Schweitzer and Commissioner of Taxation

[2019] AATA 1100

---

• The impact of this case on ATO policy is discussed in Decision Impact Statement: Schweitzer and Commissioner of Taxation (Published 4 October 2019).

(Decision by: Deputy President S A Forgie)

Ingrid Schweitzer
and Commissioner of Taxation

Tribunal:

Member:
Deputy President S A Forgie

Legislative References:
A New Tax System (Pay As You Go) Act 1999 - The Act
A New Tax System (Tax Administration) Act 1999 - The Act
A New Tax System (Tax Administration) Act (No. 2) 2000 - The Act
Australian National University Act 1946 - The Act
Administrative Decisions (Judicial Review) Act 1977 - The Act
Administration and Probate Act 1958 (Vic) - The Act
Bankruptcy Act 1966 - The Act
Commonwealth of Australia Constitution Act 1901 - The Act
Fringe Benefits Tax Assessment Act 1986 - The Act
Income Tax Act 1986 - The Act
Income Tax Assessment Act 1936 - The Act
Income Tax (Consequential Amendments) Act 1997 - The Act
Income Tax (Mining Withholding Tax) Act 1979 - The Act
Income Tax Rates 1986 - The Act
Income Tax (Transitional Provisions) Act 1997 - The Act
Indirect Tax Laws Amendment (Assessment) Act 2012 - The Act
Judiciary Act 1903 - The Act
Supreme Court (General Civil Procedure) Rules 2005 (Victoria) - The Act
Taxation Administration Act 1953 - The Act
Tax and Superannuation Laws Amendment (2014 Measures No. 4) Act 2014 - The Act
Taxation Laws Amendment Act 1984 - The Act
Taxation Laws Amendment Act (No. 6) 2003 - The Act
Taxation Laws Amendment (No. 3) Act 1999 - The Act
Taxation Laws Amendment (Self Assessment) Act 1992 - The Act
Tax Laws Amendment (2011 Measures No. 2) Act 2011 - The Act
Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 - The Act
Transfer of Land Act 1958 (Vic) - The Act

Case References:
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) - [2009] HCA 41; (2009) 239 CLR 27; 260 ALR 1
Alexandra Private Geriatric Hospital Pty Ltd v Blewett - [1984] FCA 223; (1984) 2 FCR 368; 56 ALR 265
Australian National Airlines Commission v Newman - [1987] HCA 9; (1987) 162 CLR 466; 70 ALR 275
Australian National University v Burns - [1982] FCA 191; (1982) 64 FLR 166; 43 ALR 25; 5 ALD 67
Burns v Australian National University - [1982] FCA 59; (1982) 61 FLR 76; 40 ALR 707
Binetter v Commissioner of Taxation - [2016] FCAFC 163
Buckley v Wathen [1973] VicRp 51 - [1973] VR 511
Chamberlain v Deputy Commissioner of Taxation - [1988] HCA 21; (1988) 164 CLR 502; 78 ALR 271
Chemical Trustee Ltd v Deputy Commissioner of Taxation - [2014] FCAFC 27; (2014) 96 ATR 32
Commissioner of Taxation v A Taxpayer - [2006] FCA 888; (2006) 91 ALD 335; 63 ATR 450; 2006 ATC 4393
Commissioner of Taxation v Milne - [2006] FCA 1005; (2006) 153 FCR 521; 63 ATR 538
Corlette and Another v Mackenzie and Others - [1996] FCA 1482; (1996) 62 FCR 597; 42 ALD 193; 32 ATR 667
Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) - [2012] FCA 1064; (2012) 90 ATR 711
Ebner v Official Trustee in Bankruptcy, in the matter of Ebner - [2003] FCA 73; (2003) 126 FCR 281; 196 ALR 533
Ebner v Official Trustee in Bankruptcy, in the matter of Ebner - [2000] FCA 182
Ebner v Official Trustee in Bankruptcy - [1999] HCATrans 618
Ebner v Official Trustee in Bankruptcy - [2000] HCA 63; (2000) 205 CLR 337; 63 ALD 577; 176 ALR 644
Federal Commissioner of Taxation v H - [2010] FCAFC 128
Griffith University v Tang - [2005] HCA 7; (2005) 221 CLR 99; 213 ALR 724; 82 ALD 289
General Newspapers Pty Ltd and Others v Telstra Corporation - [1993] FCA 473; (1993) 45 FCR 164; 117 ALR 629
Minister for Aboriginal Affairs v Peko-Wallsend Ltd - [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299
Powell v Evreniades - [1989] FCA 114; (1989) 21 FCR 252; 87 ALR 117; 20 ATR 472; 89 ATC 4415
Permanent Trustee Australia Limited v Commissioner of State Revenue (Victoria) - [2004] HCA 53; 220 CLR 388; 211 ALR 18
Radio 2UE Sydney Pty Ltd v Chesterton - [2009] HCA 16; (2009) 238 CLR 460; 254 ALR 606
Re Ebner and Commissioner of Taxation - [2006] AATA 525; (2006) 63 ATR 1073; [2006] ATC 2263
Re Maxwell William Ebner; Ex parte The Official Trustee in Bankruptcy and Ingrid Ebner - [1998] FCA 751
Re Rollason and Federal Commissioner of Taxation - [2006] AATA 962; (2006) 64 ATR 1210
Reader's Digest Services Pty Ltd v Lamb - [1982] HCA 4; (1982) 150 CLR 500; 2006 ATC 2529
Scharer v New South Wales - [2001] NSWCA 360; (2001) 53 NSWLR 299; 116 LGERA 217
Schweitzer v Schweitzer - [2010] VSC 543
Schweitzer v Schweitzer - [2012] VSCA 260
Secretary to the Department of Business and Innovation v Murdesk Investments Pty Ltd - [2012] VSC 319
Shi v Migration Agents Registration Authority - [2008] HCA 31; (2008) 235 CLR 286; 248 ALR 390; 48 AAR 345; 103 ALD 467; 82 ALJR 1147
Van Grieken v Veilands - (1991) 91 ATC 4423; 21 ATR 1639

Other References:
Chambers 21st Century Dictionary (1999, reprinted 2004)
Explanatory Memorandum to the Taxation Laws Amendment Bill (No 6) 2003
Hansard, House of Representatives, 29 May 2003
Practice Statement, PS LA 2011/17, Australian Taxation Office

Hearing date:
Decision date: 29 May 2019

Melbourne

---

Decision by:
Deputy President S A Forgie

REASONS FOR DECISION

1. Ms Schweitzer has applied for review of a decision made by a delegate of the Commissioner of Taxation (Commissioner) on 23 January 2017 disallowing her objection to the Commissioner's decision dated 12 September 2016 refusing to release her from her tax liabilities under Division 340 of Part 4-5 of Schedule 1 of the Taxation Administration Act 1953 (TAA). At the time the objection was disallowed, Ms Schweitzer's tax liabilities consisted of $1,231,952.40 in income tax, Medicare levy and Medicare levy surcharge and $3,472,332.40 of general interest charge (GIC). She also owed interest of $2,978,842.07 that had accrued on a judgment obtained by the Commissioner in respect of Ms Schweitzer's tax liabilities as at 10 December 2003.

2. There are three issues that the parties have identified in this case:

(1)

Does a tax-related liability retain its essential character when it becomes the subject of a judgment obtained by the Commissioner? It is accepted by both parties that the interest accruing on that judgment is not a tax-related liability.

(a)

I have decided that it does not retain its essential character and cannot be regarded as a tax-related liability.

(2)

Do the release provisions in Division 340 of Part 4-5 Schedule 1 to the TAA apply to tax-related liabilities that are described in Item 6 of the table in s 340-10(2) of the TAA as "tax" incurred before the income year ending 30 June 1998 or only in that year and subsequent years?

(a)

I have decided that they apply to all income years both before and after that ending 30 June 1998.

(3)

Should Ms Schweitzer be released from all or part of her tax-related liabilities under Division 340?

(a)

I have decided that she would not suffer serious hardship if required to satisfy those liabilities because any hardship she suffers will be by recovery of the interest on the judgment and that that hardship will not be serious hardship.

(b)

If I am incorrect in that conclusion, I have decided that I would not exercise the discretion under s 340-5 of Division 340.

3. I have decided to affirm the decision of the Commissioner. That means that Ms Schweitzer is not released from all or any of her liabilities within the meaning of s 340-10(2).

THE TAX LIABILITIES

4. There is no dispute between the parties regarding the facts that led to the Commissioner's decision disallowing Ms Schweitzer's objection to his decision of 12 September 2016 refusing to release her from her tax liabilities under s 340-5(3) of the TAA. At the time, those liabilities amounted to $7,683,126.87 and included income tax liabilities for the years of income ending 30 June 1991 to 30 June 1997 as well as for subsequent years of income up to that that ending 30 June 1999.^[1] That amount was made up of:

(1)

$1,231,952.40 in respect of income tax, Medicare levy and Medicare levy surcharges;

(2)

$3,472,332.40 of general interest charge (GIC); and

(3)

$2,978,842.07 of judgment debt interest arising from a judgment obtained by a Deputy Commissioner of Taxation in respect of Ms Schweitzer's tax liabilities as at 10 December 2003.

5. Ms Schweitzer is married to Mr Max Ebner. They both receive an Age Pension under the Social Security Act 1991. At the time of the hearing, their combined fortnightly payment was $1,296.50. They estimated their fortnightly expenses to be $1,321.00.

6. I have set out the course of events leading to the tax liabilities in Attachment A, which forms part of these reasons.

LEGISLATIVE BACKGROUND

7. Part 4-50 of Schedule 1 to the TAA is entitled "Release from Particular Liabilities". It was inserted in the TAA by the Taxation Laws Amendment Act (No. 6) 2003^[2] with effect from 1 September 2003.^[3] As to its application, Item 19 of Schedule 9 provided that:

"A person may be released, under Division 340 in Schedule 1 to the Taxation Administration Act 1953, from a liability that the person has incurred even if the liability was incurred before the commencement of this Schedule 1."

8. Item 18 of Schedule 9 to the Taxation Laws Amendment Act (No. 6) 2003 applied to an application made under s 133 of the Fringe Benefits Tax Assessment Act 1986 (FBT Act) or under s 265 of ITAA36.^[4] Item 18(2) provides:

"If the application has not been finally determined before the commencement of this Schedule [1 September 2003], Division 340 in Schedule 1 to the Taxation Administration Act 1953 applies as if the application had been made under section 340-5 in Schedule 1 to that Act."

9. Item 19 of Schedule 9 provides that:

"A person may be released, under Division 340 in Schedule 1 to the Taxation Administration Act 1953, from a liability that a person has incurred even if the liability was incurred before the commencement of this Schedule."

10. The Commissioner's powers in Part 4-50 are divided into two. Those set out in Division 342 of Part 4-50 are concerned with proceeds of crime and are not relevant in this case. The other category relates to the Commissioner's powers in cases of hardship. They are found in Division 340. They are the powers relevant in this case.

11. Section 340-1 sets out what Division 340 is about:

"The Commissioner may release you from a particular liability that you have incurred if you are an individual, or a trustee of the estate of a deceased person, and satisfying the liability would cause serious hardship."

If the person seeking release is an individual, the Commissioner may release him or her from the "particular liability" if he or she would suffer serious hardship if required to satisfy it.^[5]

12. The TAA does not define what is meant by a "particular liability" but s 340-5(1) does so by circumscribing the liabilities in relation to which a taxpayer may apply to the Commissioner for release. It provides:

"You may apply to the Commissioner to release you, in whole or in part, from a liability of yours if section 340-10 applies to the liability."

13. Section 340-10 sets out the liabilities to which it applies. Section 340-10(1) states that the section applies to a liability of the following kind:

"(a)

fringe benefits tax;

(b)

an instalment of fringe benefits tax;

(c)

*Medicare levy;

(d)

*Medicare levy (fringe benefits) surcharge;

(e)

a *PAYG instalment."

14. Section 340-10(2) provides:

"This section also applies to a liability if it is a liability that is specified in the column headed 'Liabilities' of the following table and the liability is a liability under a provision or provisions of an Act specified in the column headed 'Provision(s)' of the table ..." (emphasis added)

Item 6 of the table reads:

15. The word "tax", as it appears in the column headed "Liabilities" is defined in s 995-1(1) to mean:

"...

(a)

income tax imposed by the Income Tax Act 1986, as assessed under this Act; or

(b)

income tax imposed as such by any other Act, as assessed under this Act."

16. With effect from 1 July 1997,^[6] s 4-1 of the Income Tax Assessment Act 1997 (ITAA97) provides:

"Income tax is payable by each individual and company, and by some other entities.

Note: The actual amount of income tax payable may be nil."

17. Section 995-1(1) of ITAA97 defines the expression "income tax" to mean:

"... income tax imposed by any of these:

(a)

the Income Tax Act 1986;

(b)

the Income Tax (Diverted Income) Act 1981;

(c)

the Income Tax (Former Complying Superannuation Funds) Act 1994;

(d)

the Income Tax (Former Non-resident Superannuation Funds) Act 1994;

(e)

the Income Tax (Fund Contributions) Act 1989."

18. Section 4-1 of the Income Tax (Transitional Provisions) Act 1997 provides:

"Application of the Income Tax Assessment Act 1997

The Income Tax Assessment Act 1997, as originally enacted, applies to assessments for the 1997-98 income year and later income years.

Note: For the application of amendments of that Act (including new provisions inserted in it), see the Acts making the amendments."

19. For those assessments relating to years of income before the 1997-98 year of income, regard must be had to s 17 of ITAA36. It was amended with effect from 1 July 1997,^[7] to include s 17(2) and a Note.^[8] At that time, it read:

"Levy of income tax

(1)

Subject to this Act, income tax at the rates declared by the Parliament is levied, and shall be paid, for the financial year that commenced on 1 July 1965 and for each succeeding financial year, upon the taxable income derived during the year of income by any person, whether a resident or a non-resident.

(2)

This section does not apply to the 1997-98 year of income or a later year of income.

Note: Section 4-10 of the Income Tax Assessment Act 1997 sets out how an entity works out the amount of income tax payable on its taxable income for the 1997-98 year of income and later years of income."^[9]

SUBMISSIONS REGARDING THE CONSTRUCTION OF SECTION 340-10(2); ITEM 6(c)

20. On behalf of Ms Schweitzer, Mr Sharpley SC with Mr Diaz of counsel submitted that, with the exception of judgment debt interest, all of her liabilities are eligible for release under s 340-5 of the TAA. On behalf of the Commissioner, Mr Hanks QC with Mr Linden of counsel indicated that he did not agree that the following two of those liabilities are eligible for release:

(1)

liability for income tax for the years of income ending 30 June 1991 to 30 June 1997 totalling $395,034.03; and

(2)

interest imposed by s 170AA of ITAA36 on the liabilities for the years of income ending 30 June 1990 to 30 June 1998 totalling $410,911.

21. That meant that the parties were in agreement that the following liabilities are eligible for release under s 340-5(3):

(1)

income tax liabilities for the years of income ending 30 June 1998 and 30 June 1999 totalling $16,861.87;

(2)

general interest charge (GIC) imposed by s 170AA of ITAA36 on the liability for the year of income ended 30 June 1999 totalling $2,028.85;

(3)

additional tax, by way of penalties, for the years of income ended 30 June 1990 to 30 June 1999 totalling $390,997.92;

(4)

Medicare Levy for the years of income ended 30 June 1991 to 30 June 1999 totalling $13,786.12; and

(5)

GIC incurred under s 204(3) of ITAA36 on income tax liabilities and additional tax liabilities imposed by way of penalty for each of the years of income from 30 June 1988 to 30 June 1999 totalling $1,878,840.08.

22. The first area of disagreement between the parties raises the construction of the liability of "tax" specified in the second column of Item 6 in s 340-10(2) and whether income tax liabilities for the years of income ending 30 June 1991 to 30 June 1997 are liabilities under s 4-1 of ITAA97. The second raises the issue whether interest imposed by s 170AA of ITAA36 on the liabilities for the years of income ending 30 June 1990 to 30 June 1998 come within any of the items specified in s 340-10(2).

Item 6: a liability that is "tax" imposed under s 4-1 of ITAA97

23. Two alternative constructions of s 340-10(2), item 6 have been put forward:

(1)

It includes only income tax liabilities for the 1997-98 year of income and subsequent years of income.

(2)

It includes all income tax liabilities regardless of whether the year of income is the 1997-98 year of income or an earlier or later year.

24. The first construction is based on a reading of the text of s 340-10(2) and Item 6 when read with s 4-1 of ITAA97. Section 4-1 is limited to assessments for the 1997-98 year of income and later years of income by virtue of s 4-1 of the Income Tax (Transitional Provisions) Act 1997. This is the interpretation preferred by the Commissioner.

