CASE 18/94

RD Fayle SM

Administrative Appeals Tribunal

Decision date: 2 May 1994

RD Fayle (Senior Member)

In December 1993 this Tribunal decided, in relation to this matter, that the applicant has standing (WT93/67-69 reported Case 2/94,
94 ATC 106). The applicant (hereafter ``the taxpayer'') is applying to this Tribunal to review the decision of the respondent (hereafter ``the Commissioner'') not to grant an extension of time in which to lodge an objection, pursuant to s. 14ZW(3) of the Taxation Administration Act 1953 (``the Administration Act'').

ATC 205

2. It should be mentioned that the relevant law is that prevailing as at 9 June 1992 when the notices of amended assessment in question were issued by the Commissioner. Part IVC of the Administration Act, as it then stood, provided, in relation to the requirement for the making of an objection against a notice of assessment or amended assessment of income tax, in s. 14ZW:

``14ZW(1) The person must lodge the taxation objection with the Commissioner within 60 days after:

  • (a)...; or
  • (b)...; or
  • (c) in any other case - notice of the taxation decision to which it relates has been served on the person.

(2) If the 60 days have passed, the person may nevertheless lodge the objection with the Commissioner together with a written request asking the Commissioner to deal with the objection as if it had been lodged within the 60 days.

(3) The request must state fully and in detail the circumstances concerning, and the reasons for, the person's failure to lodge the objection with the Commissioner within the 60 days.''

3. The taxpayer, through his then agent, Roper Hoey, wrote to the Commissioner on 15 July 1993 enclosing three notices of objection by the taxpayer against notices of amended assessment for each of the years of income ended 30 June 1985, 1986 and 1987 and requested that these be dealt with as if they had been lodged within the prescribed time. It is relevant to set out in full the reasons then given by the agent for the lateness of the objections, which were approximately 11 months out of time:

``The reasons for the delay in lodging objections are claimed to be:

  • 1. The taxpayer has been under intense personal pressure and stress over the last 18 months to save his various business interests from financial collapse. These problems are a result of economic circumstances caused by the recession and the failure of debtors upon which the businesses now relied (sic).
  • 2. The taxpayer lacked the financial resources to fully research and examine the nature of the proposed adjustments upon which the assessments were based.
  • 3. The taxpayer did not receive sufficient information from the Commissioner as to the facts and case law relied upon in raising the assessments.''

4. The Commissioner duly considered this request as required under s. 14ZX of the Administration Act and gave notice by letter of 25 August 1993 to the taxpayer's agent that he had declined to grant the extension of time requested. In that letter the Commissioner gave his reasons as follows:

``The taxpayer agreed to settle the audit and as a result amended assessments issued on 9 July 1992. Your request was dated 15 July 1993, over a year after the notices of amended assessment were served, and it is considered that the reasons for failure to lodge during the prescribed time do not warrant granting an extension of time.''

5. At the hearing the taxpayer was represented by Mr PJ Hannan (instructed by Mony de Kerloy) and the Commissioner by Mr F Maloney who was assisted by Mr J Nankivell, both departmental officers. The taxpayer was called by Mr Hannan to give evidence. The documents filed pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 (``the AAT Act''), were taken into evidence along with several exhibits, one of which, D6, a copy of an affidavit filed in the Federal Court in relation to an action under the Bankruptcy provisions, was only partly admitted, the Tribunal having ruled that parts of it were irrelevant and therefore unacceptable.

6. In
Re Pulitano and Telstra Corporation Limited (Decision No. 8874, 27 July 1993), a case concerning an application for an extension of time pursuant to s. 29(7) of the AAT Act, Senior Member Barbour made observations which are most helpful and decidedly appropriate in this case. These observations are reproduced in full below:

``6. When deciding the question of whether or not to grant an extension of time, the Tribunal has often had recourse to the principles laid down by Wilcox J in
Hunter Valley Developments v Minister for Home Affairs and Environment (1984) 3 FCR 344, a case concerning the power of the Federal Court to extend time pursuant to the Administrative Decisions (Judicial Review)

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1977 (ADJR Act). These guidelines were distilled by Deputy President Todd in
Johnson and Commonwealth of Australia (unreported, 5 January 1990), and have been applied in recent Tribunal decisions such as
Freeman and Australian Postal Corporation (unreported, 9 July 1993), and
Rowe and Comcare (unreported, 1 June 1993). In
Collis and Australian and Overseas Telecommunications Corporation (unreported, 4 December 1992), I summarised them as follows:

