CASE 12/96

Members:
KL Beddoe SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 31 January 1996

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KL Beddoe (Senior Member)

By a letter dated 7 June 1994 the respondent, through a Deputy Commissioner of Taxation, advised the applicant that the objections in relation to the years of income ended 30 June 1984 and 30 June 1985 had been considered and had been disallowed for the reasons set out in the letter. By an application dated 22 November 1994 the applicant applied to this Tribunal for review of the decision. That application was defective

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and, in subsequent proceedings before the Tribunal and after hearing the parties, I extended the time for the making of Application No QT95/43 to 25 March 1995. In those proceedings the respondent objected to the jurisdiction of the Tribunal but that issue was deferred to the subsequent hearing which took place in Cairns on 19 September 1995. It is the respondent's contention that the two objection decisions, which are the subject of the application, are ineligible income tax remission decisions in accordance with paragraph 14ZS(2)(a) of the Taxation Administration Act 1953 (``the Administration Act'').

2. Section 14ZZ of the Administration Act provides that where a person is dissatisfied with an objection decision of the Commissioner, that person may apply to this Tribunal for review of the decision if the decision is a reviewable objection decision. Section 14ZQ of the Administration Act defines a reviewable objection decision to mean an objection decision that is not an ineligible income tax remission decision.

3. Section 14ZS reads as follows:

``14ZS(1) For the purposes of this Part, an objection decision is an ineligible income tax remission decision if subsection (2) or (4) applies.

14ZS(2) An objection decision is an ineligible income tax remission decision if it relates to the remission of additional tax payable by a taxpayer under the Income Tax Assessment Act 1936 (other than Division 11 of Part IIIAA), except where the additional tax is payable under section 224, 225, 226, 226G, 226H, 226J, 226K, 226L or 226M of Part VII of that Act, whatever its amount, or is payable under another provision of that Part and its amount, after the decision is made, exceeds:

• (a) in the case of additional tax payable under section 222 of that Act because of the refusal or failure to furnish a return, or any information, relating to a year of income - the amount calculated, in respect of the period commencing on the last day allowed for furnishing the return or information and ending on:
  • (i) the day on which the return or information is furnished; or
  • (ii) the day on which the assessment of the additional tax is made;

  whichever first happens, at the rate of 20% per year of the tax properly payable by the taxpayer in respect of the year of income; or

• (b) (Omitted by No 101 of 1992)
• (c) (Omitted by No 101 of 1992)
• (d) if the amount calculated in accordance with paragraph (a) is less than $20 - $20.''

4. At the hearing of the matter the applicant conducted his own case assisted by his solicitor and Ms McDonald of the Australian Government Solicitor's Office appeared for the respondent. No oral evidence was given to the Tribunal but the Tribunal had before it documents filed in the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (``the T-documents'') and the Tribunal also had before it written submissions by the parties and a bundle of documents submitted to the Tribunal by the applicant.

5. Document T2 is a copy of an income tax return in the name of the applicant for the year of income ended 30 June 1984. The copy shows that the applicant apparently signed the return on 13 September 1993 on which date a firm of tax agents also apparently signed the return, and the return was lodged in the Australian Taxation Office on or about 15 September 1993 (T1). The respondent asserts that this return was due to be lodged with the Australian Taxation Office on or before 31 August 1984. The basis of this assertion is the operation of section 161 of the Income Tax Assessment Act 1936 (``the Assessment Act'') and a notice published in the Commonwealth of Australia Gazette on 10 July 1984 which required lodgment of income tax returns for the year of income ending 30 June 1984 on or before 31 August 1984. The applicant's return shows a total income of $19,540 and a taxable income of $13,530 so that the applicant was clearly a person required to lodge an income tax return within the terms of the Gazette notice, being a person with a total income from all sources in excess of $4,595.