25. The second construction gives effect to the apparent intention of s 340-10 to include, within the scope of Division 340, liabilities arising before the 1997-98 year of income. By referring to s 4-1 of ITAA97, Parliament intended to include its predecessor, which is s 17 of ITAA36. This is the interpretation preferred by Ms Schweitzer.

26. On behalf of Ms Schweitzer, Mr Sharpley submitted that income tax is not levied under s 4-1. The role of s 4-1 is to define those who are liable to pay tax but not to impose it. The Explanatory Memorandum accompanying the Taxation Laws Amendment Bill (No 6) 2003 that introduced Part 4-50, and particularly Division 340, into the TAA, suggests that it was intended to streamline the process for obtaining release; not to remove any right to seek release for income tax imposed before the 1997-98 year of income. That view is inherent in the judgment of Conti J in Commissioner of Taxation v Milne^[10] when he dismissed an appeal from a decision of the Tribunal setting aside the Commissioner's decision refusing to release Mr Milne from his taxation liability. Mr Milne had applied for release of his income tax liability for the years of income ending 30 June 1991 to 1999. The question whether Division 340 applied so that Mr Milne could be released from liability incurred in the years of income before 30 June 1998 was not considered by Conti J and he makes no reference to its having been raised.

27. On behalf of the Commissioner, Mr Hanks submitted that a judgement does extinguish an underlying liability. One obvious reason for that conclusion is that, if it were not the case, a taxpayer could apply for release under the TAA. He referred to the judgment of the Full Court in Chemical Trustee Ltd v Deputy Commissioner of Taxation^[11] when endorsing the judgment of Perram J below.^[12] The issue has also been addressed by Deputy President Block in Re Rollason and Federal Commissioner of Taxation^[13] (Rollason), in which the Commissioner had contended that a judgment does not come within s 340-10 of Schedule 1 to the TAA even though that judgment is entered following proceedings for a tax debt. The tax debt is not merged with the judgment debt. Rather, any link between liability and the judgment debt is severed. Therefore, any tax debt is not capable of being released because there is no longer any liability. The Commissioner had relied on the case of Chamberlain v Deputy Commissioner of Taxation^[14] (Chamberlain) and Deputy President Block decided:

"Although the result may be harsh I am of the view that the judgment of the High Court in Chamberlain has the effect that the judgment debt is indeed a debt which falls outside the relieving provisions of s 340-10. That judgment appears to me to make it clear that when a tax debt is merged into a judgment debt it is the latter which is the relevant debt. ..."^[15]

28. If that conclusion is correct, Mr Hanks acknowledged, a significant amount of Ms Schweitzer's tax debt would fall outside Division 340 and its release provisions. Consideration must be given to what is a "liability under a provision" in the context of s 340-10(2) and, in particular, under Item 6. The alternative interpretations of Item 6 are set out at [23] above. Liability does not arise under s 4-1 of ITAA97 but Item 6(c) must mean something. The reference to s 4-1 is a major impediment to Ms Schweitzer's argument that she is entitled to release from income tax liabilities incurred before the 1997/98 financial year. She can claim release in respect of liabilities other than income tax in respect of the earlier years of income. Her argument that she can claim release in respect of income tax liabilities in respect of those earlier years are tenuous because they rely on implying Parliament's intention. Only by implying Parliament's intention from extrinsic material can Item (c) be read to include liability arising in respect of income tax. Relying on Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory)^[16] (Alcan), Mr Hanks submitted that it is not permissible, however, to allow extrinsic material to displace the clear text of an enactment.

CONSIDERATION OF THE CONSTRUCTION OF SECTION 340-10(2): ITEM 6(c)

Liability under a provision of an Act

29. A "liability" in the context of Item 6 is "... the state of being legally liable or responsible for something. ...".^[17] There is no dispute about this. Equally, there is no disagreement in the authorities that, when used in the context of the related expression "under an enactment", the word "under" connotes "in pursuance of" or "under the authority of".^[18] That would mean that the state of being legally liable or responsible for the payment of an amount of money, and so the liability, must arise in pursuance of, or under the authority of, a provision, or provisions, of an Act specified in the column headed "Provision(s)" in the table in Item 6.

30. Stating the principles is one thing and applying it another. In Australian National University v Burns (Burns), Bowen CJ and Lockhart J then went on to give some general guidance as to how to apply them: "We agree with the primary judge when he said (40 ALR at 716-7): [^[19]] '... In many cases the power to exercise will be precisely stated in the legislation. In other cases the power to do a particular thing will be found in a broadly stated power. The Act should not be confined to cases where the particular power is precisely stated. In each case, the question to be asked is one of substance, whether, in effect, the decision is made 'under an enactment' or otherwise.'"^[20]

31. Cases such as Burns, Australian National Airlines Commission v Newman^[21] (Newman), General Newspapers Pty Ltd and Others v Telstra Corporation^[22] (General Newspapers) and Griffith University v Tang^[23] (Tang) illustrate the practical application of the principles in the context of deciding whether a decision is "a decision of an administrative character made ... under an enactment ..." (emphasis added) within the meaning of the definition of a "decision to which this Act applies" in s 3(1) of the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act). In Burns, the question to be decided was whether a decision made by the University Council terminating Mr Burns' appointment as a professor was a decision made under the Australian National University Act 1946 (University Act) or under contract. If it was a decision under the University Act, the decision would be a decision to which the ADJR Act applied. It would follow that Mr Burns was a person aggrieved by a decision to which the ADJR Act applied and, under s 13, he would be able to apply to the University for a statement of the University's reasons for terminating his appointment. Bowen CJ stressed that regard must be had to the language and operation of a particular enactment. A decision might be made both under contract and under an enactment. In the case before them, the University Act empowered the Council to enter a contract but the effective decision to dismiss Mr Burns was made directly under the contract and not under the enactment. As Davies A-JA said in Scharer v New South Wales^[24] (Scharer): "... The crux of the issue in each case is whether the enactment has played a relevant part in affecting or effecting rights or obligations. A grant of authority to do that which under the general law a person has authority to do is not regarded as sufficient."^[25]

The liability identified in the second column headed "Liabilities" of Item 6: "tax"

32. The liability identified in Item 6 is "tax". An expression used in Schedule 1 to the TAA, where Item 6 is found, has the same meaning as in ITAA97.^[26] Section 995-1(1) of ITAA97 defines it to mean:

"(a)

income tax imposed by the Income Tax Act 1986, as assessed under this Act; or

(b)

income tax imposed as such by any other Act, as assessed under this Act."

33. The expression "this Act" appearing in both paragraphs of the definition is itself defined in s 995-1(1) of ITAA97 to include:

"

(a)

the Income Tax Assessment Act 1936; and

(b)

Part IVC of the Taxation Administration Act 1953, so far as that Part relates to:

(i)

this Act or the Income Tax Assessment Act 1936; or

(ii)

Schedule 1 to the Taxation Administration Act 1953; and

(c)

Schedule 1 to the Taxation Administration Act 1953;

except in Division 950 (Rules for Interpreting this Act).

Note: Subsection (2) of this section prevents definitions of the Income Tax Assessment Act 1997 from affecting the interpretation of the Income Tax Assessment Act 1936."

34. Section 995-1(2) provides:

"So far as a provision of the Income Tax Assessment Act 1997 gives an expression a particular meaning, the provision:

(a)

does not also have effect for the purposes of the Income Tax Assessment Act 1936 (the 1936 Act ), except as provided in the 1936 Act; and

(b)

does not also have effect for the purposes of Part IVC of the Taxation Administration Act 1953, except as provided in this Part."

35. It follows that the reference to income tax "as assessed under this Act" can be taken as a reference to income tax as assessed under either ITAA36 or ITAA97.

A. Paragraph (a): " income tax imposed in accordance with the Income Tax Act 1986 ... "

36. Beginning with the Income Tax Act 1986 (IT Act 1986), s 5(1), provides:

"Income tax is imposed in accordance with this Act and at the relevant rates declared by the Income Tax Rates Act 1986."

Sections 5(2) to (6) of the IT Act 1986 go on to set out the circumstances in which that enactment does not impose income tax. Section 7 provides:

"The tax imposed by subsection 5(1) is levied, and shall be paid, for the financial year commencing on 1 July 1986 and for all subsequent financial years until Parliament otherwise provides."

37. ITAA36 is incorporated, and read as one, with the IT Act 1986.^[27] At the time Ms Schweitzer made her application for release under Division 340 of Schedule 1 of the TAA, s 6(1) of ITAA36 defined the expression "income tax" or the word "tax" to mean:

"... income tax imposed as such by an Act, as assessed under this Act."

With effect from 16 October 2014,^[28] the definition was repealed and the expression "income tax" and the word "tax" were defined separately:

"income tax means income tax imposed as such by any Act, as assessed under this Act, but, except in section 260, does not include mining withholding tax or withholding tax."

"tax means income tax imposed as such by any Act, as assessed under this Act, but does not include mining withholding tax or withholding tax."^[29]

A.1 Assessment of income tax

38. Section 166 of ITAA36, which is incorporated in the IT Act 1986, sets out when the Commissioner must make an assessment:^[30]

"From the returns, and from any other information in the Commissioner's possession, or from any one or more of these sources, the Commissioner must make an assessment of:

(a)

the amount of the taxable income (or that there is no taxable income) of any taxpayer; and

(b)

the amount of the tax payable thereon (or that no tax is payable); and

(c)

the total of the taxpayer's TAX offset refunds (or that the taxpayer can get no such refunds)."

39. The word "assessment" is defined in s 6(1) of ITAA36. Paragraph (a) of the definition mirrors s 166 above. The remaining paragraphs extend the definition to the ascertainment of other amounts payable in certain circumstances or under specific provisions, only some of which are income tax.

40. The expression "taxable income" is defined by s 6(1) of ITAA36 by reference to the meaning it is given in ITAA97.^[31] Section 995-1(1) of ITAA97 provides that "taxable income" has the meaning given s 4-15 of that enactment. Section 4-15 states that taxable income is assessable income minus deductions. It also directs attention to specific provisions in ITAA97, ITAA36 and other enactments that make provision for taxable income to be worked out in a special way. It follows that, when the Commissioner makes an assessment is under s 166 of the ITAA36, he is assessing the income tax payable under that legislation, ITAA97 or another relevant enactment under which income tax is imposed.

A.2 Does the Income Tax Act 1986 impose tax in relation to all years of income commencing on and after 1 July 1986?

41. I have not identified any authority that has addressed the question that I ask in the heading. There are authorities that make clear that an obligation, and so a liability, to pay income tax comes into existence on 30 June of the year of income in respect of which the income was derived. The obligation is no less an obligation because the Commissioner cannot, until he makes an assessment, enforce it as a debt that is due and payable after assessment. One of those authorities is Federal Commissioner of Taxation v H.^[32] It centred on payments treated as dividends equal to the amount paid in the context of ss 109C and 109Y of ITAA36.

42. Another authority is Binetter v Commissioner of Taxation,^[33] in which the Full Court considered matters relating to the years of income 2002 to 2007. They were clearly after the commencement of ITAA97 when it applied to assessments for the 1997-98 year of income and later years of income. The Full Court seems to assume that the IT Act 1986 is not limited by whether income tax is assessed under ITAA36 or under ITAA97. In their majority judgment, with whom Siopsis J agreed on this point, Perram and Davies JJ said:

" The question then is whether that kind of inchoate liability falls within the definition of 'outstanding tax-related liability'. That definition and the accompanying definition of 'tax-related liability' are set out above. Between them they include pecuniary liabilities to the Commonwealth arising under a tax law which are neither due nor payable. It is clear that this would include the kind of inchoate liability which the modern statute imposing the income tax, the Income Tax Act 1986 (Cth), would have created in this case. Consequently, the definition of 'outstanding tax-related liability' is broad enough to include tax on income earned by a deceased person but not assessed during his life. ...".^[34]

43. In general terms, these authorities support the conclusion that the IT Act 1986 imposes liability to pay income tax in relation to all years of income commencing on 1 July 1986 and continuing to date. That is so whether the assessment of that income tax was made under ITAA36 or ITAA97. They can do so regardless of the form in which the definition of "income tax" appeared in s 6(1) over time.

A.3 Income tax imposed in accordance with the Income Tax Act 1986 , "... as assessed under this Act "

44. The reference to the income tax's being assessed "under this Act" includes a reference to its being assessed under ITAA97, for that is the Act in which the definition of "tax" is found, but it goes further. By virtue of the definition of the expression "this Act" in s 995-1(1) of ITAA97, the reference to income tax assessed in accordance with it, is a reference to income tax as assessed under either ITAA36 or ITAA97.^[35] Income tax is imposed in accordance with the IT Act 1986 but liability to pay it is crystallised when it is assessed. That assessment may be made under either ITAA36 or ITAA97 and will still come within the liability that is "tax" as specified in the second column of Item 6.

B. Paragraph (b): Income tax imposed as such by any other Act, as assessed under ITAA97

45. The qualification that income tax be that "as assessed under this Act" also appears in paragraph (b) of the definition of "tax" in s 995-1(1). Income tax that has been assessed under ITAA36 in respect of years of income preceding the 1997-98 year of income is also income tax "as assessed under this Act" being ITAA97.

C. Income tax assessed under ITAA36 is the liability described as "tax" within the meaning of Item 6

46. On this view, Ms Schweitzer's liability for income tax for the years of income up to and including the 1996-97 income and assessed under ITAA36 falls squarely within the liability that is described as "tax" in the second column of Item 6. Income tax assessed under ITAA36 in relation to the years of income from 30 June 1991 to 30 June 1997 comes within the description of the liability in the second column of Item 6. That is so even though it is income tax imposed by the IT Act 1986. It is a liability under Item 6 because it falls squarely within the meaning of "tax" as defined in s 995-1(1) of ITAA97 as it applies to Division 340 of Part 4-50 of Schedule 1 of the TAA.

Identifying the provision under which the liability arises: the parameters of s 4(1) of ITAA97

47. While the IT Act 1986 imposes income tax in accordance with its terms, income tax only becomes due and payable if the Commissioner has made an assessment of a taxpayer's income tax for the year. That is the effect of s 5-5(2) of ITAA97. The Commissioner's assessment, which is made under s 169 of ITAA36, crystallises the amount of the liability.

48. The provisions of ITAA36 and ITAA97 themselves are clear that income tax in respect of the years of income before 1 July 1997 is assessed under ITAA36 and in respect of the years of income commencing on and after 1 July 1998, under ITAA97. This is underlined by the transitional provisions relating to the introduction of ITAA97. The relevant provisions are:

(1)

With effect from 1 July 1997^[36] and until its repeal by the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 on 14 September 2006,^[37] s 17 of ITAA36 provided:

"(1)

Subject to this Act, income tax at the rates declared by the Parliament is levied, and shall be paid, for the financial year that commenced on 1 July 1965 and for each succeeding financial year, upon the taxable income derived during the year of income by any person, whether a resident or a non-resident.

(2)

This section does not apply to the 1997-98 year of income or a later year of income.

Note: Section 4-10 of the Income Tax Assessment Act 1997 sets out how an entity works out the amount of income tax payable on its taxable income for the 1997-98 year of income and later years of income."^[38]

(2)

When ITAA97 commenced on 1 July 1997, s 4-1 provided, and continues to provide, that:

"Income tax is payable by each individual and company, and by some other entities.

Note: The actual amount of income tax payable may be nil.

For a list of entities that must pay income tax, see Division 9, starting at section 9-1."

(3)

Section 4-1 of the Income Tax (Transitional Provisions) Act 1997, which also commenced on 1 July 1997,^[39] provided:

"The Income Tax Assessment Act 1997, as originally enacted, applies to assessments for the 1997-98 income year and later income years.

Note: For the application of amendments of that Act (including new provisions inserted in it), see the Acts making the amendments."

49. It would follow that the income tax imposed on Ms Schweitzer in respect of all years of income was imposed under s 5 of the IT Act 1986 and in accordance with its provisions and at the relevant rates declared by the Income Tax Rates 1986. The amount of the income tax that was payable by Ms Schweitzer in respect of the years of income from the 1990-91 year of income to the 1996-97 year of income was assessed under ITAA36. For each subsequent year, it was assessed under ITAA97. In each case, the assessment can be said to have been made under "this Act" within the meaning of paragraph (a) of the definition of "tax" in s 995-1(1) of ITAA97. That is so because, since the enactment of ITAA97, paragraph (a) of the definition of the expression "this Act" has included ITAA36. Ms Schweitzer's liability in respect of each year of income is a liability that is imposed by s 5 of the IT Act 1986 and that is assessed under "this Act". It is the liability that is described in the second column of Item 6 in s 340-10(2) of the TAA Act.