`(i) prima facie, proceedings commenced outside the prescribed period will not be entertained. An extension of time will be granted, however, if it is proper to do so;

(ii) it is relevant whether the applicant rested on his rights or took action to make the decision-maker aware that the decision was being contested;

(iii) any prejudice to the respondent that would be caused by granting the extension of time is relevant;

(iv) any wider prejudice to the general public in terms of disruption to established practices is relevant;

(v) the merits of the substantial application are relevant; and

(vi) fairness of granting the extension of time as between the applicant and other persons in a like position is relevant...'

7. A review of Tribunal and other decisions concerning the discretion to grant or refuse an extension of time shows that the primary thrust of any such inquiry is that the Tribunal do what is just and equitable between the parties.

8. Limitation periods in statutes are not to be ignored, and the policy behind this is clear; it works to the advantage of all parties concerned in litigation that matters are brought speedily to their conclusion, and limitation periods ensure that applicants commence actions promptly. But the discretion to extend time limits envisages that other matters may be relevant in fixing the period in which an applicant ought be able to begin proceedings, and the strict enforcement of statutory time frames may be anathema to the process of merit and judicial review which leads ultimately to what is just and equitable between the parties.

9. In considering the principles as enunciated by Wilcox J in Hunter Valley, and their relevance to this application, I recognise in recent cases a broader approach to the exercise of the discretion to grant an extension of time. In
A'Hearn v Comcare (unreported, 16 April 1993), Hill J observed (at page 6):

`... I should say that Wilcox J in Hunter Valley Developments Pty Ltd was at pains to make clear that he was not seeking to set out principles of law governing the exercise of discretion to extend time. Care must be taken by the Tribunal to ensure that there is not slavish adherence to the matters which are referred to in that judgement, which are listed merely as matters for guidance, in determining the extensions of time under the Administrative Decisions (Judicial Review) Act (1977), a context which differs slightly from that of the AAT Act...', and at page 10 `... [A]t the end of the day the discretion of a court or tribunal given power to extend time will be a wide one, to be exercised as the justice of the case requires. As Richards J, delivering the leading judgement in the Court of Appeal in
Avery v No. 2 Public Service Appeal Board [1973] 2 NZLR 86 at 92, said:

``In order to determine the justice of any particular case the Court should I think have regard to the whole history of the matter, including the conduct of the parties, the nature of the litigation and the need of the applicant on the one hand for leave to be granted together with the effect which the granting of leave would have on the other person involved.''


... As Deputy President Todd remarked in
Re Ardesia Pty Ltd and Chief Minister for ACT (1991) 23 ALD 255, when refusing an extension of time in relation to an appeal against a decision fixing the capital sum relevant to the value of a block of land:

`... This is not a case of an unrepresented would-be applicant in a social security matter or a compensation case. It is a commercial case and in such matters it seems to me that there is a higher... duty to be timely in making applications...'


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7. Mindful that this application concerns a commercial case and also that there is a clear duty on this Tribunal to be fair to both parties, a decision can only be reached in the context of the relevant evidence elicited at the hearing.

8. The applicant gave extensive evidence relating to both his understanding of the financial transactions which gave rise to the amended assessments in question and the circumstances whereby he and his agent on his behalf failed to lodge objections within the prescribed time.

9. The applicant is a self-made businessman who, having left school at an early age, through his own initiatives built up various businesses, some of which thrived at different times but, it would seem, all of which, in the end, suffered for various reasons. The applicant gave evidence that he had been in business for over twenty years. During most of this time he relied upon public accountants to attend to his accounting and taxation affairs. In June 1977, acting on advice from his then tax agent, he caused to be settled a deed of trust. The discretionary beneficiaries are himself, his spouse, his children and his remoter issue. The trustee of the settlement is a private company, the directors of which were himself and his then spouse, whom he subsequently divorced, later to marry the settlor of the trust property effectively excluding her as a discretionary beneficiary. The property of this trust estate included interests in several unit trust estates, each of which conducted a business, as well as shareholdings and rental properties. The family discretionary trust was the taxpayer's investment vehicle.