6. Document T3 is a copy of an income tax return for the year of income ended 30 June 1985 in the name of the applicant. A copy of that document indicates that that return was also signed by the applicant on 13 September 1993 and also signed by a firm of tax agents on the

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same date. The return discloses a net income of $91,186 and a taxable income of $87,947. The notice published in the Government Gazette in accordance with section 161 of the Assessment Act in the Gazette No G29 dated 23 July 1985 required persons who are residents of Australia whose total income was in excess of $4,595 to lodge a tax return at the Australian Taxation Office on or before 31 August 1985.

7. I am satisfied, and so find, that the applicant was a person who was required to lodge an income tax return for the years of income ended 30 June 1984 and 30 June 1985 in the terms of the notices published in the Government Gazette in accordance with section 161 of the Assessment Act.

8. Document T5 is a Final Notice issued by the Australian Taxation Office at Townsville in the name of a Deputy Commissioner of Taxation acting as a delegate of the Commissioner of Taxation requiring the applicant to lodge an income tax return for the year of income ended 30 June 1984 within 14 days of the date of the notice. The notice is dated 1 May 1991. Document T6 is a similar Final Notice of the same date in respect of the year of income ended 30 June 1985. It will be apparent that the applicant failed to comply with those notices. I should add that Document T6 in relation to the year of income ended 30 June 1985 required the lodgment of the return within 28 days of the date of the notice as distinct from 14 days for the notice for the prior year. By notices dated 7 May 1993 the respondent again required lodgment of the returns for the years of income ended 30 June 1984 and 30 June 1985 (T10 and T11). Nothing, however, turns on these notices.

9. Documents T15 and T16 are copies of extracts of notices of the assessment in respect of the years of income ended 30 June 1984 and 30 June 1985. Both indicate that the applicant was issued with notices of assessment dated 14 December 1993, each notice of assessment disclosing a taxable income, and each disclosing tax payable on that taxable income and the imposition of additional tax for late returns. In relation to the year of income ended 30 June 1984 the additional tax for late return is shown as an amount of $1,652.78 and for the year of income ended 30 June 1985, the additional tax for late return is shown as $67,661.54.

10. The applicant relies upon a substantial bundle of documents in a binder which have not been marked as exhibits but which are before the Tribunal and have been taken into account by the Tribunal. All those documents have been read by the Tribunal but none of them goes on to explain the applicant's failure to lodge the income tax returns due on 31 August 1984 and 31 August 1985. The documents are mainly concerned with events that occurred in the Cairns area and, in particular, occurred after the applicant and his family moved to Cairns in August 1986. The first sign of any activity in relation to the income tax returns for the years of income ended 30 June 1984 and 30 June 1985 is a copy of a letter dated 24 March 1987 addressed to the applicant by a firm of accountants, Deloitte Haskins and Sells, enclosing copies of the applicant's 1983, 1984, 1985 and 1986 income tax returns apparently for signature and then lodging with the Taxation Office. The letter of 24 March 1987 is marked ``Private and Confidential'' and two paragraphs of that letter have been deleted in the copy tendered to the Tribunal. I am therefore reluctant to give much weight to the letter but I am satisfied that I can accept that as at 24 March 1987 the applicant's accountants had prepared income tax returns for the 1984 and 1985 years which are the subject years before this Tribunal, but those returns had not been lodged with the Australian Taxation Office at that time. The material before the Tribunal establishes beyond doubt in my view, and I so find, that in fact the applicant did not lodge income tax returns for 1984 and 1985 until September 1993.

11. I am also satisfied on the material before the Tribunal that there is no explanation as to why the returns were not lodged in the Australian Taxation Office by the due dates of 31 August 1984 and 31 August 1985 respectively. I am also satisfied, and so find, that those are the dates specified in the relevant Gazette notices, and that those dates were the last days for lodgment of those returns by the applicant. There is no evidence before the Tribunal that any extensions of time for lodgment of the returns, whether under a tax agent's lodgment programme or by a formal grant of extension of time by the respondent, have been made in relation to the applicant for those years of income which are before the Tribunal.