50. It is not enough that the liability is "tax". It must also be a liability imposed under a provision specified in the third column of Item 6. The only relevant liability in this instance is "section 4-1 of the Income Tax Assessment Act 1997", which is specified in paragraph (c). At first sight, it seems inconsistent to determine that liability for income tax is imposed by the IT Act 1986 and, at the same time, to determine that it is also a liability under s 4-1 of ITAA97. I think that the apparent dilemma is resolved when regard is had to the liability that is imposed by the IT Act 1986. Section 5(1) provides that "Income tax is imposed in accordance with this Act ...". It goes on to make various qualifications to that general provision with reference to particular provisions of various legislation including ITAA36 and ITAA97. What s 5 does is to impose a broad obligation to pay income tax by setting the parameters within which it is imposed. It leaves other legislation to prescribe those who are to pay income tax, the classes of income which is to be taxed and the manner of its calculation and ultimate assessment. Acts such as ITAA36 and ITAA97 are the means through which the IT Act 1986 imposes tax in accordance with its terms. They crystallise the amount of the liability that is imposed by the IT Act 1986.

51. In that context, s 4-1 of ITAA97 can be seen as identifying the class of persons who is subject to the obligation to pay income tax. That class is described as each individual and company, as well as some other entities. Unless a person comes within that class, the IT Act 1986 does not impose any liability to pay income tax. The liability to pay income tax imposed by the IT Act 1986 only crystallises for the taxpayer when the amount of that income tax is assessed "under this Act" (being the relevant provisions of ITAA37 or of ITAA97 as they applied to the relevant years of income). The class of persons identified in s 4-1 of ITAA97 is not limited by matters such as the manner in which it is assessed or the income on which it is assessed. It is the provision which, to adapt the words of Davies A-JA in Scharer is the provision that plays "... a relevant part in affecting rights or obligations ...". Unless a person comes within that class, he or she will not be subject to income tax imposed by the IT Act 1986 in accordance with its terms and so assessed under ITAA36 or ITAA97 as the case might be. In the sense of its playing a relevant, and even crucial role, in determining a person's liability, the liability to pay tax, being "income tax imposed by the Income Tax Act 1986, as assessed under this Act", is a liability under s 4-1.

52. My conclusion is consistent with the provisions of s 55 of the Commonwealth of Australia Constitution Act (Constitution) which, in so far as it relates to taxation, provides:

"Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.

Laws imposing taxation, ... shall deal with one subject of taxation only ...".

53. Section 55 needs to be considered in light of s 53 which provides, among other things, that proposed laws imposing taxation shall not originate in the Senate. The Senate may not amend proposed laws imposing taxation. It may, however, request an omission or amendment by sending a message to that effect to the House of Representatives, which may make the omission or amendment as it thinks fit.

54. Both provisions were considered by the High Court in Permanent Trustee Australia Limited v Commissioner of State Revenue (Victoria).^[40] The High Court concluded that a law containing provisions for the imposition of taxation as well as its assessment, collection and recovery, is still a "law imposing taxation" as referred to in s 55 of the Constitution.^[41] If the practice of splitting the matters between a taxing Act and an assessment Act is followed, the assessment Act is not a law imposing taxation for the purposes of s 55 of the Constitution.^[42] ITAA97 is not a law imposing taxation but that characterisation does not change the fact that s 4-1 of ITAA97 is the relevant provision determining those on whom the income tax imposed by the IT Act 1986 falls. It is the provision under which the liability imposed by the IT Act 1986 is imposed on a particular taxpayer.

55. Although I have reached this view without reference to the extrinsic material, I note that this interpretation would also be consistent with the Explanatory Memorandum accompanying the Taxation Laws Amendment Bill (No. 6) 2003, which explained that:

"A new Part 4-50, consisting of Division 340, is inserted into Schedule 1 of the TAA 1953, to provide a new process by which individuals facing serious hardship can seek release from certain tax liabilities [Schedule 9, item 1]. The existing provisions in the ITAA 1936 and FBTAA 1986 are repealed [Schedule 9, items 5 and 15]."^[43]

56. In his Second Reading Speech, the then Parliamentary Secretary to the Minister for Finance and Administration said of Schedule 9:

" Schedule 9 streamlines the procedures under which an individual taxpayer can be released from a tax liability where payment of the liability would entail serious hardship. The existing authority to grant release will be transferred from tax relief boards to the Commissioner of Taxation. Consistent with contemporary review practices, the amendments will also introduce a new right to have tax relief decisions reviewed internally under the Australian Taxation Office objections process, and externally by the Administrative Appeals Tribunal sitting as the Small Taxation Claims Tribunal. Also, the scope of the release arrangements will be expanded to cover instalments of pay-as-you-go and fringe benefits tax under A New Tax System."^[44]

57. It would follow from this that Ms Schweitzer's liability to pay income tax in relation to any year of income in issue was a liability imposed by the IT Act 1986 and a liability under s 4-1 of ITAA97. I note that my interpretation of the provisions would be consistent with the views expressed in the extrinsic material available when the new release provisions were included in the TAA in the form of Part 4-50. That material presumes that a taxpayer's right to seek release would continue albeit through a different process.

Testing the approach I have taken in relation to s 4-1 with sections 128B and 128V specified in the third column of Item 6

58. In Attachment B, I have tested the approach I have taken with the other provisions specified in the third column of Item 6 as originally enacted. In my view, the approach leads to an outcome consistent with the outcome of the application of the provisions I must consider and consistent with the stated intention of the legislation in so far as that is relevant.

SUBMISSIONS REGARDING THE CONSTRUCTION OF SECTION 340-10(2): ITEM 3

59. Mr Sharpley submitted that Ms Schweitzer's liability to interest imposed under s 170AA of ITAA36 for the years of income up to and on ending 30 June 1988 are liabilities specified by Item 3 of the table in s 340-10(2). ITAA36 had referred to "interest" up until the enactment of the Taxation Laws Amendment Act (No. 3) 1999. Section 265(12) of ITAA36 stated, for example:

"In this section, tax includes interest under section 170AA or 207A and additional tax under section 207 or Part VII."

Section 170AA of ITAA36 referred to the taxpayer's liability to pay "interest" where the Commissioner amended an assessment with the effect of increasing the liability of that taxpayer.

60. One of the main reasons for the enactment of Taxation Laws Amendment Act (No. 3) 1999 was to provide a framework for the GIC regime in a new Part IIA in the TAA. The rationale behind the new regime was to standardise and streamline the manner in which the interest on late payments and other amounts was calculated and imposed. The Taxation Laws Amendment Act (No. 3) 1999 also made consequential amendments to ITAA36. Section 170AA was amended so that the reference to "interest" read as a reference to the GIC. Section 265(12) of ITAA36 was amended so that it provided that, in that section, the word "tax" included the GIC under a provision of ITAA36 (in place of interest under ss 170AA or 207A) and to additional tax under Part VII. The reference to GIC was intended to be a substitute for "interest" and the two refer to the same concept, Mr Sharpley submitted. It is inconceivable to think that Parliament intended to have precluded a taxpayer from seeking release from liabilities for "interest" arising under former s 170AA when those liabilities relate to a period before the enactment of the Taxation Laws Amendment Act (No. 3) 1999.

61. Mr Hanks referred to the same legislative amendment and submitted that the only assessment for which GIC could be imposed is the assessment for the year of income ending 30 June 1999. The expression "general interest charge" could not be interpreted as "interest".

CONSIDERATION OF THE CONSTRUCTION OF SECTION 340-10(2): ITEM 3

62. In this section of my reasons, I have set out a cross section of provisions applying before and after the introduction of the GIC provisions into ITAA36 by the Taxation Laws Amendment Act (No. 3) 1999 and then the release provisions set out in Division 340 of Part 4-50 of Schedule 1 to the TAA. I have done so in order to illustrate the background to the provisions specified by Parliament in the table in s 340-10(2) generally but specifically in the context of Item 3.

Provisions applying before 1 July 1999

63. Part VI of ITAA36 was concerned with the collection and recovery of tax. Subject to the other provisions of that Part, s 204(1) prescribed when any income tax assessed would be due and payable by the person liable to pay that tax. Section 204(2) provided that the expression "income tax" would include "additional tax under Part VII".

64. Sections 163A and 163B imposed a penalty for late lodgement of returns. In the case of a person who was a relevant entity or an instalment taxpayer, the penalty was $10 per week, or part of a week, occurring after the period in which the return was required to be lodged. The maximum penalty that could be imposed was $200.^[45] An "instalment taxpayer" was a company or a trustee of certain trusts identified in s 221AZK(1).^[46] A "relevant entity" was defined in s 221AK(1) as a company or as a trustee of certain trusts. In the case of all other taxpayers, the penalty was imposed by way of additional tax assessed at the rate of 8% per annum on the amount assessed under s 163B(2).^[47]

65. In each instance, the Commissioner was given discretionary power to remit the penalty in whole or in part.^[48] In the case of a relevant entity or an instalment taxpayer, it could object to the notice stating liability to pay the penalty or the amount or to the Commissioner's decision regarding remission.^[49] Section 163B(8) provided:

"Unless the contrary intention appears in sections ... 265, but not in any other section of this Act, a reference to income tax or tax includes a reference to the additional tax."

66. Section 170AA provided for the payment of interest by a taxpayer where the Commissioner amended an assessment increasing the taxpayer's liability to tax. The amount of interest the taxpayer was liable to pay was calculated in accordance with s 170AA(3). The Commissioner was required to give notice of the amount of interest a taxpayer was liable to pay and the date it was due for payment. That was the effect of s 170AA(9). The ascertainment of an amount of interest under s 170AA is deemed not to be an assessment within the meaning of any provision in ITAA36.^[50] Section 170AA(11) provided:

"The Commissioner may, in his or her discretion, remit the whole or any part of the interest payable by a taxpayer under this section."

Unless the contrary intention appeared, "... in sections 172, 205, 206, 208, 209, 214, 215, 216, 254, 255, 258, 259 and 265, but not in any other section of this Act, 'income tax' or 'tax' includes interest payable under ..." s 170AA.^[51]

67. Section 172 provided that, where by reason of an amendment of an assessment, a person's liability to tax was reduced, the amount by which the tax is reduced is taken, for the purposes of ss 170AA, 207 and 207A never to have been payable. The Commissioner was required to refund the amount of any tax overpaid or apply the amount of any tax overpaid against any liability of the person to the Commonwealth being a liability arising under, or by virtue of, an Act of which the Commissioner has the general administration. Unless the contrary intention appeared, the word "tax" included interest under ss 170AA and 207A of ITAA36 and additional tax under s 207A and Part VII of that legislation.

68. In so far as s 207 applied to the circumstances of an individual in respect of the 1991 income year and all subsequent years, s 207(1), provided:

"If any tax remains unpaid after the time when it became due and payable or would, but for section 206, have become due and payable, additional tax is due and payable by way of penalty by the person liable to pay the tax at the rate of 20% [8%]^[52] per annum on the amount unpaid, computed from that time or, where, under section 206, the Commissioner has granted an extension of time for payments of the tax or has permitted payment of the tax to be made by instalments, from such date as the Commissioner determines, not being a date prior to the date on which the tax was originally due and payable."^[53]

69. Unless a contrary intention was shown, the word "tax" included only additional tax under Part VII.^[54] The effect of a judgment given by, or entered in, a court for the payment of an amount of tax or an amount that included an amount of tax on the operation of s 207(1) is the subject of s 207(1B). Section 207(1B) was inserted with effect from 14 December 1984 and originally provided:

"Where judgment is given by, or entered in, a court for the payment of -

(a)

an amount of tax; or

(b)

an amount that includes an amount of tax,

then -

(c)

the tax shall not be taken, for the purposes of sub-section (1), to have ceased to be due and payable by reason only of the giving or entering of the judgment; and

(d)

if the judgment debt carries interest, the additional tax that would, but for his paragraph, be payable under this section in relation to the tax shall, by force of this paragraph, be reduced by -

(i)

in a case to which paragraph (a) applies - the amount of the interest; or

(ii)

in a case to which paragraph (b) applies - an amount that bears the same proportion to the amount of the interest as the amount of the tax bears to the amount of the judgment debt."^[55]

70. With effect from late payment of tax in respect of the 1992/93 income year of income and all subsequent years or of a franking year commencing on or after 1 July 1992, and to the late payment of provisional tax in respect of the 1993/94 year of income and all subsequent years of income, s 207(3) was amended to read:

"In this section, unless the contrary intention appears, 'tax' includes interest under section 170AA and additional tax under Part VII."^[56]

71. At the same time, s 207(1B) was amended by omitting ss 207(1B)(b), (c) and (d) and replacing them so that s 207(1B) then read:

"Where judgment is given by, or entered in, a court for the payment of -

(a)

an amount of tax; or

(b)

an amount that includes an amount of tax, then the tax must not be taken, for the purposes of subsection (1), to have ceased to be due and payable because only of the giving or entering of judgment."^[57]

72. Section 207A(1) provided:

"If any tax remains unpaid after it became due and payable or would, but for section 206, have become due and payable, the person liable to pay the tax is liable to pay, by way of penalty, interest to the Commissioner, at such annual rate or rates as are provided for by section 214A, on the amount unpaid, computed from the time or date from which additional tax on the amount is computed for the purposes of section 207."

73. With one qualification, 207A(5) is to the same effect as s 207(1B). The qualification is that, if the judgment debt carried interest, the interest that would otherwise arise under s 207A is reduced in accordance with s 207A(5)(d).^[58]

74. Section 221YDB imposed a penalty on a taxpayer who was an employee to whom s 221YAB applied and whose income was under-estimated by a certain amount^[59] or whose PAYE deductions were over-estimated. The provisions imposing that penalty were ss 221YDB(1), (1AAA), (1AA) and (1ABA). The penalty was imposed by way of additional tax. Under s 221YDB(4), the Commissioner could remit, in in whole or in part, the additional tax imposed under s 221YDB.

75. Section 102AAM required a taxpayer to pay interest on distributions from certain non-resident trust estates. Mirroring s 163B(8), s 102AAM(14) provided:

"Unless the contrary intention appears in sections ... 265, but not in any other section of this Act, a reference to income tax or tax includes interest payable under this section."

Relevant provisions applying on and after 1 July 1999

76. Part IIA, entitled "Charges and penalties for failing to meet obligations", was inserted in the TAA with effect from 1 July 1999.^[60] Section 8AAB(1) provided:

"There are certain provisions of this Act and other Acts that make persons liable to pay the general interest charge. Subsections (4) land (5) list the provisions."

Section 8AAB(1) was amended with effect from 27 June 2011 to remove the reference to s 8AAB(5).^[61] Division 1 of Part IIA explains how to work out the general interest charge (GIC). Persons are liable to pay GIC by virtue of provisions of the ITAA36 listed in s 8AAB(4) of the TAA.

77. As enacted, s 8AAB(4) specified s 170AA as one of the provisions in ITAA36 dealing with liability to the GIC.^[62] Section 170AA was amended by Items 54 to 68 of the Taxation Laws Amendment Act (No. 3) 1999 so that the reference to "interest" became a reference to the "general interest charge" and the liability was amended accordingly. Section 170AA(11) was among those provisions repealed by the Taxation Laws Amendment Act (No. 3) 1999.^[63] The outcome was the Commissioner's discretionary power to remit the whole or any part of the interest payable by a taxpayer under s 170AA was removed with effect from 1 July 1999.^[64]

78. Section 8AAB(4) also specified s 221YDB as a provision dealing with liability to the GIC.^[65] Section 221YDB imposed GIC under ss 221YDB(1), (1AAA), (1AA) and (1ABA). Section 221YDB(2) provides that the amount of GIC payable under those four subsections is taken to be additional tax payable under s 221YDB. A little later and with effect from 22 December 1999, s 221YDB(3) was enacted so that it imposed liability on a taxpayer to pay GIC on any unpaid additional tax.^[66]

79. Section 102AAM, to which I have referred in the previous section of these reasons, was not included in the lists of provision specified in s 8AAB(4) or (5). Others, such as ss 204 and 163AA of ITAA36, were specified in s 8AAB(4).

80. Section 204(3) had been inserted in ITAA36 by the Taxation Laws Amendment Act (No. 3) 1999^[67] and provided:

"If any of the tax which a person is liable to pay remains unpaid after the time by which the tax is due to be paid, the person is liable to pay the general interest charge on the unpaid amount for each day in the period that:

(a)

started at the beginning of the day by which the tax was due to be paid; and

(b)

finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:

(i)

the tax;

(ii)

general interest charge on any of the tax.

Note: The general interest charge is worked out under Division 1 of Part IIA of the Taxation Administration Act 1953."

