Explanatory Memorandum
(Circulated by the authority of the Treasurer,the Hon. J. Kerin, M.P.)Chapter 26 Direct lodgment of appeals and applications for review with the Federal Court and the Administrative Appeals Tribunal (the AAT)
[Clause: 2(10), 2(11), 106, 108-113]
Overview
Introduces new arrangements for taxpayers to lodge appeals against, or applications for review of, objection decisions directly with the Federal Court or the Administrative appeals Tribunal.
Repeals the objection and appeals provisions of various taxation laws administered by the Commissioner of Taxation and includes a set of generic objection and appeal provisions in the Taxation Administration Act.
Summary of proposed amendments
26.1. Under the existing law, if a taxpayer is dissatisfied with the Commissioner's decision on an objection, the taxpayer may lodge with the Commissioner a request to refer the decision to either the AAT or the Federal Court of Australia. This right of review or appeal is provided for in various taxation laws. Each of these taxation laws sets out the mechanisms and conditions for the lodgment of objections, request for review and appeals, and the Commissioner's responsibilities and duties in relation to them.
26.2. This Bill will amend these taxation laws in two ways.
- •
- Firstly, applications for review and appeals will no longer need to be lodged with the Commissioner for him to refer them to the AAT or the Federal Court. Taxpayers will now lodge applications for review and appeals directly with the AAT or the Federal Court.
- •
- Secondly, there will be one set of generic provisions for objections, reviews and appeals included in the Taxation Administration Act 1953 (the Principal Act).
Background to the legislation
26.3. The various taxation laws enable taxpayers to dispute certain decisions made by the Commissioner, e.g. to object against an assessment made by the Commissioner. A taxpayer who is dissatisfied with the decision on the objection may lodge with the Commissioner a request in writing to refer that decision to either the AAT or the Federal Court. Taxpayers must lodge this request with the Commissioner within sixty days after service of the notice of the decision on the objection.
26.4. Taxpayers may also apply for an extension of time in which to lodge the objection, request for review or the appeal.
26.5. When the request for review or the appeal is heard taxpayers cannot rely on any grounds other than those stated in their objection, unless the AAT or the Federal Court orders otherwise. Also, the burden of proving that the assessment is excessive lies upon the taxpayer.
26.6. In relation to requests for review, Part IVB of the Taxation Administration Act modifies the operation of Part IV of the Administrative Appeals Tribunal Act (the AAT Act) in so far as it relates to the review by the AAT of the Commissioner's decision on the objection.
26.7. A review of the Australian Taxation Office's (ATO) processes for resolving disputes recommended that taxpayers should lodge applications for review and appeals directly to the AAT and the Federal Court. The Government accepted this proposal.
26.8. A number of provisions in various taxation laws must now be amended to remove the requirement that applications for review and appeals should first be lodged with the Commissioner. The Commissioner will cease to have any involvement in the processing of these applications or appeals, or in processing applications for extension of time to lodge these applications or appeals.
26.9. These changes provided an opportunity to bring the objection, review and appeal provisions of the various laws within the one Act -the Principal Act. These amendments use more modern language and drafting techniques.
Explanation of the proposed amendments
Will these amendments change taxpayers' rights?
26.10. The Bill does not substantially change the law. The only significant changes are:
- •
- Taxpayers need to lodge their requests for review or appeals directly with the AAT or the Federal Court.
- •
- the provisions concerning the manner in which taxation objections are to be made, the manner in which the Commissioner is to deal with these objections, and about applications for review or appeal to either of the AAT or the Federal Court, will now be found in the Principal Act rather than the particular Act that gave rise to the initial assessment, determination, notice or decision, and
- •
- Subsection 14ZB(2) of Part IVB of the Principal Act will not be re-enacted. (More information on the effect of this repeal is given under the heading "Consequential Amendments" in relation to the Training Guarantee (Administration) Act 1990).
26.11. Taxpayers will still be given the right to object against an assessment, etc by the Act under which the assessment, etc is made, but Part IVC of the Principal Act will set out the manner in which the objections - made under all of those Acts - is to be made, unchanged from the existing laws. The Commissioner will have the same responsibilities and duties in dealing with objections that he has under the current law.