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12. The respondent objects to the jurisdiction of the Tribunal on the basis that the imposition of the additional tax for late lodgment of the applicant's returns together with the decision in relation to the remission in whole or in part of that additional tax is an ineligible income tax remission decision within the meaning of section 14ZS of the Administration Act because it is a penalty imposed at a rate not exceeding 20 per cent per annum and is not therefore a reviewable objection decision under section 14ZQ of the Administration Act. There is no issue before this Tribunal as to the amount of the taxable income assessed and therefore the only question is whether or not the additional tax assessed is at a rate not exceeding 20 per cent per annum of the tax properly payable.

13. The second issue which is raised by the applicant is the issue of whether the Medicare Levy is to be taken into account in determining whether or not the additional tax assessed after remission by the respondent exceeds 20 per cent per annum. That matter was not effectively argued before me, the parties preferring to rely on the outcome in a matter that was then reserved, and is now Decision No 10532. I need do no more than repeat what I said in that decision and have set out as part of the reasons for decision in the present matter, paragraphs 23 to 28 of my reasons for decision in Decision No 10532 as follows:

``23. The addition of Medicare Levy into the `tax properly payable' used for calculating the rate per annum at which penalty tax for late lodgment has been imposed can cause substantial differences in the outcome of the calculation.

24. It is contended for the applicant that the Medicare Levy imposed upon assessment should be removed from the calculation when determining the percentage rate of additional tax imposed. The applicant argues that the `tax properly payable' means primary tax only and does not include Medicare levy.

25. The phrase `tax properly payable', found, inter alia, in paragraph 14ZS(2)(a) of the Administration Act, is not defined. Section 222A of the Assessment Act defines `proper tax' as meaning `the tax properly payable by the taxpayer in respect of that year on the taxpayer's taxable income after allowing credits properly allowable to the taxpayer'.

26. Part IIIB of the Assessment Act deals with Medicare Levy. Section 251R(7) provides:

`251R(7) In this Act (other than this Part, the definition of ``year of tax'' in subsection 6(1), section 102AAN, Division 17 of Part III and sections 160AQU, 160AQX, 160AQY and 160AQZ), unless the contrary intention appears, ``income tax'' or ``tax'' includes levy payable in accordance with this Part.'

27. Reference was made to Taxation Ruling 2475 which was issued on 27 May 1988 with effect from 1 November 1988. Paragraph 9 of that Taxation Ruling sets out the Commissioner's view of the definition of `tax payable'. That is, it means gross tax including Medicare Levy. It is well recognised that such Rulings are not binding on this Tribunal, being no more than the Commissioner's view on the correct interpretation of a particular matter.

28. Do the references mentioned mean that the phrase `tax properly payable' in paragraph 14ZS(2)(a) should be read so as to include Medicare Levy? The Administration Act is silent on the question but it seems to me that there is an inference that the phrase should have the same meaning as it does in the Assessment Act. There is nothing in the legislation that I can find which suggests that the phrase is to have a different meaning when used in the Administration Act. I am therefore satisfied that the phrase `tax properly payable' in paragraph 14ZS(2)(a) includes assessed Medicare Levy. When calculating the rate at which penalty tax was imposed for each of the years of income in dispute, the amount of Medicare Levy assessed must be included as tax properly payable. In my view the effect of subsection 251R(7) is applicable in the circumstances of this case.''

14. I adopt the reasoning set out above for the purpose of deciding the present case and therefore find that the tax properly payable in the context of paragraph 14ZS(2)(a) of the Administration Act includes the assessment of Medicare Levy.

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15. Section 222 of the Assessment Act provides that the taxpayer is liable to pay by way of penalty, additional tax equal to double the amount of tax payable by the taxpayer in respect of the year of income where inter alia the taxpayer has failed to furnish a return of income. Section 227 of the Assessment Act provides that the Commissioner shall make an assessment of additional tax payable by a person under provisions of that Act and also provides that the Commissioner has a discretion to remit the whole or any part of additional tax payable by a person under the Act. There is no doubt, and it is not argued, that the Commissioner's discretion to remit additional tax applies in relation to additional tax imposed by section 222 of the Assessment Act. In administering these provisions the Commissioner relies upon an income tax ruling. At the relevant time the ruling relied upon by the Commissioner was described as Taxation Ruling IT 2475. The effect of that ruling was to require the exercise of discretion to take into account the provisions of the ruling and in particular the ruling indicated that additional tax for non lodgment of a return should be remitted so as to be no more than 100 per cent of the tax payable, plus provisional tax where applicable, under the notice of assessment.