Section 204(3) applied in relation to amounts that were due to be paid on or after 1 July 1999.^[68]

81. Section 163AA, which was also inserted by the Taxation Laws Amendment Act (No. 3) 1999,^[69] is specified in Item 6 of s 8AAB(4). It relates to penalties and provides:

"A person who fails to pay some or all of a penalty under section 163A by the time by which the penalty is due to be paid is liable to pay the general interest charge on the unpaid amount for each day in the period that:

(a)

started at the beginning of the day by which the penalty was due to be paid; and

(b)

finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:

(i)

the penalty;

(ii)

general interest charge on any of the penalty.

Note: The general interest charge is worked out under Division 1 of Part IIA of the Taxation Administration Act 1953."

Section 163AA applied to the extent that the period for which the person is liable to pay the GIC occurred on or after 1 July 1999.^[70]

82. The amount of the GIC was worked out in accordance with s 8AAC of the TAA having regard to the general interest charge rate provided for in s 8AAD. The Commissioner might remit all or part of the charge payable by the person in the circumstances set out in s 8AAG.

83. With three exceptions, the provisions I have referred to under the previous subheading remain in force. Together with s 170AA, ss 207 and 207A are the exceptions. Section 170AA has since been repealed as inoperative with effect from 14 September 2006.^[71] The amendment affected assessments for the 2006-2007 income year and to acts done, or omitted to be done, or states of affairs existing, after 14 September 2006.^[72] With effect from 1 July 1999, ss 207 and 207A were repealed.^[73]

The liability specified in Item 3 of s 340-10(2): general interest charge

84. The liability specified in Item 3 of the table in s 340-10(2) is "general interest charge". That expression is defined in s 995-1(1) of ITAA97 to mean the charge worked out under Part IIA of the TAA. It is clear from the terms of the Taxation Laws Amendment Act (No. 3) 1999 that liability to pay the GIC arises only in relation to periods occurring on or after 1 July 1999. It is also clear that, from that date, s 170AA imposed GIC. It no longer imposed liability to pay interest as it had done until that time.

85. There is nothing in the Taxation Laws Amendment Act (No. 3) 1999 that deems interest incurred under s 170AA up to the year of income ending 30 June 1998 to be GIC. There is no basis on which I can read "general interest charge", as specified in column 2 of Item 3, to include interest imposed under s 170AA before that date. GIC was clearly imposed by s 170AA only from and after 1 July 1999 and that is when the provisions of Part 4.50 came into operation.

86. When regard is had to the pattern of amendments made by the Taxation Laws Amendment Act (No. 3) 1999, it would seem that Parliament made a conscious choice to include liability incurred under some provisions and not on others. Taking s 221YDB as an example, GIC was imposed under four of its subsections. By virtue of amendments made to it, the liability for GIC under ss 22YDB(1), (1AAA), (1AA) and (1ABA) was deemed to be additional tax. Those provisions are specified in Item 1 as provisions under which liability for additional tax is imposed. At the same time, the liability for GIC imposed under s 222YDB(3) is specified in Item 3.

87. The same exercise can be carried out in relation to Item 5 of the table in s 340-10(2). It specifies only penalty under s 163A of ITAA36 and yet many more penalties were imposed under Part VII of ITAA36^[74] before it was repealed as inoperative by the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 with effect from 14 September 2006.^[75] Division 284 was inserted in Part 4-15 of the TAA to provide for administrative penalties for statements, unarguable positions and schemes in so far as they applied to things done on or after 1 July 2000.^[76] Provision was made for references in the new ss 284-220(1)(c) or (d) relating to the calculation of an increase to the base penalty to include references to the former ss 226J, 226H, 226G, 226K, 226S and 226P as specified. Each of those sections had been included in the repealed Part VII but no reference was made to the penalties imposed by other provisions of Part VII. Item 2 of the table in s 340-10(2) ensures that release can be given for administrative penalties in relation to fringe benefits tax or tax imposed under Part 4-25 of Schedule 1 to the TAA. No reference is made to other penalties in the form in which they were imposed under Part VII before it was repealed. The only penalty provision in ITAA36 that has been referred to in the table in s 340-10(2) is s 163A of ITAA36, which has continued in one form or another before and after the replacement of the other penalty provisions which were found in Part VII.

88. It seems to me, therefore, that the history of the amendments made by Parliament is consistent with the ordinary meaning of s 340-10(2) as it has been enacted. A reference to "general interest charge" under former s 170AA cannot be read to include a reference to interest charged under former s 170AA.

Accrued rights

89. Whether or not Ms Schweitzer has an accrued right to ask the Commissioner to exercise power under s 170AA(11) as it was enacted up until 30 June 1999 was not a matter on which submissions were made. In view of the decision I have made under s 340-5(1) regarding release of Ms Schweitzer's liabilities, I have not gone back to the parties for their submissions. I have considered it briefly and have concluded that, even if she had an accrued right to ask the Commissioner to consider whether he should exercise his discretion to remit interest, this Tribunal does not have jurisdiction to consider any decision that he might be presumed to have made refusing to exercise his discretion. That follows from the fact that no provision was made for a taxpayer to seek review of any decision made by the Commissioner refusing to consider whether to exercise his discretion or refusing to exercise it. The same outcome is reached when regard is had to the release provisions that were set out in s 265 of ITAA36. A Board could release a taxpayer from all or part of a liability if exaction of the full amount of tax would entail serious hardship.^[77] No provision was made for a taxpayer to object to the Board's decision. That meant that the Commissioner would never make an objection decision that could be reviewed by the Tribunal.

SUBMISSIONS REGARDING RELEASE FROM LIABILITY UNDER SECTION 340-1

90. Referring to authorities to which I will come, Mr Sharpley submitted that the expression "serious hardship" is not defined in s 340-5 but takes its ordinary meaning. It must be considered on the basis of Ms Schweitzer's relevant circumstances. Those relevant circumstances are the financial difficulties that she would face if required to pay the liabilities and is measured by reference to financial hardship she would suffer as measured by reference to the resources of her household. Her difficulties do not need to amount to her destitution. It is sufficient that the difficulties she would face are serious in the sense of being quite demanding and are determined by reference to normal community standards.

91. Mr Sharpley submitted that it is appropriate that I have regard to the Commissioner's Practice Statement Law Administration PS LA 2011/17 (Commissioner's Policy). He drew particular attention to the two tests identified in that policy as relevant in determining serious hardship. The first is the income/outgoings test whose purpose is to assess the extent to which a taxpayer has the capacity to meet tax liabilities from his or her current income. The second is an assets/liabilities test whose purpose is to assess a taxpayer's assets or equity in assets that could be used to pay his or her tax liabilities. Mr Sharpley submitted that it is appropriate that I have regard to the Commissioner's Policy.

92. As to Ms Schweitzer's circumstances, Mr Sharpley submitted that she and her husband have no capacity to pay her tax liabilities. Ms Schweitzer and Mr Ebner's expenditure is modest and, as they have been unemployed for many years, are not in a position to improve their earning capacity. She has no capacity to pay her tax liabilities as she could not do so and maintain the necessities of life.

93. Her circumstances would not be alleviated by the sale of her assets, Mr Sharpley submitted. He estimated that the total value of Ms Schweitzer's assets would be $1,435,154.03 made up in the following way:

(1)

$1,319,290.00 being the amount that would be realised if the Frankston property were sold for the amount shown as its value in the Core Logic RP Data Property Profile Report;

(2)

$114,364.03 as a beneficiary under her late mother's will calculated in the following way:

(a)

assume the value of the Moonee Ponds property is as estimated by Core Logic being $1,462,793;

(b)

the value of Ms Schweitzer's late mother's interest in the Moonee Ponds property is half i.e. approximately $731,400;

(c)

subtract from that interest the amounts owed to Ms Schweitzer's brother as a result of costs orders made by the Supreme Court in Schweitzer v Schweitzer [2010] VSC 543 and [2012] VSCA 260 being $273,943.87 leaving $457,456.13 to be distributed among the beneficiaries; and

(d)

assuming that the codicil to Ms Schweitzer's late mother's will is valid, each of the four beneficiaries would receive $114,364.03; and

(3)

$1,500.00 realised from the sale of Ms Schweitzer's motor vehicle.

94. Taking the liability of $1,231,952.40 in respect of income tax, Medicare levy and Medicare levy surcharges and that of $3,472,332.40 in respect of GIC up to 12 September 2016 - a total of $4,704,284.80 - there is a considerable discrepancy between the value of Ms Schweitzer's assets and her tax liabilities. The discrepancy would be even greater if the values of the two properties were closer to the capital improved values shown on their respective rates notices.

95. If Ms Schweitzer were required to sell the family home, she and her husband would face a new and ongoing expense, and so further hardship, in the form of rental payments estimated to be in the order of $290.00 per week. He referred to the passage from the judgment of Conti J in Commissioner of Taxation v Milne^[78] when he said:

"... It is moreover not an irrelevant matter that to change unwillingly from freehold accommodation, particularly when held and occupied for a considerable period of time, to tenanted accommodation, might well have disadvantageous consequences to a taxpayer, particularly a taxpayer having one or more family dependants or partial dependants."^[79]

96. If Ms Schweitzer would suffer serious hardship if required to pay her tax liabilities, Mr Sharpley submitted that she should be released from those tax liabilities. She is not the author of her own misfortunes, she has not acquired assets ahead of meeting her tax liabilities and has not disposed of assets without regard to those liabilities. The release of her tax liabilities would have the direct effect of reducing her hardship, which will be ongoing if they are not released. She has no other creditors who have been paid in preference to the Commissioner. Her affairs have not been structured to place herself in a position of hardship as all of her assets are held personally. Ms Schweitzer's compliance history does not outweigh these factors when considering whether to exercise the discretion to release her from her tax liabilities. Criticisms made of her honesty in earlier proceedings are of no relevance, for the matter in issue is now concerned with her present circumstances and the disadvantage she would suffer if the taxation liabilities are enforced. So too is her failure to mention her interest under her late mother's will, which has been explained.

97. Ms Schweitzer and her husband both suffer from psychological conditions, which are being aggravated and exacerbated by the existence of her crushing tax liabilities. In that respect, regard should be had to the most recent report of Dr Kenneth Byrne dated 25 May 2016.^[80]

98. On behalf of the Commissioner and assuming that, apart from interest, Ms Schweitzer's tax liabilities are eligible for release, Mr Hanks submitted that she has not established that she would suffer serious hardship if required to pay those liabilities. If, for example, she were required to sell the Frankston property, she has not established that she and her husband could not afford to rent a small unit in Frankston or that their income would be insufficient to cover their living expenses.

99. Even if serious hardship were established, the discretion to release her from her tax liabilities should not be exercised. In accruing a large tax liability, Ms Schweitzer has been the author of her own misfortune. She and her husband have been dishonest in relation to the ascertainment and recovery of the tax liability. Her acts of dishonesty include her lodging tax returns that substantially understated her taxable income over a 12 year period. Ms Schweitzer and Mr Ebner gave false evidence to the Tribunal in the income tax review proceedings in relation to the ownership of the Frankston property. Furthermore, she omitted to reveal her interest in her late mother's estate when making her application for release.

CONSIDERATION OF WHETHER TO RELEASE FROM LIABILITY UNDER SECTION 340-1

Serious hardship

A. What is meant by " serious hardship " and how is it assessed?

100. The TAA does not define what is meant by "serious hardship" or set out how to assess when an individual would suffer it if required to satisfy the liability. Division 340 does not give any guidance as to the matters to which thought should be given in determining whether the person would suffer serious hardship. Any guidance that is to be found must be found in the provision itself while having regard to its place in the administration of the taxation laws relating to income tax and related liabilities as well as in the authorities that have considered s 340-5(3) or its predecessor, s 265(1) of ITAA36 or similar provisions.^[81]

101. The expression "serious hardship" has been considered both in this context and in others. The principles that can be drawn from them include:

(1)

Provisions in s 265(1) of ITAA36 "... assume the existence of the tax liability and provide for relief on special grounds beyond those considered in the process of assessment.": Van Grieken v Veilands^[82] per Gummow J.

(2)

The expression "serious hardship" is an ordinary English expression but one influenced by its context:

"... The context in which the words appear makes it clear that the Relief Board is to consider whether the exaction of the full amount of tax would involve the dependants of a deceased taxpayer in financial difficulty which in all the circumstances can be said to be serious. The financial difficulty will be such that the dependants will be in significant need warranting action by the Relief Board to relieve their condition.": Powell v Evreniades^[83] per Hill J.

(3)

"... Clearly, there is a distinction between, on the one hand hardship which is serious, and on the other hand, hardship which may be said to be extreme although it is obvious enough that what will constitute either will depend upon the circumstances of a given case.

... Clearly there would be severe financial hardship if the dependants of a deceased person were left destitute without any means of support. That is not to say that in any particular case something less than that will not constitute serious hardship.": Powell v Evreniades^[84] per Hill J.

(a)

"... In Evreniades, Hill J gave such an example when he recognised that there would be 'severe financial hardship' if persons were left 'destitute without any means of support'. The Taxation Ruling gives a similar example when it says that there would be serious hardship if a taxpayer were left 'without the means to achieve reasonable acquisitions of food, clothing, medical supplies, accommodation, education for children and other basic requirements'. I do not see any inconsistency in these examples. Effect must be given to the qualification of 'reasonable' in the Taxation Ruling and, consistently with the reasoning of Hill J, these examples do not exclude the possibility that something less than destitution will constitute serious hardship. Whether this is so depends on the particular circumstances of each case.": Commissioner of Taxation v A Taxpayer^[85] per Stone J.

(4)

"... 'serious hardship' is itself the test that has to be applied to an applicant's circumstances to decide if that applicant is eligible for relief from a tax debt. There is no other test, although there may be issues about which factors, in the particular circumstances, are or are not relevant to this determination. It is because the assessment is based so squarely on the individual circumstances that Hill J in Evreniades [Powell v Evreniades^[86]] thought it was inappropriate to try and identify, in the abstract, the circumstances that would give rise to serious hardship.": Commissioner of Taxation v A Taxpayer^[87] per Stone J.

(5)

The task lies in "... assessing the ... [taxpayer's] individual circumstances by reference to normal community standards": Commissioner of Taxation v A Taxpayer^[88] per Stone J.

(a)

What amounts to "reasonable acquisitions" of relevant necessities is assessed by reference to what is "... not excessive or unreasonable in all the circumstances. ...": Commissioner of Taxation v A Taxpayer^[89] per Stone J.

(b)

Those matters can be assessed by the decision-maker "... from its own knowledge and experience, determine what were and what were not reasonable living costs ...": Powell v Evreniades^[90] per Hill J.

(c)

The expression "normal community standards" is not a term used in item 1 of s 340-5(3) or in Division 340 generally. The principles that can be drawn from cases that have considered the expression in other areas of the law suggest that community standards relate to a variety of matters and cannot be the subject of evidence. The decision-maker, be it a jury,^[91] a magistrate^[92] or an administrative decision-maker is expected to draw on its own collective knowledge of such things.

(d)

"... There can be no doubt that the jury would have understood, from the general directions given by her Honour, that they were to assess any injury to the plaintiff's reputation resulting from the imputations and they were to undertake that assessment from the point of view of ordinary reasonable decent members of the community. ... In that regard they had been told that the question was whether ordinary reasonable members of the community would think less of the plaintiff. ...": Radio 2UE Sydney Pty Ltd v Chesterton^[93] per French CJ, Gummow, Kiefel and Bell JJ.

(e)

" In Reader's Digest [Reader's Digest Services Pty Ltd v Lamb^[94]] Brennan J emphasised that any standard to be applied must be one common to society, rather than one which reflects an attitude of a section of it..." Radio 2UE Sydney Pty Ltd v Chesterton^[95] per French CJ, Gummow, Kiefel and Bell JJ

(6)

In assessing serious hardship, an individual's potential bankruptcy may be relevant in assessing his or her capacity to work and so to generate income: Corlette and Another v Mackenzie and Others^[96] per Wilcox, Einfeld, Foster and Einfeld JJ.

(a)

An example is found in Commissioner of Taxation v A Taxpayer in which Stone J decided that the Tribunal's decision that serious hardship was very likely to follow should the individual be made bankrupt was a reasonable decision. It was reasonable even though the applicant's income was substantial when reference was made to community standards. His circumstances, though, were not usual when assessed by those same standards for he faced complications arising from his wife's illness if his income were jeopardised by his being made bankrupt. Those complications centred on his wife's illness and the costs associated with her illness, domestic support and educating his children. The costs themselves are assessed by reference to what would be regarded as reasonable according to community standards.