26.12. Part IVC of the Principal Act will have 5 Divisions:
- Division 1 - Introduction
- Division 2 - Words and expressions defined
- Division 3 - Describes how taxpayers are to make objections and how the Commissioner is to deal with them
- Division 4 - Contains provisions about applications to the AAT for review of objection decisions
- Division 5 - Contains provisions about appeals to the Federal Court against objection decisions.
26.13. For the purpose of illustrating the ways in which Part IVC either preserves or departs from the operation of the existing laws, this memorandum compares various new provisions with provisions being repealed (generally in Part V of the Income Tax Assessment Act 1936 (ITAA) and Part IVB of the Principal Act).
26.14. Taxpayers dissatisfied with a taxation decision (e.g. and assessment) who wish to object against it will be required to object in the manner prescribed in Division 3 of Part IVC of the Principal Act. These requirements are similar to those set out in section 185 of the ITAA being repealed by this Bill. [Sections 14ZU and 14ZV, and Subsections 14ZR(1) and 14ZW(1) and the definition of "taxation objection" in section 14ZL]
26.15. Subsection 14ZR(1) is intended to replace existing provisions such as subsection 185(3) of the ITAA in relation to the incorporation into one notice of more than one taxation decision where at least one of those decisions is in respect of the imposition of additional tax. In other words, the subsection will operate where a provision such as subsection 227(2) of the ITAA enables the Commissioner to incorporate decisions into the one notice.
* 26.16. The Commissioner must consider and determine objections that have been properly made and serve notice of his decision on the taxpayer. This obligation is the same as that set out in section 186 of the ITAA being repealed by this Bill. [Section 14ZY and the definition of "objection decision" in section 14ZQ] * Amended during passage - refer Supplementary EM)
Application for extension of time to lodge objection
26.17. Taxpayers wishing to lodge an objection after the 60 day period has elapsed can ask the Commissioner to treat the objection as having been lodged within time. [Subsections 14ZW(2) and (3)]
26.18. The Commissioner must consider this request and either agree to it or refuse it. He must then advise the taxpayer of his decision. If he refuses the request the decision is referred to in the Bill as an "extension of time refusal decision" which is reviewable by the AAT [Section 14ZX 14ZQ] . These provisions reflect subsections 188(1) and (3) and section 188A of the ITAA being repealed by this Bill.
Application for review or appeal against objection decision
26.19. An objection decision may be either a "reviewable objection decision" or an "appealable objection decision". [Section 14ZZ and the relevant definitions in section 14ZQ]
26.20. A reviewable objection decision is any objection decision other than an "ineligible income tax remission decision" or an "ineligible sales tax remission decision". These ineligible remission decisions are the same as those referred to in section 193 of the ITAA and section 42F the Sales Tax Assessment Act (No.1) 1930 being repealed by this Bill. [Sections 14ZQ, 14ZS and 14ZT]
26.21. If the objection decision is both "reviewable" and "appealable" the taxpayer may either apply to the AAT for review of the decision, or appeal against it to the Federal Court. If the decision is only "reviewable", the taxpayer can only apply for review (by the AAT). A decision that is solely "appealable can only be appealed against (to the Federal Court). [Section 14ZZ]
Review of decisions by the AAT
26.22. A modified AAT Act will apply to:
- •
- reviewable objection decisions [Sections 14ZZ and 14ZZA]
- •
- extension of time refusal decisions [subsection 14ZX(4) and section 14ZZA]
- •
- application, under subsection 29(7) of the AAT Act, to the AAT for an extension of time in which to lodge an application for review [Sections 14ZQ and 14ZZA]
26.23. The modifications are intended to have substantially the same effect as did the provisions of Part IVB of the Principal Act being repealed.
