has come to light since”.
Ms Lam, a “super six” councillor, said she was “disappointed” in some of her colleagues. “I am disappointed those councillors give the information to the public and the media, which is how things have blown up in the past few months,” Ms Lam said.