B. At what time is "serious hardship" assessed?

102. Whether a person would suffer serious hardship "... is an issue which clearly enough arises to be looked at at the time of the application. ...", Hill J said in Powell v Evreniades.^[97] Although not considering the powers of the Tribunal, he clearly expected the Relief Board, which was the relevant body at the time, to have regard to matters that had occurred since the application had been made to it.^[98] This approach is consistent with that of the High Court in Shi v Migration Agents' Registration Authority^[99] (Shi). As Kirby J expressed the general principle in his judgment in Shi, while the terms of a particular enactment may lead to a different conclusion:

" When making a decision, administrative decision-makers are generally obliged to have regard to the best and most current information available. This rule of practice is no more than a feature of good public administration. When, therefore, the Tribunal elects to make 'a decision in substitution for the decision so set aside', as the Act permits, it would be surprising in the extreme if the substituted decision did not have to conform to such a standard."^[100]

103. Section 340-5(3) of the TAA is not an enactment that leads me to take a different conclusion. The question whether an individual "would suffer hardship if ... required to satisfy the liability" (emphasis added) is a question very much framed in the moment of when it is being answered. It is not framed in terms of whether an individual would have suffered hardship if required to satisfy the liability at some time in the past or will do so if required to do so in the future. The liability changes as time goes by due to such matters as the GIC and interest charges. An individual's circumstances change as time goes by. Those changes may be for the worse but, on occasion, they may be for the better. Section 340-5(3) does not ask the decision-maker to forecast the future or to divine what would have happened in the past.^[101]

Commissioner's Policy

104. The Commissioner has issued a Practice Statement, PS LA 2011/17 (Policy), on the subject of debt relief, waiver and write off.^[102] He states in his introduction that:

"... The Commissioner has a statutory obligation to pursue the recovery of tax debts. However, a tax debt will not be pursued in certain situations. The Commissioner may permanently release particular liabilities in the case of serious hardship. The Finance Minister may waive amounts owing to the Commonwealth. Alternatively, the Commissioner can determine not to pursue a debt considered uneconomical to pursue (in which case it can be re-raised later), or permanently extinguish a debt that is irrevocable at law. Such decisions must be consistent with both the law and the principles set out in this practice statement."

105. Under s 340-5 of Schedule 1 of the TAA, an individual may be partially or fully released from particular liabilities if the Commissioner considers that payment of those liabilities would result in serious hardship. In the Commissioner's view, serious hardship exists:

"... where the payment of a tax liability would result in a person being left without the means to afford basics such as food, clothing, medical supplies, accommodation, or education.

Tests are applied to determine whether serious hardship exists. The object of the tests is to determine whether consequences of paying the tax would be so burdensome that the person would be deprived of what are considered necessities according to normal community standards.

Three tests are used to determine the merits of a serious hardship application:

•

the income/outgoing test

•

the asset/liabilities test, and

•

other relevant factors."^[103]

106. In broad terms, the income/outgoing test requires identification of those who are dependent on the taxpayer and the degree of responsibility that the taxpayer and his or her partner have for them. Regard is had to:

"•

the taxpayer's capacity to pay in a reasonable timeframe on the basis of their income and outgoings ...

•

scope for the taxpayer to increase their income

•

whether all expenditure could be considered reasonable and consideration of any discretionary components, and

•

whether the taxpayer has made attempts to defer or reschedule other financial commitments."^[104]

107. The asset/liabilities test is directed to assessing a taxpayer's equity in, or access to, assets which may be indicative of his or her capacity to pay. Consideration is given to any property owned by the taxpayer whether alone or jointly with their partner and whether privately or in a business structure. That position is qualified by the following passage:

"There are several types of assets which are regarded as normal and reasonable possessions. These would not be expected to be surrendered in order to pay a tax debt, provided they are of modest nature and include:

•

ownership of, or equity in, a residential property which is the taxpayer's home

•

a motor vehicle

•

furniture and household goods

•

tools of trade

•

cash on hand or bank balances sufficient to meet immediate day-to-day living expenses, and

•

funds put aside by aged persons to cover funeral expenses.

All other significant assets need to be scrutinised to determine capacity to pay (either by sale or used as security for a loan). These assets include other real estate, luxury motor vehicles or boats, life insurance or annuity entitlements, shares and other investments, and collections for trading, investment or hobby purposes. "^[105]

108. Clause 8 of the Policy sets out other relevant factors to be considered. It underlines the discretionary nature of the Commissioner's power to grant release. He is not bound to grant release even though a taxpayer may have demonstrated serious hardship. The Commissioner, however, is obliged to act reasonably and responsibly and, as cl 8 of the Policy continues, should not act capriciously. Clause 8 sets out examples of situations in which the Commissioner might decide against releasing a taxpayer from liabilities identified in s 340-10(2) even though implications of serious hardship might be drawn:

"•

where a taxpayer appears to have unreasonably acquired assets ahead of a meeting their tax liabilities

•

where a taxpayer appears to have disposed of funds or assets without giving consideration to their tax liability

•

where release would not result in reduction of hardship, such as where the person has other liabilities or creditors

•

where a taxpayer has paid other debts (either business or private), in preference to their tax debt

•

where the taxpayer, without good reason, has not pursued debts owed to them

•

where the taxpayer, without good reason, has not pursued debts owed to them

•

where serious hardship is likely to be short term ... ['Short term' is to be determined on a case-by-case basis]."

•

where the taxpayer has a poor compliance history

•

where the taxpayer is unable to show that they have planned for future debts

•

where the taxpayer has structured their affairs to place themselves in a position of hardship (for example, placing all assets in trusts or related entities over which they have control), and

•

where the taxpayer has delayed lodgment of returns resulting in the accumulation of a large debt that they are unable to pay,"^[106]

Release when the Commissioner has obtained judgment liability and judgment debt

109. I note that cl 9 of the Policy refers to judgment debts and states that:

"Release cannot be granted from judgment interest and associated legal costs. However, if you allow a full release of the liability relating to the judgment, we will not pursue the judgment interest or the costs. If partial release is allowed, we will not pursue the corresponding proportion of the judgment interest or costs."

110. There is no doubt that judgment interest and legal costs do not come within the scope of the liabilities identified in s 340-10(2) of the TAA. To that extent, I have no difficult with cl 9. Where my difficulty arises centres on the suggestion that release can be given for the liability that relates to the judgment debt.

111. The matters in issue cover years of income from 1991 to 1997. In that time, there have been extensive changes to taxation law including the introduction of ITAA97 and repeal and replacement of the release provisions. I have, therefore, split the task into two periods of time but will begin with the case of Chamberlain for it was decided in 1988 about income tax incurred for the years 1975 to 1982 and pre-dates the start of the first period I have identified.

A. Chamberlain

112. At the time Chamberlain was decided, s 208 of ITAA36 provided:

"Income tax when it becomes due and payable shall be a debt due to the King on behalf of the Commonwealth, and payable to the Commissioner in the manner and at the place prescribed."

113. The Deputy Commissioner had issued a writ against Mr Chamberlain out of the Supreme Court of the Australian Capital Territory claiming the sum of $25,557.92 as a debt due to the Crown for income tax for the 1975 to 1982 years of income. The amounts set out in the writ totalled $255,579.20. Terms of settlement were entered into by the parties and, on 6 August 1984, judgment was entered in favour of the Deputy Commissioner for the smaller amount; $25,557.92 for debt. Also on 6 August 1984, Mr Chamberlain withdrew all of his outstanding objections to the Commissioner's assessments against him. A few days later on 10 August 1984, the Deputy Commissioner issued a further writ claiming the difference between the two amounts - $230,021.28, for a debt due to the Crown in respect of the same assessments and the same amounts of additional tax identified earlier. He did not institute proceedings to have the judgment set aside as having been entered or obtained by mistake. What he was doing for all practical purposes was to sue again in respect of the same cause of action in which he had already obtained judgment. In those circumstances, the court said, the Deputy Commissioner:

"... must accept the consequences of res judicata. There is nothing in the Act or arising from the position of the respondent as a public officer that precludes the operation of that doctrine. The matter is not one for the discretion of the Court; by operation of law the cause of action relied upon by the respondent has ceased to exist."^[107]

B. Changes in the law from 1984 to 30 June 1999

114. The case of Chamberlain was decided before the introduction of ss 207(1B) and 207A(5) in ITAA36. Section 207(1B) was inserted in s 207 with effect from 14 December 1984.^[108] They were later amended with effect from the 1992/93 years of income^[109] before being repealed by the Taxation Laws Amendment Act (No. 3) 1999 in relation to amounts due to be paid on or after 1 July 1999.^[110] Although now no longer in force, what s 207(1B), and its counterpart s 207A(5) did in respect of penalty interest, was to underscore Parliament's acceptance of the principles underpinning the High Court's judgment in Chamberlain. Both refer to the circumstances in which judgment has been given by, or entered in, a court for the payment of an amount of tax or an amount that includes an amount of tax. Each provided that, for the purposes of imposing additional tax (in the case of s 207(1B)) or penalty interest (in the case of s 207A(5)), tax must not be taken to have ceased to be due and payable only because of the giving or entering of the judgment. Neither provision sought to alter the effect of the merger of the tax liability into the judgment debt. Each was focused on imposing liability in the case of unpaid tax even when judgment had been obtained. Initially s 207(1B) made provision for reducing the amount of additional tax by reference to the interest on the judgment debt but that was later repealed. A taxpayer was subject to a penalty while the tax remained unpaid but any penalty interest imposed under s 207A(5) was reduced by reference to interest paid on the judgment debt.

115. The way in which ss 207(1B) and 207A(5) dealt with judgment debts is consistent also with the fact that, at all relevant times from 1991 until the amounts due to be paid on or before 30 June 1999 and in all later periods, the definition of the word "tax" or "income tax" has not included any reference to a judgment debt. Where an extended meaning was to be given to that word or expression, that extended meaning was specifically provided for in each individual situation e.g. s 163B(8), 102AAM(14) and 204(2) of ITAA36 and, in relation to income tax that became due and payable before 1 July 2000, ss 208 and 209.

C. Changes in the law from 1 July 1999

116. As I have said above, ss 207 and 207A were repealed by the Taxation Laws Amendment Act (No. 3) 1999 with effect from 30 June 1999. More accurately, Item 398(2) provided that, among others, the amendment made by Item 18 to repeal ss 207 and 207A applied "... in relation to amounts that were due to be paid on or after 1 July 1999." That is to say, ss 207 and 207A continued to apply to amounts that were due and payable up until and including 30 June 1999. The principles underpinning them continued to apply and they were principles that accepted the merger of the tax liability into the judgment debt

117. The provisions relating to the imposition of GIC were inserted in ITAA 36 with effect from 1 July 1999 but they have not affected the underpinning operation of the principles in Chamberlain. Section 8AAH of the TAA continues to apply the principles applied in Chamberlain and underpinning the earlier ss 170 and 170A of ITAA36. Section 8AAH provides:

"Judgment for payment of an unpaid amount

This section applies if judgment is given by, or entered in, a court for the payment of:

(a)

all or part of an amount in respect of which a person is, or was liable to pay the charge because the amount remains unpaid after the time by which it is due to be paid; or

(b)

an amount that includes all or part of the unpaid amount.

(2) The consequences of the judgment being given or entered are:

(a)

the unpaid amount is not taken, for the purposes of a provision that makes, or would make, the person liable to pay the charge on the unpaid amount, to have ceased to be due and payable by reason only of the giving or entering of the judgment; and

(b)

if the judgment debt carries interest, the amount of the charge that the person would, if not for this paragraph, be liable to pay on the unpaid amount is reduced by:

(i)

in a case to which paragraph (1)(a) applies - the amount of the interest; or

(ii)

in a case to which paragraph (1)(b) applies - the amount worked out using the formula:

Unpaid amount or part of unpaid amount / Judgment debt * Interest "


118. When viewed in light of s 8AAH and the principles set out in Chamberlain, it seems to me that Ms Schweitzer's tax liability as at 10 December 2003 ceased to exist when judgment was obtained for a sum that reflected the amount of that tax liability. As cl 9 of the Policy states, release cannot be granted for the interest accruing on the amount of the judgment debt and associated legal costs. They are not a liability arising under a provision of an Act specified in the table in s 340-10(2). Equally, the judgment debt is not a liability arising under a provision or provisions of an Act specified in the third column of that table. By operation of law, it ceased to exist when the judgment was entered.

Distinguishing the tax liabilities from the Judgment Debt and interest accrued on that Judgment Debt

119. As at 12 September 2016 and excluding the amount of tax liabilities subsumed in the Judgment Debt and the interest on that Judgment Debt, the amount of those tax liabilities coming within those described in s 340-10(2) of Schedule 1 to the TAA amounted to $4,704,284.80 i.e. $1,231,952.40 in respect of income tax, Medicare levy and Medicare levy surcharges and $3,472,332.40 of GIC. The Judgment Debt interest amounted to $2,978,842.07.

Value of Ms Schweitzer's assets

120. Regardless of the value the Frankston property or the Moonee Ponds property, Ms Schweitzer's assets cannot cover the amount of her tax liabilities and/or the amount of the Judgment Debt and accrued interest. This can be illustrated by taking the highest value attributed to the properties in the evidence and working out the approximate value of Ms Schweitzer's interest. Beginning with the Frankston property, its highest estimated value as at 19 July 2017 was $1,412,495.00 with an estimated price range falling between $1,002,800.00 and $1,822,190.00. This valuation was prepared by RP Data. It is supported by sales of other properties in the area in the preceding months as well as those offered for sale and rental. None is precisely comparable with either property but, bearing in mind valuation principles^[111] and subject to the tenancy, to which I will now turn, the estimated values would seem to be fair even though a higher, or a lower, price might actually be realised if the property were sold and even though the Rate and Valuation Notice issued by Frankston City showed that it had been valued on 1 January 2016 at $840,000 both for the site and having regard to its capital improvements.^[112]

121. Ms Schweitzer claimed that the Frankston property was subject to a tenancy agreement in which her husband is the tenant. In some circumstances, that could be a factor affecting the value of the property but not so in this case. First, I do not think that is a relevant factor because I do not accept that it is a genuine tenancy. Ms Schweitzer made no reference to it in her statement made on 27 June 2017 for the purposes of these proceedings. Her husband had read her statement and said in his own of the same date that everything that she had said concerning him "as an individual" was correct. This would include her statement at [23] that she was the sole owner of the Frankston property from 1989. She referred to her having granted a mortgage over the property in favour of the Commissioner in respect of her outstanding tax liabilities but made no reference to the fact that she had entered a tenancy agreement with her husband so that he was her tenant. The tenancy agreement is dated 3 October 2004 and she justified its existence by saying that she had always regarded it as her husband's property.

122. Her statement to that effect is not consistent with the evidence that she and her husband gave before Senior Member Pascoe at the hearing in April 2006. This was only eighteen months or so after the tenancy agreement was said to have been entered. Senior Member Pascoe recorded in his reasons for decision in Re Ebner and Commissioner of Taxation^[113] that:

"... The funds for the purchase of the Frankston house was initially said to have come from a cousin in Germany, Ludwig Bock, with Mrs Ebner acting as trustee. In oral evidence at the hearing this was retracted on the basis that Mr Ebner thought that he had provided the funds but now realised that this was a misapprehension. ...".^[114]

He also recorded:

"In his witness statement Mr Ebner stated that the amount of $275,000 used for the purchase of the Frankston property was money held in trust from her cousin, Ludwig Bock and a declaration to that effect dated 26 November 2002 said to be signed by Mr Bock was attached. Mrs Ebner, in her witness statement, stated that the content of her husband's statement was true. In his oral evidence at the hearing, Mr Ebner first insisted that he had arranged for Mr Bock to provide the statement. When faced with a report of an interview with Mr Bock in Germany, Mr Ebner completely changed his evidence. He then said that he had 'thought' that Mr Bock had paid for the property but now realised that his wife paid for the property out of her own money and had not been reimbursed. Mrs Ebner in her oral evidence said that she had thought that Mr Bock was to reimburse the $275,000 but now knew that this was incorrect. ..."^[115]

123. These passages show that, in 2006, Ms Schweitzer and Mr Ebner put forward the view that the Frankston property was either paid for with moneys provided by Mr Bock and held by her on trust for him or paid for from her own moneys. There is no mention of a tenancy agreement with her husband dating from 2004 or at all. Contrary to Ms Schweitzer's current position that the Frankston property was always his, Mr Ebner himself had retracted his initial statement in the matter before Senior Member Pascoe that he had paid for the property. The existence of a tenancy agreement stands at odds with Ms Schweitzer's statement that the Frankston property had always been his. He had no need to be a tenant of his own property.

