Decision impact statement
Mount Pritchard v Commissioner of Taxation
 FCAFC 129
(2011) 169 FCR 549
2011 ATC 20-288
(2011) 85 ATR 496
Venue: Federal Court
Venue Reference No: NSD 85 of 2011
Judge Name: Edmonds, Middleton and Jagot JJ
Judgment date: 17 October 2011
Appeals on foot: No.
Favourable - application dismissed with costs
Impacted AdviceRelevant Rulings/Determinations:
Validity of assessments where made contrary to a private binding ruling
Outlines the ATO response to this case challenging the validity of assessments and seeking to require the Commissioner to assess in accordance with a private binding ruling that had been issued to the taxpayer.
Brief summary of facts
In February 2004, the Commissioner issued a private binding ruling to the taxpayer stating that the taxpayer would be exempt from income tax for the years of income ended 30 June 2003 to 30 June 2010.
The Commissioner ruled that the taxpayer was exempt from income tax because the arrangement as defined in the private ruling was a club established for the promotion of sport. Hence, Item 9.1(c) of section 50-54 of the Income Tax Assessment Act 1997 (ITAA 97) applied.
Subsequently, the Commissioner issued assessments to the taxpayer for the years ended 30 June 2006 and 30 June 2007, on the basis that the arrangement as defined in the private ruling was not the same arrangement that was actually carried out by the taxpayer. Accordingly, the Commissioner was not bound by the private ruling.
The taxpayer objected to the assessment for the year ended 30 June 2006 on the ground that the Commissioner was bound by the ruling and thus he did not have the power to make an assessment for the 2006 income year.
The Commissioner decided to disallow the objection in full on 5 March 2010. On 23 April 2010, the taxpayer applied to the Administrative Appeals Tribunal under Part IVC of the Tax Administration Act 1953 (TAA 53) for a review of the Commissioner's objection decision.
In the meantime, the applicant also applied to the Federal Court for judicial review of the Commissioner's decision, on the ground of jurisdictional error.
Issues decided by the court
The Full Court held that no error has been shown in the process of assessment going to jurisdiction.
The Full Court also concluded that in the absence of jurisdictional error, failure by the Commissioner to comply with a provision of the tax legislation does not make an assessment invalid.
Further, where the taxpayer contends that the Commissioner is bound by a private ruling, the taxpayer can proceed to have heard its arguments in Part IVC proceedings, and if successful in arguing that the private ruling should be applied, will demonstrate that the 2006 assessment is excessive.
ATO view of Decision
The decision supports the proposition that a review or an appeal under Part IVC is the proper avenue for a taxpayer seeking review of an income tax assessment on the basis that it is excessive.
Implications for ATO precedential documents (Public Rulings & Determinations etc)
Implications for Law Administration Practice Statements
Deputy Commissioner of Taxation v Richard Walter Pty Ltd
 HCA 23
183 CLR 168
29 ATR 644
95 ATC 4067
FJ Bloemen Pty Ltd v Federal Commissioner of Taxation
 HCA 27
147 CLR 360
11 ATR 914
81 ATC 4280
Federal Commissioner of Taxation v Administrative Appeals Tribunal
 FCAFC 37
2011 ATC 20-248
191 FCR 400
Federal Commissioner of Taxation v Futuris Corporation Limited
 HCA 32
237 CLR 146
69 ATR 41
2008 ATC 20-039
Kennedy v Administrative Appeals Tribunal
 FCAFC 124
168 FCR 566
2008 ATC 20-037
73 ATR 276
McAndrew v Federal Commissioner of Taxation
 HCA 62
98 CLR 263
McDonald v Commissioner of Business Franchises
(1992) 175 CLR 472
Perpetual Executors and Trustees Association of Australia Limited v Federal Commissioner of Taxation
(1948) 77 CLR 1
Plaintiff S157/2002 v Commonwealth of Australia
 HCA 2
211 CLR 476
Project Blue Sky Inc v Australian Broadcasting Authority
 HCA 28
194 CLR 355
R v Metal Trades Employer's Association; Ex parte Amalgamated Engineering Union, Australian Section
 HCA 3
82 CLR 208
Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (No 20)
(1980) 44 FLR 455
X v Australian Prudential Regulation Authority
 HCA 4
226 CLR 630
Decision Impact Statement, Futuris Corporation Limited