Decision impact statement

Deputy Commissioner of Taxation v De Angelis

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Venue: Miscellaneous - Australian
Venue Reference No: 2093/2005
Judge Name: Master Rice
Judgment date: 7 March 2007
Appeal date: 28 March 2007
Appeals on foot:
The Commissioner has appealed to the District Court of South Australia

Impacted Advice

Relevant Rulings/Determinations:

• None

Subject References:
Administrative Overpayments
Running Balance Account
General Interest Charge

Précis

Outlines the Tax Office's response to this case which concerned, amongst other issues, whether the General Interest Charge is payable on administrative overpayments where the Tax Office has not issued a notice to the taxpayer under section 8AAZN of the Taxation Administration Act 1953.

Brief summary of facts

1. Mr De Angelis and Mr Carpinelli entered into a partnership for the construction and sale of residential units. Mr De Angelis and Mr Carpinelli separately sought and obtained GST registration relating to the partnership's business and lodged business activity statements (BASs) claiming input tax credits.

2. A refund of $77,018, representing input tax credits claimed, was paid to Mr De Angelis. However, the Tax Office later determined that the amount had been paid in error, resulting in an administrative overpayment (AOP) occurring and issued amended assessments disallowing the input tax credits.

3. The AOP was allocated to a Running Balance Account (RBA) and the General Interest Charge was calculated as accruing from the date of the assessment. No notice issued pursuant to s8AAZN of the Taxation Administration Act 1953 (TAA) in respect of the overpayment.

4. The Deputy Commissioner (the DCT) commenced recovery action in the District Court of South Australia against Mr De Angelis in respect of the RBA deficit debt comprising the administrative overpayment and brought an application for judgement to be entered summarily.

5. Mr De Angelis filed an amended defence wherein he, amongst other things, pleaded:

•

that the account relied on by the DCT was not an RBA for the purposes of 8AAZC;

•

that an administrative overpayment (AOP) is not a "primary debt" for the purposes of the RBA provisions;

•

that section 8AAZD did not permit the DCT to allocate an AOP to an RBA;

•

that the DCT is not entitled to claim GIC on the AOP as no notice was given pursuant to section 8AAZN; and

•

that the DCT was statute barred from recovering the debt pursuant to section 35 of the TAA.

6. Mr De Angelis also filed a Notice for Specific Direction seeking a stay in respect of the summary judgement application, claiming there was an error or abuse of office by the Commissioner in allowing the multiple registrations to occur, and to then prefer one registration over the other.

7. The DCT submitted that an AOP is a primary tax debt and may therefore be allocated to an RBA and that she had allocated the AOP in the matter at hand as a primary tax debt to an RBA. As the RBA was in deficit GIC was payable pursuant to section 8AAZF(1).

8. In support of her application for summary judgement the DCT produced to the Court a copy of the notice of assessment issued to Mr De Angelis and relied on notice as conclusive evidence of Mr De Angelis' liability pursuant to the then sections 59 and 61 of the TAA [now sections 105-100 and 105-110 of Schedule 1 to the TAA].

9. The DCT also relied on evidentiary certificates pursuant to section 8AAZJ.

Findings of the Court

10. The RBA deficit

The Master found:

•

that the RBA deficit debt could not be "conclusively proved under s59 TAA as the over payment is not based on a notice of assessment, it is based on the overpayment mistake provision";

•

that s8AAZN is part of the "taxation law" and is a primary tax debt.

•

that the Court does not have jurisdiction to determine which of the taxpayers ought to have been assessed and can have no view of the facts including any disputed facts relevant to the summary judgment application on the basis that "[the] Court starts with the plaintiff's assessment of the defendant's liability based on an overpayment".

•

that the administrative overpayment made to Mr De Angelis was within the definition in s8AAZN(3) and was a payment made by "mistake".

Accordingly the Master found that the DCT had established RBA deficit debt.

11. Section 35 [now 105-50] time limit

The Master found that:

"the operative date is the date of the reversal of the "refund" or credit" and that the "section 35 of the TAA does not impose a time limit to which this action is out of time. The monies that are repayable arise at the earliest in November 2002 but more likely in July 2005" and that the "appropriate date on which s35 could apply was when the Notice of Assessment was created in July 2005".

12. General Interest Charge:

The Master found that because no section 8AAZN notice was given the Commissioner could not allocate GIC to the RBA debt.

13. Stay

The Master commented that he could say nothing in respect of the allegations of bad faith as no material had been filed in the Federal Court to substantiate the allegations. The only material in evidence was the fact of the rejection of Mr De Angelis's BAS claims. The Master found that the authorities establish that any assertion of bad faith requires cogent evidence be advanced to support the allegation.

The Master found that there was no material that justified the granting of a stay in the proceedings on the basis that the Commissioner acted in bad faith or in some other way seriously acted in default of his obligations.

14. Outcome

The Master summarily entered judgement for the Deputy Commissioner for her claim exclusive of the GIC finding that "there is no entitlement to a claim for General Interest Charge as no notice was given pursuant to s8AAZN(2) of the TAA".

Mr De Angelis's application for a Stay was refused.

Tax Office view of Decision

The Tax Office respectfully disagrees with the Master's conclusion in respect of the GIC issue and remains of the view that, when an AOP is posted to an RBA, the GIC provisions are engaged and GIC is payable on the RBA balance. Further, the Tax Office considers that the correct date from which GIC is able to be imposed is the date that the AOP was made and that the RBA deficit debt can be conclusively proved under section 105-100 of Schedule 1 to the TAA (formerly section 59 of the TAA) where the AOP is reflected in an assessment of the taxpayers net amount made by the Commissioner.

Accordingly, the DCT has appealed to the District Court of South Australia against the decision of Master Rice.

Administrative Treatment

Pending the outcome of the appeal to the District Court, the Tax Office will continue to allocate AOPs to RBAs, and to calculate GIC on such AOPs from the date of the overpayment where the AOP has been posted to an RBA.

The Tax Office will continue to seek recovery of AOPs and GIC on the AOPs.

In the event the Tax Office's view as to the interpretation of the various TAA provisions is ultimately not preferred by the Courts, the Tax Office will identify affected taxpayers and refund any overpaid GIC without the need for the taxpayer to request a refund. In that regard, the Tax Office is considering whether the law would require interest to be paid on any GIC refunded in those circumstances.

Implications on Law Administration Practice Statements

None.

Court citation:
Unreported

Legislative References:
Taxation Administration Act 1953
8AAZA
8AAZC
8AAZD
8AAZF
8AAZJ
8AAZN
8AAZW
22 [now s105-5]
35 [now s105-50]
59 [now s105-100]