124. In cross-examination, Ms Schweitzer said that the tenancy agreement had been drafted when she and her husband first moved into the Frankston property. They did so because a police officer, who had been a neighbour, had suggested to them that it was a good idea to do so but she could not remember his reason for his suggestion. Ms Schweitzer did not think it unusual for people who have been married since 1986 to enter a formal tenancy arrangement. They entered the tenancy agreement because of the neighbour's suggestion and because they had always thought that it was her husband's house in the first place. When it was pointed out to her that Senior Member Pascoe had not accepted that the Frankston property was Mr Ebner's property, Ms Schweitzer replied that it was their opinion. She denied that the tenancy agreement had been created when it became clear that the Commissioner wanted the property. The police officer who served the warrant of possession had told them that the interests of any tenant would be taken into account.

125. Mr Ebner's evidence in cross-examination is to the effect that he and his wife had shared various flats and houses since 1972 but they had not thought it necessary to have a tenancy arrangement before their neighbour, who had been a police officer, suggested it. They told their neighbour of their bankruptcy and taxation problems. Mr Ebner told his neighbour that they were being pursued in relation to claims that were completely fraudulent and his neighbour advised them that they should secure their position as much as they could. He did not obtain any legal advice. Mr Ebner denied that he had written the tenancy agreement in 2017. He insisted that it had been written in 2004 and that he and his wife remembered that they had it. Later in cross-examination, Mr Ebner said that he had asked the Commissioner's solicitors to respect his rights and to take the necessary steps to ensure his legal protection.^[116] He said that he used those words after obtaining advice from a Community Legal Centre. Mr Ebner was vague about the advice he received. It seems from his description of the advice was that it focused on his rights as a tenant who has been given a notice to vacate by a landlord.

126. In view of the inconsistent history regarding the ownership of the Frankston property, I do not accept that the tenancy agreement was drawn up in 2004. Rather, it was drawn up at some time after Ms Schweitzer was served with the warrant of possession and 2 February 2017 when she faxed a copy of it to both the Sheriff's Office and the Australian Government Solicitor (AGS). That was the day before she was required to give vacant possession of the Frankston property. I have reached that conclusion in light of the fact that Ms Schweitzer and Mr Ebner have shared accommodation since 1972. Never before 2004, on their view of matters, had they felt any need to have a lease agreement between them. If it had been prepared in 2004, it is difficult to think that it would not be thought of again until the day before they were required to give vacant possession of the Frankston property. The covering email sent to the AGS asking it to respect his rights is consistent with Mr Ebner's view that the tenancy agreement did give him some rights. His view was based on legal advice obtained some time before he sent the email but not long before. It was advice given in the context of a landlord and tenant and not in the context of a warrant of possession under Order 53. The Community Legal Centre cannot be blamed for that.

127. In view of these matters, I do not accept that Mr Ebner was a tenant of the Frankston property. Even if I am incorrect in that finding, a tenancy agreement would not prevent the ultimate execution of any warrant of possession that might be issued by a court. The interests of a tenant are possessory only and cannot withstand a warrant of possession issued by the Supreme Court under Order 53.08 of the Supreme Court (General Civil Procedure) Rules 2015 (Victoria). Any tenancy would not have to be taken into account if sale of the Frankston property were to follow.

128. The value of the Moonee Ponds property was estimated on 7 July 2017 to be $1,462,793.00 and the estimated price range to be between $1,147,010.00 and $1,778,570.00. Again, the valuation was prepared by RP Data property. It is supported by sales of other properties in the area in the preceding months as well as those offered for sale and rental. It is commensurate with the capital improved value relied on by the City of Moonee Valley in a Rate and Valuation Notice for the year ending 30 June 2017 is shown as $1,353,000.00 and the site value as $1,194,000.00.

129. If I take $1,462,793.00 as the value of the Moonee Ponds property, the value of the half share that is the subject of the late Mrs Maria Schweitzer's will is $731,396.50. That sum must be reduced by the total of the costs that must be paid out of it. At the time they were taxed, they totalled $127,843.63 ($86,210.71 plus $41,632.92). Assuming for the moment that there is no interest component, that would leave $603,552.87 to be distributed amongst the four beneficiaries named in the will and its codicil i.e. approximately $150,000 each.

130. If I add to the sum of $150,000.00, the approximate value of the Frankston property, Ms Schweitzer's assets are a little over $1,500,000.00.^[117] The value of her assets is far short of the Judgment Debt interest accrued. That interest is not a liability within the meaning of s 340-10(2). The liabilities that led to the Judgment Debt have been subsumed within it. The Judgment Debt is of a different character from the liabilities that led to it and is subject to a different regime of collection. So too is the interest it accrues. If Ms Schweitzer were required to satisfy the liability that is the Judgment Debt interest, she would face the loss of her assets, including the Frankston property in which she and her husband reside, regardless of whether she were required to satisfy the tax liabilities that do fall within Item 1 of s 340-5(3).

131. I do not have the breakdown of the amount of tax liabilities that are subsumed in the Judgment Debt that I have found not itself to be a liability that comes within s 340-10(2). It does not matter for any hardship that Ms Schweitzer will suffer will have been suffered by the recovery of the interest accrued on the Judgment Debt. To the extent that the income tax, Medicare levy, Medicare levy surcharge and the GIC had not been subsumed in the Judgment Debt, their recovery will be of no consequence so far as assets are concerned for the assets will have been consumed in satisfying the Judgment Debt interest.

Would satisfying the tax liability cause Ms Schweitzer serious hardship?

132. Even if I assume that all of the amounts sought are liabilities within the meaning of s 340-10(2), would the loss of her Frankston property in which she lives and her inheritance amount to serious hardship within the meaning of Item 1 of s 340-5(3)? I think that it does not. Ms Schweitzer's and her husband's eligibility for Rent Allowance has not been explored. That would be in addition to her current social security payment. Her social security payment would not be affected by her assets because she would not hold the proceeds of the sale of the Frankston property. She and her husband would no longer have to pay rates on the Frankston property and that amount would contribute to the rent. Ms Schweitzer would he living the life that many people receiving an Age Pension must live. Those on the Age Pension living in rental accommodation are not, by reason of that fact alone, regarded as suffering serious hardship. If she were required to contribute a significant sum from her Age Pension each fortnight, I might have a different view. She may suffer hardship because her income and outgoings as presented by Ms Schweitzer lead to a shortfall of $25 each fortnight but that will be hardship suffered by reason of her budgeting and not by reason of satisfying tax-related liabilities. In the absence of any suggestion that the Commissioner proposes to take that course, I am not satisfied that she would suffer significant hardship if she were required to satisfy her tax-related liabilities.

133. As she would not do so, she does not meet the criterion in Item 1 of s 340-5(3). Therefore, I do not have power to release her from all or part of her liabilities that are liabilities within the meaning of s 340-10(2).

Should Ms Schweitzer have been released from tax liabilities had she met Item 1?

134. This is a hypothetical question in view of the conclusion I have reached in the previous paragraph but, lest I be incorrect in my conclusion, I have considered it and concluded that I should not exercise the power to release Ms Schweitzer from any part of her tax liabilities. I accept that Ms Schweitzer and her husband are very unlikely to find remunerative work and so are likely to continue to be in receipt of social security benefits. On the figures that Ms Schweitzer presented in her application for release, their expenditure of $1,321.00 exceeds their income of $1,296.50 per fortnight by $24.50.^[118] The difference is small but, on a limited budget, noteworthy and, over time and in the absence of any curtailing of expenditure, likely to lead to misery in the sense that she would have to sell; her house.

135. I find that Ms Schweitzer has done nothing to realise her contingent interest in her late mother's estate so that she can go some small way to reducing her debt to the Commissioner let alone perform her duties as executrix of her late mother's will. Her interest in her late mother's estate was contingent at the time she sought relief. It was contingent on her taking steps to obtain probate as she had been appointed as the executrix of the will and it was contingent upon any challenge to the will and upon any eligible person applying for a family provision order under s 90A of Part IV of the Administration and Probate Act 1958 (Vic) (AP Act). Under Part IV, an eligible person had six months after the grant of probate in which to do so according to the terms of s 99(1) but that time might be extended by the Court under s 99(2).

136. I also find that she tried to conceal her interest in her late mother's estate from the Commissioner. Furthermore, she has not taken reasonable steps to put herself in a position where she would receive her inheritance so that she could reduce her debt to the Commissioner. Ms Schweitzer's statement that she did not include any reference to her interest in her late mother's estate to be disingenuous. She specifically referred to Part IV of the AP Act. In doing so and as the executrix of the will, she can be taken to have had some understanding of what Part IV provides for. It provides for a Court to make a family provision order when an application is made by an eligible person. The definition of "eligible person" set out in s 90 of the AP Act includes children of the deceased who are under the age of 18 years, those who are full-time students between 18 and 25 years and those with a "disability" as defined in s 90. A disability must meet the criteria set out in that definition. It must, for example, be attributable to one or more intellectual, cognitive, neurological, sensory or physical impairments or to one or more impairments attributable to a psychiatric condition and be likely to be permanent. The impairment or impairments must result in substantially reduced functional capacity to undertake, or psychosocial functioning in undertaking, one or more of the activities listed in the definition including communication, social interaction, self-care and self-management.

137. There is no suggestion that either Ms Schweitzer's brother or sister suffered such a disability. She made no reference to it and referred only to their having been excluded from sharing in their late mother's estate. That is not a ground under Part IV and Ms Schweitzer can be expected to have known about that. Even if she did not look at the detail, the possibility that her siblings would bring an action under Part IV was a contingency as was the possibility of their challenging the will and its improperly executed codicil. The fact of the contingency did not change the fact that Ms Schweitzer had been the beneficiary of a deceased estate since her tax debt arose. I find that she gave a false answer to Question 22 in completing her Application for Release. It cannot be excused on the basis of ignorance because she was not only the executrix of her late mother's will and had responsibilities regarding distribution but had also acted as guardian for her mother in the proceedings brought against her mother by her brother.

138. In the absence of any explanation of Ms Schweitzer's delay in obtaining probate, her delay is consistent with her course of conduct in avoiding her obligations as a taxpayer. She understated her taxable income and has taken every legal avenue to defer the payment of the income tax payable on that taxable income. She is, of course, entitled to apply for review and to appeal to the Federal Court against the Commissioner's assessments. Like any taxpayer, she cannot be criticised for it but litigation has to have a reasonable footing. When, in 2007, she discontinued her appeals against Senior Member Pascoe's decisions, that effectively brought to an end her challenges to the notices of assessment the Commissioner had issued between 8 and 15 February 2001 in respect of the income years ended 30 June 1988 to 30 June 1999. Despite that, eight years later in December 2015, Ms Schweitzer sought orders under the Judiciary Act 1903 that the assessments issued for those years be declared invalid and quashed. In the proceedings before Senior Member Pascoe, she and her husband were found to have given false evidence regarding the Frankston property. It was clear from her answers at the hearing before me that Ms Schweitzer was still trying to assert that her husband had a right of occupancy in the Frankston property based on his being a tenant rather than simply as her spouse.

139. Putting aside intangible elements on which a community is based and which bind it together, a modern community requires infrastructure such as transport systems, hospitals and health care facilities, educational institutions and so on. In a community that is concerned that such infrastructure is available to all and not simply to those who can pay for it, income and other taxes play a vital role. They provide the funds on which that infrastructure is built. They also provide the funds for a system of social welfare for those who meet its assets and income tests and other criteria depending on the payment. Subject to a person's meeting those tests and criteria, those payments are available to persons whether or not they have met their liabilities as taxpayers. They are available to Ms Schweitzer and Mr Ebner even though she has not voluntarily made any payment to reduce her taxation liabilities. She has involuntarily reduced them through the sale of the Mt Eliza property by the trustee in bankruptcy.

140. I have also taken into account the report dated 25 May 2016 written by Dr Kenneth Byrne, who is a Clinical and Forensic Psychologist. Dr Byrne noted that he had first examined Ms Schweitzer in 2001 for 3½ hours followed by further examinations on 6 May 2003 and 10 September 2003. His next and last examination was on 20 May 2016. In all, he had spent 7½ hours with Ms Schweitzer and had not seen her since. Dr Byrne had read the history provided by her then solicitors and set out in a letter dated 18 May 2016. The history and observations he set out in his report are, Dr Byrne wrote, based almost exclusively on the history provided by Ms Schweitzer. Should new information be given to him that contradicted that history, it would be necessary to change some or all of the opinions that he had expressed in his report.

141. Dr Byrne's report is extensive and thoughtful in its recitation of the history Ms Schweitzer gave him and of her presentation at the examination. He made particular mention of the extensive litigation in which she has been involved and the stressful nature of being engaged in even one litigation event let alone multiple events. Involvement tends to intrude into a person's thoughts and that intrusion tends to create preoccupation, tension and anxiety. She has feelings of guilt and shame associated with a feeling that she has let her family down. Dr Byrne diagnosed Ms Schweitzer as suffering from a Major Depressive Episode with significant paranoid features as well as Post Traumatic Stress Disorder related to events on 12 May 1998 when the aggravated burglary occurred and 22 October 1998 when officers of the Australian Federal Police executed a warrant issued under s 130(2) of the Bankruptcy Act 1966 (Bankruptcy Act).^[119] In Dr Byrne's opinion, Ms Schweitzer is desperately in need of psychiatric help. She is, however, completely opposed to this and Dr Byrne has no doubt that any attempt to direct her towards it would be completely unsuccessful. In the circumstances, Dr Byrne thought that the only solace that could be available to her lies in her spiritual beliefs and that she may receive from her prayers.

142. I understand that Ms Schweitzer has found litigation extremely stressful and it matters not whether she instigated some of that litigation or not. Dr Byrne noted that, at his last interview with Ms Schweitzer, she showed a very slight degree of insight into her problems. Her thinking, he found, was clear and relevant although her interpretation of events was largely coloured by her paranoid ideas and her conversation diverted from relevant topics. Although I do not have the benefit of Dr Byrne's opinion, in light of the whole detailed history of litigation in which she has been engaged, it is apparent from his report that he was aware of the range of litigation. Having the detailed history, I have drawn the same conclusion. Ms Schweitzer appears to have a very slight degree of insight into her problems. In particular, she appears to have a very slight degree of insight into how she came to be in the position she is with the debt that she has. That is consistent with Dr Byrne's conclusion that any attempt to direct Ms Schweitzer to obtain psychiatric help would be completely unsuccessful.

143. In light of all of these matters, I find that Ms Schweitzer will always believe that she has been badly done by and question the assessment of the taxation liabilities she faces. Is that a basis for releasing her from those taxation liabilities that every taxpayer is expected to meet? She has made no voluntarily effort to meet or reduce her taxation liabilities. Perhaps that is because of her psychiatric condition but, as Dr Byrne found, she has not made any effort to seek psychiatric help to assist her to address her conditions and so gain insight into her situation.

144. I am sympathetic to her condition as described by Dr Byrnes but this is not a situation in which Ms Schweitzer does not have other options to find accommodation should the Commissioner decide to defer taking steps to sell it before she and her husband leave it. Whether the Commissioner decides to do that in the short or the long term, I have come to the view that Ms Schweitzer should not be released from the tax liabilities she has incurred. That is so even though her assets will meet only a part of those taxation liabilities.

145. For these reasons, I affirm the Commissioner's decision dated 23 January 2017 disallowing Ms Schweitzer's objection against the refusal of her application for release from tax liability under Division 340 of Schedule 1 to the TAA.

THE EVENTS LEADING TO THE TAX LIABILITIES

146. Ms Schweitzer had been employed by Myer for approximately 25 years. In 1985, a company known as Logenstone Corporation Pty Ltd (Logenstone) was incorporated. From at least 1987, when she resigned from her position at Myer, Ms Schweitzer was involved in business activities with her husband, Mr Ebner. They operated either through Logenstone, in partnership with each other or both. Ms Schweitzer described Logenstone as the business she and her husband used for trading. It had carried on business as an export consultant. Logenstone had established export markets for Australian companies, she said.^[120]

147. Ms Schweitzer and Mr Ebner were registered as the joint proprietors of a property in Mt Eliza on 5 November 1987 (Mt Eliza property). A little over eighteen months later on 14 July 1989, Ms Schweitzer acquired a house property for $275,000 (Frankston property). No mortgage was registered on the title and she was the sole proprietor of the property.

148. Ms Schweitzer lodged a tax return for the year of income ending 30 June 1988 disclosing her income as an amount below the taxable threshold. That meant that no tax was assessed as payable. Apart from that ending 30 June 1993, Ms Schweitzer lodged tax returns disclosing income below the taxable threshold for each of the years of income up to 30 June 1995. The Commissioner assessed that she was not liable to pay income tax.

149. On 16 April 1991, Mr Ebner transferred his half share of the Mt Eliza property to Ms Schweitzer. She was then its sole proprietor.