10. The taxpayer gave evidence that he left all matters relating to his accounting and taxation affairs to be handled by his accountant on his behalf. He said that prior to the tax audit, which eventually gave rise to the amended assessments in question, he had never been queried by the taxation authorities nor had he reason to lodge a formal objection. His evidence was that he was not familiar with the requirements to lodge a formal objection and that his usual method of handling disputes in relation to debts owed was to contest them through the court system after summons or writs had been served and, in some cases, even after judgment had been entered, to negotiate a more favourable settlement. He further stated that he believed that this technique would be appropriate in relation to challenging disputed income tax assessments, and that such a process might eventually result in their being reduced.

11. In April 1984 the Commissioner launched a tax audit of the affairs of the taxpayer, his family, the family discretionary trust and related investments. This audit was a protracted affair involving, by and large, the taxation officers and the taxpayer's then tax agent, Mr PD Metcalf. The taxpayer gave evidence that he was present at two conferences relating to the proposed amendments to be made to previously issued income tax assessments. He said he understood that these would result in additional tax of between $20,000 and $30,000.

12. On 19 August 1991, some seven years or so after the tax audit began, Mr Metcalf wrote to the Commissioner in the following terms:

   ``Australian Tax Office
   GPO Box H508
   Perth WA 6001

   Dear Mr Ganeson
   [taxpayer's] FAMILY TRUST

   In reply to your correspondence dated 9 July
   1991 we provide the following information:

1. Commission fees from [Family] Unit Trust.

(i) These fees were not actually received in cash or cheque. They were credited to a loan account in the name of [the trustee] in the accounts of [Trustee Company] Pty Ltd.

The loan details covered 1/7/86 to 30/6/87 and as such the income was included in [the trustee] that period.

(ii)Your decision to have the commission included in [the taxpayer's] personal returns is accepted.

We also confirm that your office will amend all necessary returns for [the taxpayer], the Family Trust and for all beneficiaries as follows:

1985 [the taxpayer's] return to include commission of $32,427.

1986 [the taxpayer's] return to include commission of $121,799.

1987(1) [the Family Trust] to have carried forward losses of

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$172,029. (then follows a calculation)

(2) Amend beneficiaries Tax Returns as follows:

   [taxpayer's spouse] to have
   trust distribution withdrawn of

   [taxpayer's child] to have trust
   distribution withdrawn of

   [taxpayer's child] to have trust
   distribution withdrawn of

   [taxpayer's] return to include
   commission of $42,986 and a
   spouse rebate as his wife does
   not have income over $300.

1988 [the Family Trust] to have carried forward losses as follows... $20,719

Amend beneficiaries Tax Return as follows:

   [taxpayer's spouse's] trust
   distribution of $40,000 to be

   [taxpayer's child] to have trust
   distribution withdrawn of

   [taxpayer's] return to exclude
   trust distribution of $110,510
   but to include spouse rebate of

1989[the Family Trust] to have carried forward losses as follows... $20,719 (leaving) available for distribution $23,786. Distributed to [taxpayer's spouse] $22,986; [taxpayer's child] $400; and [taxpayer's child] $400.

Beneficiaries returns to be amended as follows:

   [taxpayer's spouse] trust
   distribution to be reduced by
   $17,014 to $22,986.

   [taxpayer's] return to be
   amended (by withdrawing the
   trust distribution).

2.Your assessment of the rates and taxed (sic) is noted and the carried forward loss for 1986 will need amending from $7,093 to $3,685.

3.As this matter has been long drawn out it is critical that consideration be given to the time which time (sic) penalties cover.

If you require further assistance from me please do note (sic) hesitate to write or telephone.

Yours faithfully (signed) PD METCALF"

13. On 29 January 1992, nearly five months before the amended assessments for 1985, 1986 and 1987 issued, Mr Metcalf, a Certified Practising Accountant (``CPA''), wrote to the taxpayer making reference to discussions regarding outstanding income tax for the periods 1985 through 1989. This letter advised him that the total amount (of tax) outstanding was $86,697 including penalties. The letter also enclosed, for the taxpayer's signature and return, a form which accepts that tax penalties are to be calculated at 20 per cent of the net tax avoided and a ``per annum'' component to be calculated from 6 October 1989. This was duly signed by the taxpayer on 7 February 1992 and then returned to the Commissioner.