26.24. Applications to the AAT for review must be made under section 29 of the AAT Act as modified by this Bill. Previously, section 29 did not apply at all as applications for review were lodged with the Commissioner. Subsections 29(7) to (11) will now apply to "AAT extension applications". [Section 14ZQ and 14ZZC]
Other modifications of the AAT Act
26.25. Sections 27, 41, 28 and 44A of the AAT Act do not apply to the review of reviewable objection decisions and sections 27 and 41 of that Act do not apply to extension of time refusal decisions. However, these provisions do apply to reviewable objection decisions that are "registration-type sales tax decisions". A registration-type sales tax decision is one made under new subsection 38A(4) of the Sales Tax Assessment Act (No.1) 1930. (More information on section 38A is given under the heading "Consequential Amendments"). These modifications, and the modification to section 41 of the AAT Act that applies to reviewable objection decisions that are registration-type sales tax decisions continue the operation of sections 14ZD and 14ZJ of Part IVB of the Principal Act that is being repealed by this Bill. [Section 14ZQ, 14ZZB and 14ZZH]
26.26. The modification of section 30 of the AAT Act being made by Part IVC of the Principal Act, while different in form from the modifications made by section 14ZE of Part IVB, (being repealed by this Bill), the substance of the new modification is the same. [Section 14ZZD]
26.27. The modification of section 35 of the AAT Act effected by section 14ZF of Part IVB, being repealed, is continued so that the hearing of an application for review by the AAT will, generally, not be in public. [Section 14ZZE]
What documents are to be lodged with the AAT?
26.28. Division 4 of Part IVC will modify the operation of section 37 of the AAT Act in relation to the lodgement of material documents with the AAT. Section 37, as presently modified by section 14ZG of Part IVB of the Principal Act, requires the Commissioner to lodge with the AAT copies of a statement setting out:
- •
- the findings on material questions of fact, the evidence on which those findings are based and the reasons for the objection decisions; and
- •
- every other document that is in the Commissioner's possession, or under his control, that he thinks is relevant to the review by the AAT.
26.29. This practice led to many copies of documents being lodged with the AAT that were never referred to in the review or were otherwise unnecessary. Accordingly, Part IVC of the Principal Act modifies section 37 of the AAT Act in relation to relevant objection decisions in a slightly different way. The new approach will reduce the number of documents referred to the AAT when the application for review is made, without restricting the AAT's power to obtain any documents it requires in particular cases.
26.30. After being notified that there is an application for review with the AAT, the Commissioner will now be required to lodge with the AAT the prescribed number of copies of:
- •
- a statement giving the reasons for the decision. Section 25D of the Acts Interpretation Act requires that this statement set out the findings on material questions of fact and refer to the evidence on which those findings are based.
- •
- the notice of the taxation decision (eg the assessment), the taxation objection and the notice of the decision on the objection.
- •
- every other document that is in the Commissioner's possession, or under his control, that the Commissioner considers is necessary to the review of the objection decision and a list of those documents. The change from relevant to necessary puts the requirements to lodge documents with the AAT on a similar footing to that required for appeals by Order 52A Rule 8 of the Federal Court Rules. [paragraph 14ZZF(1)(a)]
26.31. Part IVC of the Principal Act also modifies the AAT's power, under section 37, to order the lodgment of additional documents. The AAT will now be able to:
- •
- issue oral orders at a preliminary conference requiring a person to lodge additional relevant documents;
- •
- serve a notice on a person requiring specified documents in the person's possession or control to be lodged within a specified time; and
- •
- serve a notice requiring the person to lodge a list of documents in the person's possession or control that he or she considers to be relevant to the review of the objection decisions. [Paragraph 14ZZF(1)(b)]
26.32. The imposition of a requirement to lodge a list of relevant documents with the AAT is not intended to prevent the AAT from subsequently ordering the lodgment of documents identified in the list. [Subsection 14ZZF(3)]
26.33. As the modification of section 37 of the AAT Act has been changed it is necessary to make a consequential change to the way section 38 is modified. As with the existing law, the modification ensures that the AAT can order a person to lodge an additional statement of reason where the initial statement of reasons and findings on material questions of fact did not contain adequate particulars. [Section 14ZZG]
Reasons for the Tribunal's decision
26.34. The AAT may still publish its reasons for decision even if a review is not held in public. This continues the modification of section 43 of the AAT Act made by section 14ZK of Part IVB of the Principal Act being repealed by this Bill.