150. On 18 January 1993, Mr Ebner failed to comply with a Bankruptcy Notice issued by the Australia and New Zealand Banking Group Limited (ANZ Bank). The Bankruptcy Notice had been issued in respect of debts amounting to some $12,098.26^[121] on a credit card the bank had issued to Mr Ebner in the early 1990s. On 29 August 1994, a sequestration order was made against Mr Ebner and he became a bankrupt. Mrs Ebner was examined by the Official Trustee (trustee) on 14 December 1995 regarding the business conducted by Logenstone and its demise as well as the transfer of the Mt Eliza property.

151. As a consequence of that sequestration order, all property that belonged to, or was vested in Mr Ebner at the commencement of his bankruptcy and all property that had or was acquired by him after that commencement and before his discharge was property divisible among his creditors.^[122] Under s 58(1)(a) of the Bankruptcy Act, Mr Ebner's property, not being after-acquired property, vested immediately in the trustee. Under s 58(1)(b), any of Mr Ebner's after-acquired property vested in the trustee as soon as it was acquired by, or devolved on, him.

152. Certain transactions, which have the effect of divesting property of a bankrupt, are void against the trustee. Among them are those which take place in the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy and in which the transferee gave consideration of less value than the market value of the property.^[123] There are certain exemptions to this but they are not applicable in this matter. Transfers that may generally be described as transactions to defeat a bankrupt's creditors are also void under s 121 of the Bankruptcy Act. In her married name of "Ebner", Ms Schweitzer brought proceedings in the Federal Court disputing the vesting in the trustee of the half share she had acquired from her husband in the Mt Eliza property.

153. On 4 October 1997 and while the matter was before the Federal Court, Mr Ebner was discharged from bankruptcy.

154. In the Federal Court proceedings, Goldberg J considered both ss 120 and 121 of the Bankruptcy Act and, on 30 June 1998, he found Mr Ebner's transfer of his interest in the Mt Eliza property to Ms Schweitzer to be void against the trustee under both provisions.^[124]

155. Earlier, on 1 February 1996, Ms Schweitzer applied to the then Department of Social Security (DSS) for unemployment benefits. She stated that she was a single person and used her former, rather than her married, name. Mr Ebner also applied to the DSS for unemployment benefits and he also stated that he was a single person.

156. On 12 May 1998, an aggravated burglary at the Mt Eliza property led to the theft of chattels valued at $658,195.

157. Ms Schweitzer lodged an appeal against the judgment of Goldberg J relating to the Mt Eliza property on 21 July 1998. One ground of appeal was that Goldberg J should have disqualified himself from hearing the proceedings at first instance by reason of his having declared himself to be a director of a family trust and a contingent beneficiary of shares held by that family trust in the ANZ Bank. Her appeal was dismissed on 10 March 1999.^[125]

158. Mr Ebner's discharge from bankruptcy did not bring the trustee's powers to an end. The trustee formed the view that he had reasonable grounds for suspecting that there was "relevant property" on or in the Mt Eliza property. "Relevant property" was defined in s 130(1)(a) of the Bankruptcy Act to include any property of the bankrupt. Having formed that view and having set out the grounds upon which the warrant was sought, the trustee applied to an eligible judge for the issue of a warrant authorising a constable of police to enter onto premises, search those premises for relevant property, take possession of any relevant property found on those premises and deliver that property to the trustee.^[126] An eligible judge was satisfied that there were reasonable grounds for issuing the warrant and issued the warrant under s 130(2). Officers of the Australian Federal Police (AFP) executed the warrant on 22 October 1998 and seized a large quantity of chattels, some of which were very valuable. The trustee intended to sell the chattels and to distribute the proceeds among his creditors.

159. On 19 March 1999, Ms Schweitzer applied to the Federal Court for a declaration that she was either the owner or the co-owner of the chattels seized by the AFP under the warrant and held by the trustee.

160. On 9 December 1999, the High Court granted special leave to appeal from the Full Court's judgment in Ebner v Official Trustee in Bankruptcy but limited to the disqualification point regarding Goldberg J's having heard the case.^[127] Ms Schweitzer was represented at the special leave hearing by senior and junior counsel instructed by Clayton Utz. The appeal was ultimately dismissed by the High Court on 7 December 2000.^[128]

161. For each of the years of income ending 30 June 1996 to 30 June 1999, Ms Schweitzer disclosed the unemployment benefits she received from DSS and no other income. On 3 March 2000, the Australian Taxation Office (ATO) wrote to Ms Schweitzer informing her that her tax returns for the 1996 to 1999 years of income would be audited.

162. Ms Schweitzer's application for a declaration regarding the property seized by the AFP on behalf of the trustee led in the initial stages to contested discovery proceedings. They were decided on 3 March 2000^[129] by Finkelstein J, who made orders for discovery in favour of Ms Schweitzer. She was represented by senior and junior counsel instructed by Clayton Utz.

163. Ms Schweitzer wrote to the ATO on 22 March 2000 stating that she refused to attend the ATO for an interview by reason of her suffering from ill health. The ATO sent her a notice under s 264 of the Income Tax Assessment Act 1936 (ITAA36). Her solicitors, Clayton Utz, advised the ATO by letter dated 1 September 2000 that they had experienced difficulties in obtaining instructions as their client had been extremely ill. Despite that, they were in the course of finalising her response and expected to respond to the Notice early in the following week. The ATO did not receive a response by 15 September 2000.

164. Between 8 and 15 February 2001, the Commissioner issued Notices of Assessment to Ms Schweitzer for the years of income ending 30 June 1988 to 30 June 1999. Over those 12 years, the Commissioner assessed that Ms Schweitzer had failed to disclose income totalling $2,031,619. The Commissioner also imposed penalties by way of additional tax under Part VII of ITAA36 equal to 90% of the tax shortfall in each year. For the years of income ended 30 June 1988 to 30 June 1993, the penalties were imposed under s 222 and 223 of ITAA36 and reduced under s 227 from the statutory 200%. For the following years of income ending 30 June 1994 to 30 June 1999, the penalties were imposed under s 226J at 75% and increased by a further 20% under s 226X. Ms Schweitzer's solicitors, Clayton Utz, objected to those assessments on 9 April 2001.

165. Ms Schweitzer was again represented by senior and junior counsel, instructed by Clayton Utz, when her application for a declaration regarding the property previously seized by the AFP was heard by the Federal Court. Finkelstein J handed down his judgment in Ebner v Official Trustee in Bankruptcy, in the matter of Ebner^[130] on 14 February 2003.

166. Finkelstein J found that Ms Schweitzer had established her claim in respect of a handful of items purchased with the Myer and American Express credit cards received as gifts from family members or acquired after her husband's discharge from bankruptcy. Several items, Finkelstein J found, had been purchased after the date of Mr Ebner's discharge from bankruptcy. He ordered that the trustee return those items he had found that Ms Schweitzer had purchased or received as gifts or that had been acquired after her husband's discharge. Her claim to own all of the other assets because she had paid for them was a claim Finkelstein J rejected but he still had to decide who did own them. He described them as a "collection".

167. His Honour found that both Ms Schweitzer and Mr Ebner had each contributed to the purchase of items in the collection to a greater or lesser degree. In some instances, the cost of the items making up that collection was known but it was not in others. Finkelstein J estimated that the value of the collection seized by the trustee was about $435,000. To that, he added the value of the goods stolen in 1998. Their value as reported by Mr Ebner to the Victoria Police was $658,000. Doing the best he could, his Honour said, he estimated that Ms Schweitzer had contributed 20% of the aggregate purchase price of items held by the trustee. Those items had been converted by the trustee and Finkelstein J concluded that she was entitled to recover by way of damages 20% of the present value of the property held by the trustee. Ms Schweitzer lodged an appeal against the judgment of Finkelstein J.

168. In the meantime, Ms Schweitzer and Mr Ebner had been charged with defrauding the Commonwealth by representing themselves as single people when they applied for unemployment benefits from DSS. Each pleaded guilty on 1 July 2003.

169. The appeal against Finkelstein J's judgment was settled on 25 August 2003 when a Full Court of the Federal Court allowed the appeal so that Ms Schweitzer was entitled to 50% of the assets seized by the AFP.^[131] Her claim to damages was recalculated on that basis. The order was prepared by Clayton Utz.

170. On 22 September 2003, the Commissioner disallowed the objections Ms Schweitzer had lodged on 9 April 2001. She lodged an application in the Tribunal on 18 November 2003 for review of the objection decision and again instructed Clayton Utz to act for her. Mr Ebner also applied to the Tribunal for review of an objection in respect of income tax assessments previously issued to him.

171. On 10 December 2003, the Supreme Court ordered Ms Schweitzer to pay a Deputy Commissioner of Taxation the sum of $3,319,350.36 (Judgment Debt).

172. The trustee sold the Mt Eliza property on 10 June 2004 and the purchaser lodged the transfer with the Registrar of Titles on 12 January 2005. As a consequence, Mr Ebner and Ms Schweitzer moved into the Frankston property. On 25 January 2006, the trustee paid the sum of $535,276.58 to the Commissioner as Ms Schweitzer's share of the net proceeds of sale of the Mt Eliza property.

173. On 27 February 2006, Ms Schweitzer entered a Deed of Security with the Commonwealth represented by the Deputy Commissioner of Taxation in respect of what were described as "Secured Moneys". Those secured monies were made up of the Judgment Debt (less any credits as a result of the Tribunal's determination of the AAT proceedings^[132]), the Judgement Enforcement Costs, Interest on the Judgment Debt and any moneys which are, or become, payable under any agreement relating to the Secured Moneys or arising out of breach of any such agreement. Ms Schweitzer acknowledged her indebtedness to the Commonwealth. By means of the Deed of Security, Ms Schweitzer charged the Frankston property with the obligation to repay the Secured Moneys in favour of the Commonwealth. To secure the repayment of the Secured Monies, she was required to execute a registrable mortgage over the Frankston property. The Commonwealth would lodge a caveat on the property to protect its interest in the Frankston property. Under cl 4.1 of the Deed, Ms Schweitzer undertook to punctually pay the Secured Moneys to the Commonwealth within 30 days of the determination of the proceedings in the Tribunal numbered VT2003/226-237.

174. The Tribunal's proceedings, which were heard on 18 and 19 April 2006, were determined when Senior Member Pascoe handed down his decision on 19 June 2006.^[133] Ms Schweitzer was represented by Rigby Cooke Lawyers. In so far as the proceedings related to Ms Schweitzer, Senior Member Pascoe decided:

"The Tribunal varies the decisions of the respondent in relation to decisions on the objections of Mrs Ingrid Ebner in respect of assessments for the year ended 30 June 1988 to 30 June 1999 inclusive to the extent of remitting the matters to the respondent with direction to amend the amendment in relation to allowing deductions of 25% of agency fees received, reducing income attributed to expenditure on stolen valuables, the inclusion of income from Social Security Benefits and the remission of part of the penalty imposed in accordance with the reasons for decision."

175. Senior Member Pascoe's decision resulted in a reduction in the total amount of Ms Schweitzer's taxable income over 12 years from $2,031,619 to $1,751,331. The penalties were reduced from 90% of the tax shortfall to 75%. He reached that conclusion on the basis that Ms Schweitzer had intentionally disregarded the provisions of ITAA36. That meant that the penalty was assessed under s 226J. He was not satisfied that s 226X applied because, although there had been a marked lack of cooperation and truthfulness, Senior Member Pascoe was not satisfied that Ms Schweitzer had actively hindered the Commissioner.^[134]

176. Through her solicitors, Rigby Cooke Lawyers, Ms Schweitzer lodged notices of appeal against Senior Member Pascoe's decision. When she discontinued her appeals on 17 October 2007, she was represented by Mr John Young, who is a consulting tax lawyer.

177. On 14 March 2008,^[135] Ms Schweitzer lodged an application with the Commissioner under Division 340 of the TAA for release from her tax liabilities for the years of income ending 30 June 1988 to 30 June 1999. In her application, she said that she lived with her husband in the Frankston property, which is a 55 year old, two bedroom, single level house. She disclosed fortnightly household expenditure of $435 made up of: food and household supplies ($240); electricity ($25); telephone ($30); water/land rates ($80); motor vehicle registration ($20); motor vehicle (1978 280CE Mercedes, which she estimated to have a market value of $2,000) repairs/maintenance/petrol and oil ($20); and fares ($20).^[136] On 12 December 2008, the Commissioner refused to release Ms Schweitzer from payment of tax for the following reasons:

"The Commissioner is of the view that your poor compliance history is sufficient to warrant a decision to refuse release.

The assessments that gave rise to the outstanding debt were a result of audit investigations into your affairs by the Tax Office. That audit disclosed substantial evidence of deliberate understatement of income and a lack of cooperation in regards to providing information when requested."^[137]

178. Ms Schweitzer's solicitor, Mr Christopher Dale of O'Donnell Salzano Lawyers, prepared a Notice of Objection dated 14 January 2009 on her behalf.^[138] The Commissioner disallowed Ms Schweitzer's objection against his decision to refuse her application for release from her tax liability. His objection decision was dated 3 February 2009. On 10 March 2009, Ms Schweitzer applied to the Tribunal for review of the Commissioner's objection decision. Mr Christopher Dale again acted for her.^[139]

179. Between 23 January 2009 and 27 April 2009, the Commissioner issued notices of amended assessment to Ms Schweitzer to give effect to Senior Member Pascoe's decision dated 19 June 2006. The total amount of income tax and Medicare Levy payable under the amended assessments was $759,206.29. The total amount of penalties and interest payable under the amended assessments was $1,008,022.69 made up of penalties of $569,404.63 and interest of $438,618.06. As a result of the receipt of the sum of $535,276.58 from the trustee on 25 January 2006, the following liabilities had been satisfied:

180. In 2007, one of Ms Schweitzer's brothers, Mr Hermann Schweitzer, brought proceedings against their mother, Mrs Maria Schweitzer, in the Supreme Court of Victoria (Supreme Court). The dispute involved a property at Moonee Ponds, which Mrs Maria Schweitzer and her late husband had purchased in 1984 and which had been registered in their names as joint tenants. Mr Hermann Schweitzer claimed that he was entitled to a half share of the Moonee Ponds property. He sought to protect it first by obtaining a statutory declaration from his parents to the effect that he was so entitled and, second, by lodging a caveat over the property on 15 September 2005. His mother received notice of the caveat and put it to one side. Some two years later, his sister, Ms Schweitzer discovered the existence of the caveat. At the time, she held jointly with one of her sisters an enduring power of attorney for her mother. By this time, Mrs Maria Schweitzer was the sole registered proprietor after the death of her husband. Mr Hermann Schweitzer claimed that, subject to a life interest of his parents or his surviving parent being his mother, he owned a half share of Moonee Ponds property as the beneficiary of an express, resulting or constructive trust.

181. On 4 November 2010, Mr Dale lodged a notice withdrawing Ms Schweitzer's applications for review of the Review of Release Decision made by the Commissioner.

182. Cavanough J delivered his judgment on 30 November 2010. He decided that Mrs Maria Schweitzer held the Moonee Ponds property on trust for herself and for Mr Hermann Schweitzer as tenants in common as to one equal undivided half part or share, for herself absolutely and, as to the other equal undivided half part or share, for herself for her lifetime and then for Mr Hermann Schweitzer absolutely.^[140]

183. Late in 2010, Mrs Maria Schweitzer lodged an appeal to the Court of Appeal. It delivered its judgment on 23 October 2012 dismissing the appeal and ordering Ms Maria Schweitzer to pay Mr Hermann Schweitzer's costs to be taxed on a party and party basis.^[141]

184. Section 76 of the Transfer of Land Act 1958 (Vic) (TL Act) sets out the procedure in situations in which there has been default in the payment of sums secured or in the performance or observance of any express or implied covenant in a mortgage or charge and that default continues for one month or such period as is prescribed in the mortgage or charge. The mortgagee may serve a notice in writing on, in this case, the mortgagor to pay the money owing or to perform and observe the covenants. The Commissioner served such a notice on Ms Schweitzer on 4 November 2013.