14. In relation to his appreciation of his rights to contest the amended assessments in question which issued on 9 June 1992, the taxpayer said he understood that Mr Metcalf said he was precluded from objecting until such time as he paid the assessments in full. He also gave evidence that after receiving the notices of amended assessment, which showed his total liability of $156,722.22 then due and payable, he telephoned the Australian Taxation Office (``ATO'') and spoke to an officer, whose name he provided to the Tribunal, who, he said, told him that he must pay the assessment in full before he could challenge it. His evidence was that because he was in no position to pay the amended assessments in full he did not take any action to challenge them and it was not until he changed tax agents that he became aware of his rights and obligations in this respect and that objections were lodged accompanied by a request for an extension of time in which to lodge them.

15. This Tribunal finds it very hard to accept that the taxpayer believed at all material times that his income tax debt resulting from the tax audit would be only in the vicinity of $20,000

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to $30,000 when, in January 1992 his agent advised him in writing that the total debt would be (exactly) $86,697.

16. Further, the Tribunal finds it hard to accept that, despite the taxpayer being under considerable financial strain at the time, and despite having attended at least two meetings with his tax agent and officers of the Commissioner, he did not have a reasonable understanding of the magnitude of the likely tax liability overall once the amendments agreed to by his agent had been made. In this regard the Tribunal cannot accept that the agent, a professionally qualified CPA, would have unilaterally committed his client, the taxpayer, to assessing amendments of the magnitude referred to in his letter of 19 August 1991. That letter speaks for itself and, in the absence of any evidence to the contrary, it represents what can only be regarded as the culmination of a long and protracted series of negotiations between delegated officers of the Commissioner and the taxpayer's agent. There is no suggestion that those negotiations were not conducted in a proper manner and without regard to the interests of the taxpayer.

17. The Tribunal accepts the taxpayer's statement, repeated many times under cross- examination, that he understood that he would not be able to challenge the amended assessments until he paid them in full. That is not to say that that is what he was told by his agent or by the taxation officer with whom he spoke by telephone - but it is plausible that that is what he thought they said. Nevertheless, the taxpayer's evidence was that his agent was aware that he was dissatisfied with the settlement and the magnitude of the attendant tax liability. The fact that no objections were prepared by the former agent cannot, of itself, infer any reason as to why no objections were filed in time. The Tribunal is left only with the fact that the liability in question arose after a long audit involving consultation with the agent and a complex settlement agreement which, in essence, shifted the tax burden from other members of the taxpayer's family to himself, contemporaneously increasing it in aggregate.

18. In reaching a decision as to whether to grant the extension of time requested the Tribunal turns to the principles enunciated by Wilcox J in Hunter Valley, (as summarised by Senior Member Barbour [supra]), bearing in mind the appropriate caution issued by Hill J in A'Hearn v Comcare, that these are but guidelines not to be slavishly followed without proper regard to the relevant circumstances of the case.

The Guidelines

(i) Prima facie, proceedinqs commenced outside the prescribed period will not be entertained. An extension of time will be granted, however, if it is proper to do so.

19. This guideline merely places an onus on the taxpayer to show that it is proper and appropriate, in the interests of justice, to grant an extension of time in the particular circumstances. It would appear to require the taxpayer to convince the decision-maker that there are unusual circumstances and that the failure was not due only to inadvertence. Whether these conditions prevailed in this case will only be revealed by an examination of the remaining guidelines.

(ii) It is relevant whether the applicant rested on his rights or took action to make the decision-maker aware that the decision was being contested.

20. The evidence shows that the taxpayer was represented, at all material times, by his tax agent who was intricately involved in the process which led to the amended assessments in question and who, prima facie, would have been mindful of the requirements to formalise an objection to contest the amended assessments. Indeed, there is evidence that the taxpayer had been involved in the negotiations which led to the amended assessments and that the taxpayer had specifically signed an undertaking to the Commissioner that he would accept an agreed level of penalties in relation to the then pending amendments. That document, of itself, is compelling evidence that the taxpayer, at least insofar as the penalties were concerned, was not going to lodge an objection against them.