26.35. Section 43 will be further modified by Part IVC of the Principal Act so that if a review is not held in public, and a notice of appeal against the AAT's decision has not been lodged with the Federal Court, then the AAT's reasons must be framed so that the applicant is not likely to be identified. This modification was not made in the previous law. [Section 14ZZJ]
26.36. Division 5 contains provisions about appeals to the Federal Court against certain objection decisions referred to as "appealable objection decisions".
26.37. Appeals to the Federal Court against "appealable objection decisions" are to be lodged with the Court within 60 days after the service of the notice of the decision on the objection. [Section 14ZZN]
26.38. On the hearing of an appeal against an appealable objection decision, the Federal Court may make such orders as it thinks fit. This continues the operation of provisions in various taxation laws, such as section 199 of the ITAA, being repealed by this Bill. [Sections 14ZQ and 14ZZP]
Transfer of appeal proceedings to the Family Court
26.39. A proceeding that is pending in the Federal Court on an appealable objection decision in relation to a taxation decision made under the ITAA, may be transferred by the Federal Court to the Family Court. This may be done on the application of a party to the proceeding or at the Court's own initiative. This continues the operation of section 189B of the ITAA, being repealed by this Bill. [Section 14ZZS]
26.40. The law in relation to limitation of the grounds of objection and the burden of proof, in proceedings before the AAT or the Federal Court, has not been altered from that which operated previously. For example, the effect of provisions such as section 190 of the ITAA, being repealed by this Bill, will continue. [Sections 14ZZK and 14ZZO]
26.41. The law in relation to the implementation of AAT and Federal Court decisions has not been altered from that which operated previously. For example, the effect of provisions such as section 200B of the ITAA, being repealed by this Bill, will continue. [Sections 14ZZL and 14ZZQ]
26.42. Similarly, the law in relation to the effect of pending reviews and appeals on the implementation of taxation decisions has not been altered. The effect of provisions such as subsection 201(1) of the ITAA being repealed by this Bill, will continue. [Sections 14ZZM and 14ZZR]
Consequential amendments
26.43. As a consequence of the introduction of common objection, review and appeal provisions into Part IVC, the affected taxation laws must be amended to repeal or omit their specific objection, review and appeal provisions. These consequential amendments are set out in Schedule 4 of the Bill. [Clause 109]
26.44. Each of the affected taxation laws will now contain a section that will enable a taxpayer to object against a relevant taxation decision in the manner set out in Part IVC of the Principal Act (eg, proposed section 175A of the Income Tax Assessment Act 1936 ).
26.45. A definition of "this Act" has been included in the following Acts:
- Estate Duty Assessment Act 1914
- Fringe Benefits Tax Assessment Act 1986
- Gift Duty Convention (United States of America) Act 1953
- Income Tax Assessment Act 1936
- Pay-roll Tax (Territories) Assessment Act 1971
- Petroleum Resource Rent Tax Assessment Act 1987
- Sales Tax Assessment Act (No 1) 1930
- Training Guarantee (Administration) Act 1990
- Wool Tax (Administration) Act 1964.
26.46. The definition operates to include in each Act, Part IVC of the Principal Act. This amendment has been made to ensure that provisions in these Acts that operate for taxation decisions will also operate for objection decisions, reviews and appeals. For example, this amendment will ensure that the Commissioner's access and information gathering powers under sections 263 and 264 of the Income Tax Assessment Act will continue to operate as they do now in relation to the assessment, objection, review and appeal process.
Administrative Decisions (Judicial Review) Act 1977 (AD) JR) Act)
26.47. It is necessary to include objection decisions made under section 14ZY of the Principal Act in Schedule 1 (as a class of decisions that are not decision to which the AD(JR) Act applies). This is to ensure that objection decisions made under the Principal Act are not reviewable under the AD(JR) Act.
* Amended during passage through Parliament refer Supplementary EM*
Income Tax Assessment Act 1936
26.48. Subparagraph 82KZAA(3)(d)(ii) has been replaced with a new subparagraph which ensures that the subparagraph still operates for relevant objections where the objection decisions are made after the commencement date for these amendments.
26.49. Section 175A is intended to apply to both assessments actually made by the Commissioner and assessments the Commissioner is deemed to have made under section 166A of the ITAA.