185. When he did not receive payment, a Deputy Commissioner of Taxation lodged a writ in the Supreme Court seeking an order that he recover possession of the Frankston property together with either costs calculated on a full indemnity basis in accordance with clause 9.2 of the Deed of Security or reasonable expenses in accordance with the mortgage. Ms Schweitzer lodged a defence on 10 March 2015. The Deputy Commissioner applied for summary judgment. When the matter came before the Derham AJ on 14 August 2015, he gave directions for filing affidavits and Outlines of Submissions. He gave Ms Schweitzer three weeks to file any affidavit in opposition. She did not but was given further time within which to provide substance to the application she proposed to make under s39B of the Judiciary Act 1903 (Judiciary Act) for judicial review of the tax assessments lying behind the Judgment Debt. Derham AJ described the matter that Ms Schweitzer wished to pursue under s 39B in the following terms:

"... The matter raised is said to be the fact that moneys assessed as income were in fact repayment of loans by a company called Loganstone [sic] Pty Ltd and that to the extent the assessments of income relate to other matters they are covered by receipts paid to the plaintiff from the sale of property at Mt Eliza (for which the plaintiff has already given the defendant credit). It is relevant to note, as the plaintiff submitted, the AAT had before it a similar contention in the review of the assessments (see Ebner v FCT [2006] ATC 2263 at [8]). ..."^[142]

186. He refused the adjournment giving the following reasons:

"... In my view the defendant has had had ample opportunity (both since the filing of the defence on 24 April 2015 and since the summons for summary judgment was issued on 4 August 2015, including by an adjournment given on 17 September 2015, not to mention the years between 2009 and 2015) to give form and substance to her very general allegations that the assessments are susceptible to judicial review, and has failed to do so. In those circumstances I refuse to grant an adjournment and will proceed to hear the application for summary judgment."^[143]

187. On 1 October 2015, Derham AJ ordered that the Deputy Commissioner recover possession of the Frankston property and that Mrs Schweitzer deliver up possession of the Certificate of Title relating to that property to the Deputy Commissioner of Taxation. There was a stay of execution of the order for 60 days.^[144] That 60 day period ended on 30 November 2015 but Ms Schweitzer did not deliver possession of the Certificate of Title to the Deputy Commissioner of Taxation as ordered. In cross-examination at the hearing in the current proceedings, she said that she could not find the Certificate of Title given all the upheaval that she and her husband had been through.

188. Shortly after the summary judgment in the Supreme Court, Ms Schweitzer's mother died. She had an interest in her late mother's estate, which included a half share in the Moonee Ponds property.

189. On 24 December 2015, Ms Schweitzer lodged a proceeding in the Federal Court under s 39B of the Judiciary Act seeking orders that the income tax assessments issued in respect of the years of income ending 30 June 1988 to 30 June 19999 be declared invalid and quashed (JA proceedings).

190. The Deputy Commissioner of Taxation applied to the Supreme Court by Summons for orders that the Registrar of Titles be directed to cancel the folio of the register for the land described in the Certificate of Title for the Frankston property, create a new folio for that property, produce a Certificate of Title for the new folio and deliver that Certificate of Title to the Deputy Commissioner of Taxation as the person entitled to it. Ms Schweitzer was named as the defendant in the proceedings.

191. On 31 March 2016, Ms Schweitzer discontinued the JA proceedings she had instituted in the Federal Court. During cross-examination in the current proceedings, Ms Schweitzer did not recall the discontinuance. There were some issues about operational matters at the time, she said, but did not elaborate.

192. On 6 June 2016, Mr Hermann Schweitzer instituted proceedings in the Supreme Court against his mother, Mrs Maria Schweitzer. By an order dated 22 June 2016, McMillan J ordered that Mr Hermann Schweitzer was authorised to commence the proceeding. His Honour noted that Ms Ingrid Schweitzer's solicitor undertook to file and serve her written consent to be the litigation guardian of Mrs Maria Schweitzer, who was believed to be a handicapped person. Ms Schweitzer's solicitor noted that she had signed the consent and had no interest in the proceeding adverse to the interest of Mrs Maria Schweitzer.

193. Mrs Maria Schweitzer died on 22 October 2015 and, on 18 November 2016,^[145] McMillan J substituted Ms Schweitzer in her capacity as a legal personal representative of Mrs Maria Schweitzer. Under her will dated 1 July 2009, Mrs Maria Schweitzer had appointed Ms Schweitzer to be her executrix. She left her estate to her four daughters and to one of her sons, Mr Albert Schweitzer, in equal shares. A document stating that it is a codicil to that will was signed on 31 December 2009 in the presence of one witness, rather than two. It removes the name of one of her daughters, but not Ms Schweitzer, from clause 3 so that her estate was left to three of her daughters and one of her sons. She stated that her daughter had colluded with her son to obtain a half share of the Moonee Ponds property, that she had shown lack of concern for her and had already been amply provided for.

194. In the same order dated 18 November 2016, McMillan J directed Ms Schweitzer to file an application for probate of the will of her late mother on or before 2 December 2016. Within seven days of the grant of probate, Ms Schweitzer was to apply to the Registrar of Titles to be registered as the legal personal representative of her late mother of the Moonee Ponds property. She was then to complete and deliver to Mr Hermann Schweitzer's solicitor a transfer of land transferring to Mr Hermann Schweitzer a one half interest in fee simple in the Moonee Ponds property. Mr Hermann Schweitzer's solicitor would arrange for the transfer to be signed, stamped and lodged with the Registrar of Titles. On receipt of the certificate of title, arrangements were to be made for the sale of the Moonee Ponds property by auction, its valuation and its reserve price agreed upon or determined according to the order made by McMillan J. The proceeds of the sale were to be deposited in a trust account and held in payment of the agent's costs in preparing the property for sale, payment of legal costs of the sale and Mr Hermann Schweitzer's one half share of the net balance. The remaining net half share was to be paid to the late Mrs Maria Schweitzer's estate less the amount of Mr Hermann Schweitzer's costs in the sum of $146,100.24 in the Supreme Court proceedings at first instance, his costs of the appeal that were later taxed at $86,210.71 and his costs in the proceedings regarding the sale of the Moonee Ponds property and the distribution of the proceeds later agreed upon as totalling $41,632.92.

195. During the course of the proceedings involving her brother continued, Mrs Schweitzer made a second application dated 26 August 2016 to the Commissioner under Division 340 of Schedule 1 to the TAA. She again sought release from her tax liability and completed the details in the Application for Release. Ms Schweitzer stated that she had been unemployed since August 1993 and that, although she has a small pension from overseas, she and her husband each depended on the Age Pension for her income. She described their mental health issues that led to the establishment of Health Care Plans to assist both of them in 2010 and 2012. Ms Schweitzer questioned the process that had been followed during the initial audit as well as its outcome. Their attempts to have the assessment corrected have been unsuccessful and they have been living with the consequences ever since. Legal assistance they received was on a pro bono basis. Their total expenses amounted to $1,321.00 each fortnight and their combined income to $1,296.50.^[146]

196. Ms Schweitzer declared the Frankston property as the home they live in and estimated its market value to be $740,000.00. She did not disclose any interest in her late mother's Moonee Ponds property. In particular, Ms Schweitzer ticked the box marked "No" to Question 22: "Have you or your spouse or partner been a beneficiary of a deceased estate since your tax debt arose?"^[147] In cross-examination, she told Mr Hanks that she had done that because the property had not been sold. In her statement dated 27 June 2017, Ms Schweitzer said:

"... My mother's main asset is a half interest in a property at 29 Argyle Street Moonee Ponds, which is a rundown weather board house, the value of which is land value only. Under my mother's will and later codicil I am to receive a quarter interest in her estate but that is after the payment of costs associated with the litigation in the Supreme Court and Court of Appeal between my brother Hermann Ludwig Schweitzer, who has a half interest in that property, and my mother. As both my brother Hermann and my sister Anna-Marie were excluded from sharing in my mother's will there's a possibility that they might seek to challenge the will or make a claim under Part IV of the Administration and Probate Act 1958 which might considerably diminish any interest I might obtain from that estate. I did not include an entitlement under my mother's estate when making the application for release of my claimed taxation liability as I did not consider that I was entitled to it then and the amount I might recover from it is entirely uncertain having regards to the matters previously raised."^[148]

197. In cross-examination, Ms Schweitzer said that she did not know that she would receive one quarter of the net assets under her mother's will. She did not know how much would be left as she did not know what the amount of the costs would be and could not know until the will was settled. She was not a beneficiary under the will; she had received nothing. It was an outrageous statement and not true, she told Mr Hanks, to put to her that she had not disclosed her interest in response to Question 22 because she wanted to conceal it from the ATO.

198. The Commissioner refused Ms Schweitzer's release application in a decision dated 12 September 2016.^[149] The amount of tax owed at that time was stated to be $7,072,423.65.

199. On the following day, 13 September 2016, Derham AJ of the Supreme Court ordered that, under s 103(1) of the TL Act, the folio in the register for the land described in the then existing Certificate of Title for the Frankston property be cancelled. In its place, a new folio was ordered to be created in Ms Schweitzer's name. A Certificate of Title was created for the new folio and delivered to the Deputy Commissioner as the person entitled to it.^[150] The new Certificate of Title recorded the mortgage to the Commonwealth, the caveat in the name of the Commonwealth and various warrants of seizure and sale served on various days between 22 April 2004 and 29 September 2005.^[151] On 28 October 2016, the Supreme Court issued a warrant of possession for the Frankston property. That warrant directed the Sheriff to enter the land and cause the Deputy Commissioner to have possession of it.

200. The Sheriff had acted on the warrant directed to him and had issued a notice to the occupants of the Frankston property to vacate the property by 3 February 2017. If they did not do so, the Sheriff advised them, he might remove both them and their personal property from the Frankston property.^[152]

201. In cross-examination, Ms Schweitzer said that she did not recall having seen the order dated 13 September 2016 and knew nothing about it. When Mr Hanks reminded her that a warrant of possession had been served on her, she replied that was probably why police officers had been standing on her doorstep one morning. It had come as a complete shock to her. She said she knew nothing of the later order dated 28 October 2016 either.

202. Ms Schweitzer lodged an objection against the Commissioner's decision to refuse her release application. She did so on 11 November 2016. The objection was lodged by O'Donnell Salzano Lawyers.^[153] The Commissioner disallowed her objection on 23 January 2017.^[154]

203. On 2 February 2017, Mr Ebner faxed a copy of a document dated 3 October 2004 to both the Sheriff's Office, the ATO and the Commissioner's solicitors, the Australian Government Solicitor (AGS). The document is headed "Tenancy Agreement" and states that Ms Schweitzer, as the owner of the Frankston property, has allowed Mr Ebner to reside at the property subject to the following terms and conditions:

"1.

Tennant (sic) shall be responsible for all ground maintenance work around the house as well as the property.

2.

All major works to be carried out at the expense of the Owner.

3.

Tennant shall pay for a half of the cost of the utilities; gas electricity, water telephone etc.

4.

Tennant shall pay for half of the Rates Notices, as they become due.

5.

This agreement is for the duration of the Tennant's lifetime and can only be varied by agreement between the owner and the Tennant."^[155]

204. On 3 February 2017, Ms Schweitzer lodged an application in the Tribunal for review of the Commissioner's objection decision dated 23 January 2017. On 19 February 2017, the execution of the warrant of possession of the Frankston property was put on hold.

COMPARISON WITH ITEMS (a) AND (b) OF ITEM 6 OF THE TABLE SET OUT IN SECTION 340-10(2) OF THE TAXATION ADMINISTRATION ACT 1953 : SECTIONS 128B AND 128V OF THE INCOME TAX ASSESSMENT ACT 1936

205. I have considered the approach I have taken in relation to paragraph (c) in light of the other two provisions that were originally specified in the third column of Item 6 in s 340-10(2) at the time of its enactment to test my analysis in relation to s 4-1 of ITAA97 i.e. paragraphs (a) and (b). Although I have not set out my reasoning in relation to the remaining provisions specified in the third column, I am content that my understanding of them all leads to a consistent outcome in relation to each.

206. Beginning with ss 128B and 128V, they are both provisions in ITAA36. Section 128B imposes liability to withholding tax in certain circumstances and subject to certain qualifications . Section 128B(1) gives a flavour of those circumstances. It applies when income was derived on or after 1 January 1986 by a non-resident and consisted of a dividend paid by a company that is a resident. Withholding tax is defined by s 6(1) to mean income tax payable in accordance with s 128B. Section 128C makes provision for when it was due and payable by the person liable to pay it. Before it was amended by the Taxation Laws Amendment (No. 3) Act 1999 with effect from 1 July 1999,^[156] s 128C(4) provided for the remission of additional tax imposed for late payment. That additional tax was imposed by way of penalty, was due and payable at the rate of 16% per annum on the amount of withholding tax remaining unpaid after it became due and payable.^[157] Section 128C(6) provided that:

"The ascertainment of the amount of any withholding tax shall not be deemed to be an assessment within the meaning of any of the provisions of this Act."

Neither ss 128B nor 128C made any provision for remission of withholding tax itself.

207. Section 128V imposes mining withholding tax. It was defined by s 6(1) to mean income tax payable in accordance with s 128V. Section 128V provides that, where a mining payment is made to, or applied for the benefit of, any person, that person is liable to pay income tax on the amount of the mining payment. Section 5 of the Income Tax (Mining Withholding Tax) Act 1979 (ITMWT Act) provides that, to the extent that income tax is payable in accordance with s 128V, it is imposed and shall be levied and paid. The rate of income tax imposed by the ITMWT Act is 4%.^[158] A mining payment is a payment made to a distributing body or made to, or applied for, the benefit of an indigenous person or persons.^[159] Until their repeal by the Tax Laws Amendment (2009 Measures No. 4) Act 2009 with effect from 18 September 2009,^[160] s 128W(4) provided that the amount of that withholding tax was ascertained, rather than assessed,^[161] and s 128W(2) provided that payment was a debt due to the Queen and payable to the Commissioner.^[162] Unlike s 128C in relation to withholding tax, s 128W did not make any provision for either the imposition of additional tax or its remission either at the time it was enacted or since. Like s 128C, s 128W does not provide for remission of the mining withholding tax.

208. Until the later enactment of Part 4.15 in Schedule 1 of the TAA, Division 5 of Part VI of ITAA36 provided for the collection of mining withholding tax. Section 221Z provided that the object of the Division was to facilitate the collection of mining withholding tax. The Division was to be construed and administered accordingly. Before 1 July 2000, s 221ZB(1) required any person making a mining payment to a person, or applying it for a person's benefit, to first deduct from it an amount equal to 5.8% of the amount of the mining payment. The person was then required to pay to the Commissioner an equal to the amount of the deductions.^[163] An amount payable to the Commissioner under Division 5 was a debt due to the Commissioner, who could sue for, and recover, it in a court of competent jurisdiction.^[164]

209. With effect from 1 July 2000,^[165] Part 4.15 of the TAA applied to "tax-related liabilities", of which mining withholding tax was one of those tax-related liabilities.^[166] A "tax-related liability" is a pecuniary liability to the Commonwealth arising directly under a taxation law, of which ITAA36 is one.^[167] The object of Part 4.15 is to ensure that unpaid amounts of tax-related liabilities and other related amounts are collected or recovered in a timely manner.^[168] Section 255-5 provided for the recovery of a tax-related liability as a debt due to the Commonwealth and payable by the Commissioner. In recovery proceedings, a statement or averment about a matter in the plaintiff's complaint, claim or declaration is prima facie evidence of the matter.^[169]

210. With the introduction of Part 4-50 in the TAA with effect from 1 September 2003,^[170] provision was made for release from liabilities under ss 128B and 128V regardless of whether they were incurred before 1 September 2003.^[171] Up until the insertion of s 155-5 in the TAA, which applied to tax periods starting on or after 1 July 2012, the assessment of income tax under ss 128B and 128V had not been made under ITAA36. With effect from 1 July 2012,^[172] Division 155-A was inserted in the TAA.^[173] Section 155-5 in that Division provided that the Commissioner might, at any time, make an assessment of the assessable amount being an amount of indirect tax not otherwise specified in s 155-5(2).

211. For the purposes of the definition of the liability specified as "tax" in Item 6 of the table in s 340-10(2) of the TAA, the income tax imposed by ss 128B and 128V cannot come within paragraph (a) for it is not income tax imposed by the IT Act 1986. Section 5(2) of the IT Act 1986 specifically provides that it does not itself impose income tax payable in accordance with, among others, ss 128B or 128V. It can, however, be said to be imposed by ITAA36 and so meet the first part of paragraph (b) of the definition of "tax" in s 995-1(1) of ITAA97. Before the introduction of Part 4.15, the amount of the withholding tax or mining withholding tax was assessed, in the sense of ascertained, under ITAA36 even though that ascertainment was deemed not to be an assessment within the meaning of any of the provisions of this Act. Since 1 July 2012, it has not only been assessed but, under s 155-5 of the TAA, is the subject of an assessment. In either case and in light of the extended meaning of "this Act", it can be said to have been "assessed under this Act" within the meaning of paragraph (b) of the definition of "income tax" in s 995-1(1). Even though it is specifically not assessed under ITAA36, it is imposed under ITAA36. It is assessed under s 155-5 of the TAA. For the reasons I have given, that means that it has been "assessed under this Act" as that expression is defined in s 995-1(1). That brings the tax imposed by ss 128B and 128V into the compass of "tax" within the second column of Item 6 in s 340-10(2). Specific liability is imposed under ss 128B and 128V of ITAA36 and it follows that the requirements of the third column are also met.