$1m company tax debt puts Salim Mehajer on notice

Tax office owed over $1m with he collapse of two property development companies owned by Auburn’s deputy mayor.

Auburn's deputy mayor Salim Mehajer outside one of his properties in John steet Lidcombe.

The collapse of two property development companies owned by the flashy Deputy Mayor of Sydney’s Auburn City Council, Salim Mehajer, has left the tax office owed $1.1 million and opens the door to him being banned from managing corporations.

The Australian can reveal that Mr Mehajer’s failed SM Engineering and Construction owes $213,454 in unpaid taxes, while his company SM Project Developments owes the Australian Taxation Office a further $886,701.

Under corporations law, the Australian Securities & Investments Commission can ban a person from managing corporations for up to five years if they have been a director of two failed companies within seven years.

The regulator can levy the disqualification if it believes it is “justified” and may take into account whether it considers such a banning is “in the public interest”.

ASIC said yesterday it could not comment on individual cases.

However, it is understood that the regulator, along with several other government agencies, is reviewing the affairs of Mr Mehajer, who made headlines in August after hosting a lavish wedding which included an unauthorised street closure, supercars and helicopters.

That spectacle placed the spotlight on repeated claims that Auburn council — whose councillors include property developers and real estate agents — has repeatedly waved through controversial developments and changed laws to aid developers.

It also played out against the backdrop of calls for the amalgam­ation of a number of Sydney councils.

The two companies have been wound up by the ATO over the unpaid debts: those debts remain outstanding. But this has no impact on the private wealth of Mr Mehajer, who drives supercars and boasted to The Australian this week that he could “buy any car I want”.

But what is also understood to have authorities such as ASIC interested is that Mr Mehajer continues to operate a string of other property development companies.

The ATO moved to wind up Mr Mehajer’s SM Engineering & Construction Pty Ltd over unpaid taxes on June 7, 2013.

Eleven days later, on June 18, 2013, Mr Mehajer, in his own name, registered SM Engineering & Construction Services Pty Ltd.

Three days after that, he registered SM Engineering & Construction (NSW) Pty Ltd.

In 2008 Mr Mehajer had registered, and still operates, another company, SM Engineering & Constructions. One Mehajer-connected company named in public documents as “SM Engineering & Constructions Pty Ltd” had completed on May 1, 2013, an 81-page environmental impact assessment by a company called Environmental Investigation Services.

That report was for a major development of 192 apartments and 16 commercial units, which takes up a block at 36-44 John Street, Lidcombe, adjacent to Auburn in Sydney’s west.

That major project is being developed by Sydney Project Group, which is fully owned and controlled by Mr Mehajer.

It was unclear which company “SM Engineering & Constructions Pty Ltd” referred to — no proprietary limited company with that precise name is registered — however, the dealings illustrate the interconnectivity between the various companies. Mr Mehajer said he could not comment on specifics but strongly denied engaging in any wrongdoing.

As revealed by The Australian this week, Mr Mehajer and his business partner Min Hua are being sued for almost $700,000 by the liquidator of their failed company SM Project Developments.

SM Project Developments liquidator Anthony Elkerton, principal at Deal Willcocks Advisory, alleges they breached directors’ duties while managing the company.

Specifics of those breaches have not yet been detailed because Mr Mehajer and Mr Hua are yet to lodge a response.

Mr Hua is the business partner of Auburn Mayor Le “Lily” Lam. Despite the pair operating prominent real estate agency Combined Real Estate Auburn for more than a decade — and Ms Lam being the partner of Mr Hua’s brother — Mr Mehajer said this week he had “no idea” of a connection between the two.

A key asset of SM Project Developments before it was wound up was a two-level brick walk-up commercial building at 38 John Street, Lidcombe.

After SM Project Developments collapsed, 38 John Street was bought by Mr Mehajer’s Sydney Project Group, which knocked it down to make way for the group’s major block-long development at 36-44 John Street.

Mr Mehajer said that deal was fully transparent, that Sydney Project Group had paid slightly more for the property than SM Project Developments had paid for it and SM Project Developments’ creditors were “lucky” another of his companies had bought the property.

Mr Elkerton yesterday confirmed SM Project Developments still owed the ATO $886,701 in unpaid taxes.

The federal government is currently conducting an inquiry into insolvency in the construction industry.

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