21. The tax agent, Mr Metcalf, is a member of a recognised professional body, the Australian Society of Certified Practising Accountants, and there is no evidence to suggest that he would not have properly represented his client. The taxpayer's evidence, on the other hand, is that he was given to believe by both his tax agent and an officer of the ATO, (in effect, the Commissioner) that it would not be competent to object until he had paid the amended assessments. This of course is

ATC 210

not the law - quite the contrary, as under Division 3 of the Administration Act, a person may lodge an objection within a specified time, which in this instance is 60 days after notice of the amended assessment has been served on him [s. 14ZW(1)(c)], whether or not the amended assessment has been paid. There is no disagreement between the parties that the Commissioner did everything required of him properly to serve the notices of amended assessment on the taxpayer, by posting them to his usual address for service of notices, care of his then tax agent. Nevertheless, it is the taxpayer's evidence that he informed the ATO officer that he wanted to challenge aspects of the assessments. On this point there is some doubt because in the taxpayer's affidavit, filed with the Tribunal, he makes the following statement in this regard:

``I had a series of telephone conversations with various officers of the Tax Office. The upshot of what I was told was that unless I had a substantial amount of money to pay to them and then pay the balance over a very short period of time, they would not entertain any repayment proposal. They explained to me that if that was not acceptable then my only option was to consent to judgment being entered against me for the amount of the tax and only then, after reviewing my asset position, would they sit down and listen to my contentions that the amount that they were claiming was too much and possibly agree a lower figure which was acceptable to both sides and which I could repay by way of a mutually agreed repayment program.''

22. Having regard to the taxpayer's background and his evidence as to how he approached disputed business liabilities, the Tribunal accepts that he believed that he had put the Commissioner on notice that he was dissatisfied with the amount of the tax liability. That, however, is not to say that he had put the Commissioner on notice that he was dissatisfied with the substance of the amended assessments and wished to challenge them. What is not clear is whether the ATO officer understood that the purport of the discussions was to express the taxpayer's concern about funding the payment of the liability rather than to complain about the substance of the amendments. Nevertheless, the Tribunal is not satisfied that the taxpayer ever made clear to his tax agent his intention to challenge the substance of the amended assessments, as his evidence was that he took the matter into his own hands. The Tribunal is satisfied that the taxpayer had at all material times given his tax agent to believe that, due to a period of time over which the settlement was reached and its complexity, he was not about to challenge it in any way. It seems strange and almost beyond belief that a taxpayer would entrust his tax agent with technically complex and demanding negotiations relating to a possible fresh liability for income tax and then shut him out of any negotiations to challenge the substance of the liability arising as a consequence of those negotiations. That does not seem to fit the character of the taxpayer as portrayed in his evidence - a self-made intelligent businessman who relied on his tax agent for all accounting and taxation services and advice.

23. Further, hindsight shows that it was the liability to pay the very amended assessments in question which led directly to the taxpayer becoming a bankrupt. It seems that it was this later realisation that if these were to be overturned then the bankruptcy might be annulled, which prompted the taxpayer to seek to reopen them and challenge them on their merits. This action was instigated by the succeeding tax agent whom the taxpayer had approached as a direct result of his bankruptcy. The Tribunal concludes that the taxpayer did not properly notify the Commissioner that he wished to contest the amended assessments until the letter of 15 July 1993 from the then tax agent to the Commissioner (detailed above). This letter is some eleven months out of time. The reasons there given by his newly appointed agent, for the delay in lodging the objection (supra), were that the taxpayer was under intense stress, lacked the financial resources to research the amendments and that he did not receive sufficient explanations of the factual and legal basis of the amendments. The Tribunal accepts that any person who had once regarded himself as wealthy, as the taxpayer testified (``I was loaded''), and was later confronted with bankruptcy would most likely be under more than normal stress and also find himself unable to afford professional representation and that if he took exception to any of the terms put forward for settlement then that was his opportunity to disagree (as it was a negotiated settlement after all). Accordingly,

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neither the taxpayer's subsequent lack of financial resources, nor the suggestion that the settlement was made ``in the dark'', would appear to be relevant. ``Intense stress'', of itself, is insufficient reason to grant the sought after extension.

(iii) Any prejudice to the respondent that would be caused by granting the extension of time.