16. In relation to the year of income ended 30 June 1984 the respondent attempted to apply the provisions of the tax ruling IT 2475 but proceeded to make a number of fundamental errors in that calculation including an error as to the date on which the return was due, adopting a date of 31 October rather than 31 August. However, the net effect was that the Commissioner decided to remit half of the additional tax imposed by section 222 and given that the return was some nine years late in being lodged with the Taxation Office, it will be apparent that a 100 per cent penalty spread over nine years is considerably less than 20 per cent per annum. I should add that all the errors made by the Commissioner in applying his own ruling are, in fact, in favour of the applicant so that the reality is that the Commissioner has assessed an amount for additional tax after remission which is less than 100 per cent of the tax properly payable by the applicant in relation to the year of income ended 30 June 1984. It is not suggested that the Tribunal should adjust to make the remission in accordance with the tax ruling and I see no reason why that should be done, because the power to remit is a discretion and the discretion is to remit the whole or any part of the additional tax payable. The power to remit does not rely upon an ascertainment of a fixed or variable percentage of the tax properly payable. The Commissioner has therefore acted in accordance with subsection 227(3) although failing to act in accordance with his own taxation ruling. As I have already indicated that failure was to the benefit of the applicant taxpayer and I can see nothing that can be done in this Tribunal in relation to the matter.

17. The net result is that this Tribunal has no jurisdiction to review the exercise of discretion by the Commissioner. The reason this Tribunal has no jurisdiction to review the Commissioner's decision in relation to the additional tax is because section 14ZS of the Administration Act makes the remission decision an ineligible income tax remission decision within the terms of subsection 14ZS(2). The subsection applies because the additional tax payable under section 222 of the Assessment Act for failure to furnish a return does not exceed the rate of 20 per cent per year of the tax properly payable by the taxpayer in respect of the 1984 year of income.

18. Similar considerations apply in relation to the year of income ended 30 June 1985. However, in that year the Commissioner did not remit additional tax to an amount not exceeding 100 per cent of the tax properly payable, but appears to have calculated the remission on the basis of a calculation at 20 per cent per annum, assuming the return was due to be lodged on or before 31 October 1985 and making another adjustment to allow one week's grace for lodgment. I am satisfied on the material before me that the remission decision by the Commissioner resulted in remission of additional tax to an amount which does not exceed 20 per cent per annum and once again the decision is therefore an ineligible income tax remission decision within the terms of section 14ZS of the Administration Act.

19. The law as to the jurisdiction of this Tribunal is explained by Davies J in
Qantas Airways Limited v DFC of T (WA) 79 ATC 108 at 109; (1979) 2 ALD 291 at 292 where his Honour said:

``In argument, counsel for Qantas Airways Limited relied upon the provisions of sec. 25 of the Administrative Appeals Tribunal Act 1975, particularly the provisions of subsec.

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(4) that, `The Tribunal has power to review any decision in respect of which application is made to it under any enactment'. He submitted, as a matter of construction, that the words `under any enactment' qualify the word `decision' and not the word `application'. In my view, the expression qualifies `application' so that the Tribunal has power to review a decision only in those cases `in respect of which application is made to it under any enactment'. Were there any doubt about this, which I think there is not, that doubt is resolved by the context. Section 25(1) provides that `An enactment may provide that applications may be made to the Tribunal...' An application for which provision is so made is an application made under an enactment. Moreover, sec. 26(2) provides that a reference in sec. 25(4) to an enactment includes a reference to the Schedule. The effect of sec. 26(2), is that, for the purpose of sec. 25(4) applications authorised by the provisions of the Schedule are applications made under an enactment.