Sales Tax Assessment Act (No.1) 1930
26.50. A new section 38A will be included in the Sales Tax Assessment Act (No.1) 1930 as a consequence of the repeal of Part VII of that Act (sections 39A to 44A). Subsection 38A(1) replaces subsection 40(1) of the previous Act. Subsections 38A(2) and (3) replace subsections 40(2),(3) and includes the definition of "refund decisions" in section 39A of the previous Act.
26.51. Subsection 38A(4) replaces subsection 40(4). The taxation decisions referred to in section 38A(4) are called registration-type sales tax decisions in the new Part IVC of the Principal Act (See section 14ZQ, 14ZZB and 14ZZH).
Taxation Administration Act 1953
26.52. A new subsection 3B(4) will be included in the Principal Act to ensure that the Commissioner does not have to report to Parliament in respect of the same matters under two Acts, for example the Income Tax Assessment Act and the Principal Act.
26.53. A new subsection 3C(9) will be included in the Principal Act to ensure that only one set of secrecy provisions apply in respect of each matter. This amendment, when read together with the amendments to other relevant Acts that include in them Part IVC of the Principal Act, will mean that only one secrecy provision will apply. For example, the secrecy provisions in section 16 of the Income Tax Assessment Act will apply to income tax matters throughout the decision, objection, review or appeal process.
Taxation (Interest on Overpayments) Act 1983
26.54. As the objection provisions of the various taxation laws are being repealed it is necessary to amend the definition of "objection" in subsection 3(1) of the Taxation (Interest on Overpayments) Act 1983.
Training Guarantee (Administration) Act 1990
26.55. New sections 44A and 44B are to be included in the Training Guarantee (Administration) Act as a consequence of the repeal of Part 7 of that Act to be effected by this Bill.
26.56. Sections 44A and 44B replace sections 61 and 62 of the Act, which are being repealed by this Bill.
26.57. Subsection 14ZB(2) of Part IVB of the Principal Act is not being re-enacted. As a result, a decision of the Training Advisory Body to issue a certificate under section 44 or 44A will not be taken to be an objection decision. The consequence of this is that the modifications to the AAT Act made by Division 4 of Part IVC of the Principal Act will not apply to the review of these decisions by the AAT.
Commencement date
26.58. The amendments made by clauses 108-113 (inclusive) of this Bill will commence on a day to be fixed by proclamation. [Subclause 10 of clause 2]
26.59. Generally, these amendments will apply in relation to objections to taxation decisions which were notified to a taxpayer after the commencement date. In relation to the Training Guarantee (Administration) Act the amendments will apply in relation to certificates issued under section 44, or refusal decisions under subsection 43(3) of that Act, where the certificate was given or the decision notified after the commencement date. [Clause 110]
26.60. The amendments made to the Principal Act will apply to any application for review of, or appeal against, an objection decision made after the commencement date in respect of an assessment, determination, etc made prior to the commencement date. That is, the objection decision is treated as if it had been made under section 14ZY. The intended effect of this measure is that applications for review and appeals in respect of objection decisions made after the commencement date will need to be lodged directly with the AAT or the Federal Court.
Clauses involved in the proposed amendments
Clause 108 : Repeals Parts IVAB and IVB of the Principal Act and substitutes a new Part IVC which contains common objection, review and appeal provisions that relate to the various taxation laws administered by the Commissioner.
Clause 109 : Provides for the consequential amendment of the Acts set out in schedule 4.
Clause 110 and 2 (10) : Provide that this Part will commence on a day to be proclaimed. (More information on the commencement and application of this Part is given under the heading "Commencement Date").
Clause 111 : Provides that despite the amendments to the Principal Act made by Part 4 of this Bill, sections 3B and 3C, and Parts IVAB and IVB of the Principal Act will continue to apply to certain Acts.
Clause 112 : Enables the new review and appeal procedures (ie, direct lodgment) to apply to reviews and appeals against objection decisions made after the commencement of this Part in respect of assessments, determinations, notices and decisions made before the commencement of this Part. (More information on the transitional measures is given under the heading "Commencement Date").