24. Clearly, having regard to the time which has elapsed in this matter, there would be prejudice to the Commissioner if the request was granted. The audit began some seven years before completion and culminated in the issue of amended assessments, a year or so before the present request to contest them arose. This lapse of time would give rise to obvious evidentiary difficulties should the amended assessments be reviewed at this time - particularly where evidence relied on statements by officers of the Commissioner involved in, or working papers which were prepared during, the protracted audit of the taxpayer. The further prejudice in this matter is that the taxpayer seeks now to argue that Part IVA of the Income Tax Assessment Act does not operate to allow the amended assessments in question. There is no evidence that the Commissioner actually relied on that provision. If he had then he would have been required to have made a determination in terms of s 177F before the Part could be applied to raise the amendments in question. Mr Maloney, for the Commissioner, submitted that as the Commissioner did not rely on Part IVA, such a determination was neither necessary nor made. To now have to defend the assessments against an attack relying on Part IVA would severely prejudice the Commissioner as he would be estopped because no such determination exists. Mr Maloney further submitted that as the amended assessments arose after the extensive audit and negotiations with both the taxpayer and his agent then there would be extreme prejudice to the audit and settlement practices of the Commissioner should taxpayers be allowed unlimited time to contest what would be assumed to be agreed amendments settled at an earlier time. He submitted that this would be a most unsatisfactory result since the Commissioner's practice is to regard audited matters as closed, once such a procedure has been undertaken. He submitted, therefore, not to impose the same limitations on taxpayers, who have a statutory time limit in which to object anyway, would undermine accepted practices causing uncertainty about the nature of the finality of the audit process for both parties. Under such circumstances, he submitted, the Commissioner's undertakings, arising from audits, would never reach finality.

25. In accepting these submissions as reasonable, the Tribunal concludes that there is sufficient threat of prejudice to the Commissioner to be considered in favour of a decision to refuse the grant of the extension of time sought in this matter.

(iv) Any wider prejudice to the general public in terms of disruption to established practices.

26. Should the extension sought be granted then there is no obvious reason why that might result in a prejudice to the general public. There might be a class of members of the general public who may feel prejudiced if this extension was granted. That class is those members of the public who, for whatever reasons, accepted an income tax assessment without contesting it but, after the time to object had elapsed, had been professionally advised that they ought to have challenged that assessment at the time. However, the Tribunal concludes that prima facie there would be no obviously wide prejudice to the general public if this request were to be granted.

(v) The merits of the substantial application.

27. In his attempt to satisfy the Tribunal that the taxpayer's claim that the amended assessments are erroneous is one of substance, Mr Hannan argued that there is a distinct difference between the two principal agreements entered into by the trustee of the Family Trust. In this regard he submitted that it was incorrect to impugn one of those as not giving rise to the derivation of assessable income of the trustee. The taxpayer gave evidence that a related trustee company (``the owner'') entered into a ``commission agreement'' which purported to undertake to pay a commission to the trustee of the Family Trust and another related party (together called ``the contractors'') of 10% of any profit arising from the completion of the supply contract by the owners, should the contractors be able to secure the owner as the successful tenderer. Mr Hannan argued that the commission paid to the trustee of the Family Trust, being a share of the 10% fee mentioned, and becoming due as a result of the owner having become the

ATC 212

successful tenderer, was not income derived by the taxpayer but by the trustee of the Family Trust. He submitted that the Commissioner had confused the ``commission agreement'' with another agreement (``the consultancy agreement'') and that it was this confusion that had resulted in the Commissioner drawing incorrect conclusions about the nature of the income derived by the trustee of the Family Trust from the ``commission agreement''. The nature of the confusion, it was submitted, was that under the ``consultancy agreement'' the taxpayer was required personally to provide services to ensure day to day management of a business subsequently sold to a third party, whereas the ``commission agreement'' was not so designed but rather initiated to protect the goodwill of that business particularly as it related to the supply contract tender.

28. Mr Hannan argued that as a result of this confusion incorrect amendments were made, attributing the income from both contracts to the taxpayer, and that it was only proper that the taxpayer should now have the opportunity to challenge these amended assessments, at least insofar as they relate to the ``commission agreement''.

29. The question of merit is but one of the matters which should be considered in deciding whether to grant the extension of time sought. If it were decided that the claim has no merit then that would be the end of the matter. But if it were thought that the claim does have merit then the Tribunal would proceed to make its decision on the basis of that and other criteria. The taxpayer, through his counsel, bases his case principally on merit - arguing that as there is considerable merit in the submissions and that as the taxpayer did put the Commissioner on notice that he was dissatisfied with the amended assessments but, due to his understandable ignorance of the rigours of lodging a formal objection, he simply failed to meet the procedural strictures in this instance. Therefore, it was submitted that the extension should be granted to ensure that the proper amount of tax is levied.