Counsel for Qantas Airways Limited further submitted than an application to review a decision made under an enactment is itself an application made under that enactment and, therefore, it is an application which, by the operation of sec. 25(4), confers upon the Administrative Appeals Tribunal power to review the relevant decision. Counsel submitted that the terms of sec. 25(1), which state that an enactment may provide that applications may be made to the Tribunal, do not limit the interpretation of sec. 25(4) but rather are an enabling provision providing for the granting of power to the Tribunal in specific cases. I do not accept this submission. An application is not made under an enactment unless the enactment empowers the making of the application.

In the present instance, no enactment empowers the making of the application to the Administrative Appeals Tribunal. Therefore, the Administrative Appeals Tribunal has no jurisdiction to review the subject decision.''

Insofar as his Honour refers to section 26 of the Administrative Appeals Tribunal Act 1975 that provision has now been repealed but his dicta is otherwise applicable to that Act as now in force.

20. Section 14ZZ of the Administration Act provides that where a person is dissatisfied with the Commissioner's objection decision the person may, inter alia, apply to the Tribunal for review of the decision if the decision is a reviewable objection decision. Section 14ZQ of the Administration Act defines a reviewable objection decision to mean an objection decision that is not an ineligible income tax remission decision or an ineligible sales tax remission decision. An ineligible income tax remission decision is defined by section 14ZS in terms already identified as decisions in relation to the remission of additional tax where the additional tax payable does not exceed the rate of 20 per cent per annum of the tax properly payable by the taxpayer in respect of the year of income. I am satisfied that the Administration Act therefore excludes such decisions from the operation of section 25 of the Administrative Appeals Tribunal Act 1975 (s. 14ZZA).

21. For these reasons I am satisfied that the Tribunal does not have jurisdiction to deal with Application No QT95/43 and I will direct the Registrar to remove that application from the list of applications awaiting hearing before the Tribunal.

22. Application QT95/130 seems to have had its genesis in an alleged agreement between the applicant and the respondent's officers for the settlement of a dispute about the payment of unpaid taxes and, in particular, an agreement to resolve the issue of the unpaid taxes by adopting an arrangement for the payment of a certain amount of money over a period of time. That apparently resulted in the application to this Tribunal which, on its face, appears to be an application to review a decision made by the Australian Taxation Office under the terms of the Freedom of Information Act 1983. In the course of proceedings before me the applicant sought to argue that the Australian Taxation Office had breached an agreement reached as to the payment of outstanding taxes and did not seek to argue before me any issue which might fairly be thought to be an issue raised within the terms of the Freedom of Information Act. The respondent disputes the claims made by the applicant and it is not for this Tribunal to determine whether or not there has been a breach of an agreement for settlement of a dispute between the parties. If such is the situation then, as I said during the course of the

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proceedings, the applicant should seek his remedies in another place, but not in this Tribunal. I am satisfied that the application which is numbered QT95/130 does not disclose any reviewable decision and the applicant does not therefore have a right to make an application for review of such a decision. The Application for Review (Form 1) attached copies of the correspondence dated 10 May 1995 from the Australian Taxation Office and 16 June 1995 from the Australian Government Solicitor, apparently acting on behalf of the respondent Commissioner. The Government Solicitor's letter of 16 June 1995 makes it clear enough that the Government Solicitor is referring to a decision by the Taxation Office not to offer the applicant a fast track review in relation to his current circumstances, and his financial information. It goes on to say that despite allegations by the applicant that the Taxation Office had accepted his offer to pay an amount of money over three years that allegation is denied by the Taxation Office and asserts that the Taxation Office in fact rejected the offer to settle on that basis.

23. So far as the applicant is in dispute with the Taxation Office over whether or not there is an agreement reached between the parties, as I have already indicated that is a matter where the applicant remedies in another place. Insofar as the applicant asserts maladministration by the Taxation Office, and that seems to be part of the allegation which he makes, issues of maladministration are appropriately dealt with by the Commonwealth Ombudsman and the applicant should approach the Ombudsman if he wishes to pursue such matters. Insofar as this Tribunal is concerned, I cannot identify any reviewable decision and I will therefore direct that the Registrar remove application QT95/130 from the list of matters awaiting hearing before this Tribunal.