Decision impact statement

Dixon atf the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation

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Court Citation(s):
[2008] FCAFC 54
(2008) 167 FCR 287
2008 ATC 20-015
69 ATR 627

Venue: Federal Court of Australia
Venue Reference No: QUD251 of 2007
Judge Name: Spender, Ryan and Emmett JJ
Judgment date: 8 April 2008
Appeals on foot:

Impacted Advice

Impacted Practice Statements:

Subject References:
Remission of administrative penalty


Outlines the Tax Office's response to this case which involved a consideration of factors relevant to the exercise of a discretion to remit penalty.

Decision Outcome:


Brief summary of facts

The applicant, as trustee of a superannuation fund, purchased a commercial property for $1.88 million as a going concern. The applicant's tax agent correctly identified the transaction as a Goods and Services Tax (GST) free acquisition and the relevant activity statement, as lodged, did not assert a claim for input tax credits (ITCs).

Some time later the applicant changed tax agents. The new tax agent lodged an amended activity statement claiming ITCs of $171,791. He did so without instructions from the applicant based solely on a draft of the sale contract (ie. without a valid tax invoice and without consulting with the vendor or the previous tax agent). If processed as lodged the activity statement would have resulted in a refund of $171,791. However, in accordance with his usual administrative practices, the Commissioner sought verification of the ITC claim, determined the ITCs were not allowable and did not pay out a refund.

The Commissioner concluded that the relevant statutory provisions provided that administrative penalty of $85,681 applied in the circumstances of the case. The Commissioner also decided a remission of penalty was not indicated and issued an assessment of penalty. The applicant lodged objections against the assessment of penalty and the remission decision. Both objections were disallowed and the applicant sought a review of the objection decisions by the Administrative Appeals Tribunal (AAT).

In determining the review the AAT affirmed the objection decision in respect of the assessment of penalty but varied the decision in respect of remission, finding that, as no refund of the ITC claim had been made, "no harm was done". Subsequently:

The Commissioner successfully appealed the AAT decision on remission to a single judge of the Federal Court;
The applicant appealed the Federal Court decision to the Full Federal Court which remitted the matter to the AAT to determine a question of fact.
The Tribunal affirmed the objection decision.

Issues decided by the court or tribunal

At issue was the exercise of a discretion to remit penalty pursuant to section 298-20 of Schedule 1 of the Taxation Administration Act 1953. Section 298-20 is expressed as an unfettered discretion. However, the basis of the Commissioner's appeal to the Federal Court was that the AAT had made an error of law in exercising the discretion taking into account certain irrelevant considerations.

In the first instance the Federal Court dealt with each of the considerations raised by the Commissioner finding, inter alia, that the remission discretion may only be exercised in "special circumstances" and the fact that no refund had been made was not a relevant consideration for the purposes of exercising the discretion. On appeal the Full Federal Court stated (at paragraph 19):

It is difficult to see how [all the questions considered by the primary judge], assuming they are questions of law, arose in the circumstances of this case. The only relevant question of law was the subject of the ultimate conclusion of the primary judge. Her Honour's ultimate conclusion was that the discretion to remit is not enlivened by whether or not an amount of revenue has or has not been lost: absence of loss of revenue is not a relevant consideration in relation to the exercise of the discretion to remit the penalty.

and (at paragraph 21):

To the extent that the primary judge concluded that it is necessary that there be special circumstances before the discretion to remit can be exercised, her Honour was in error. There is nothing in the legislative scheme to suggest that special circumstances must be established...

The Full Federal Court concluded (at paragraph 24):

It must follow, therefore, that, for the purposes of the exercise of the discretion to remit, it can be of no consequence whether a taxpayer's false statement was detected before the Commissioner allowed or paid an input tax credit to a taxpayer, on the one hand, or whether, on the other hand, the Commissioner detected the overpayment after an input tax credit had been paid and recovered the amount, together with an amount in respect of the general interest charge.

The Full Court remitted the matter to the AAT to determine whether the imposition of the penalty was "harsh, having regard to the particular circumstances of the Taxpayer" (at paragraph 27). That not being the case, the AAT affirmed the objection decision.

Tax Office view of Decision

The decision is consistent with the Commissioner's view and with the manner in which the exercise of the remission discretion is currently administered.

Administrative Treatment

Implications on current Public Rulings & Determinations


Implications on Law Administration Practice Statements

Practice Statement Law Administration PS LA 2006/2, dealing with the administration of shortfall penalty for false and misleading statements, is presently being reviewed. The decision of the Full Federal Court in this case will be taken into account during the course of the review.

Legislative References:
Taxation Administration Act 1953
Schedule 1, Section 298-20

Case References:
Dixon v Commissioner of Taxation
[2008] AATA 825
2008 ATC 10-047

Dixon atf the Dixon Holdsworth Superannuation Fund v Commissioner of Taxation history
  Date: Version:
You are here 12 August 2009 Identified
  12 February 2013 Resolved