30. In an extension of time application such as this the Tribunal is not required to decide on merit but rather to be satisfied that there is merit. The Tribunal finds that if there is any merit it resides in the Part IVA submission, that the income from the ``commission agreement'' derived by the trustee of the Family Trust may not give rise to a ``tax benefit'' capable of being reassessed pursuant to s 177F. However, putting aside the possible nuisance factor to the Commissioner from his not having made a required determination under s 177F, the Commissioner would no doubt take considerable comfort in the following decisions which would provide a basis to support any such Part IVA decision: Case W58,
89 ATC 524; Case X90,
90 ATC 648 and Case Y13,
91 ATC 191, each of which involved a consultant practising through a trust estate and each of which determined that the Part applied to treat the income as derived by the respective consultant. Whilst there is a significant structural difference between the former anti- avoidance provision s 260 and the present one, Part IVA, cases under s 260 annihilating trustee arrangements to derive consultancy income would be relevant in supporting any assessment relying on Part IVA. Such cases are:
FC of T v Gulland; Watson v FC of T; Pincus v FC of T 85 ATC 4765; (1985) 160 CLR 55,
Bunting v FC of T 89 ATC 5245 and
Daniels v FC of T 89 ATC 4830.

31. The Tribunal therefore concludes, on the question of whether the application for review has any merit, that it may well have but so too would the Commissioner's rebuttal. Since the Commissioner contended that the amended assessments were not raised under Part IVA but by an agreement with the taxpayer that he derived the income in question, the issue of Part IVA never arose at the audit stage and to do so now would prejudice the Commissioner for reasons mentioned.

(vi) Fairness of granting the extension of time as between the applicant and other persons in a like position.

32. Mr Maloney submitted, in this respect, that there would be innumerable taxpayers who, through a negotiated settlement with their agent representing them, have agreed to the issue of amended assessments to put paid to an audit or investigation. No doubt some of these may have changed their minds and may have been fortunate enough to have done so within the objection period and so acted. But others may have been too late. If such a class of taxpayer exists, and one can only assert that it does, then should this extension of time be granted, that class of taxpayer would see such a decision as either unfair or opening an opportunity to now seek a similar extension. The first result is not

ATC 213

to be condoned and the second might be seen as an administrative nightmare - where would one draw the line as to which should be extended similarly and which should not? It would create arbitrary decision-making in an environment where there is already a statutory time in which to respond. In the interests of both fairness to that class of taxpayer and sensible administrative practice, an extension of time should only be granted in circumstances which predicate both justice to the applicant and the effect of that decision on others, having regard to broader considerations of both prejudice and public interest. In
Hickey & Ors v Australian Telecommunication Commission (1983) 47 ALR 517, Lockhart J said:

``Justice, as the ultimate object to be obtained by the exercise of the discretion, seems to me to require that regard be had to broader considerations than merely the interests of the applicant.... It may be that exceptional circumstances need not always be shown before time can be extended. However, I consider that an applicant for an extension of time maintains throughout the burden of showing why, in all the circumstances, the extension of time should be granted.''

(p. 522)

The Decision

33. The Tribunal is of the opinion that: (1) the taxpayer was represented at every stage of a long and protracted tax audit of his, his family's and related income tax affairs and in consequence he agreed, through his agent, to the issue of amended assessments for each of the years ended 30 June 1985, 1986 and 1987 to both himself and to other family members, some resulting in reduced liabilities; (2) the taxpayer did not make it plain to either his agent or to officers of the ATO that he intended to dispute the substance of the amended assessments although he did discuss with the ATO ways and means of alleviating the need to pay the entire assessment at that time; (3) to grant an extension of time as requested would result in severe prejudice to the Commissioner, particularly in relation to both evidentiary matters and procedural matters concerning the alternate ground now sought to be argued by the taxpayer; (4) the grounds which the taxpayer wishes now to argue are not without merit. However, the same applies to a possible rebuttal by the Commissioner of such grounds, given that the Commissioner be in an unfettered position to rebut. Merit alone is not a sufficient ground to grant the extension; and (5) to grant the extension sought is as likely as not to give rise to unfairness to a class of taxpayer having similarly experienced a tax audit whilst being professionally represented and where members of that class have not sought to object within the statutory time limit.

34. The Commissioner's decision is affirmed.

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