Decision impact statement

Commissioner of Taxation v Administrative Appeals Tribunal

Venue: Federal Court of Australia
Venue Reference No: VID 738 of 2010
Judge Name: Keane CJ, Downes and Gordon JJ
Judgment date: 17 March 2011
Appeals on foot:
No

Impacted Advice

Relevant Rulings/Determinations:

• N/A

Subject References:
TAXATION
superannuation
non-concessional contributions cap and excess contributions tax
the nature of the rights of review available to a taxpayer, if the Commissioner refuses to make a determination under s 292-465 of the Income Tax Assessment Act 1997 (Cth) (as it stood prior to the amendments provided by the Superannuation Legislation Amendment Act 2010 (Cth))
whether the rights of revielude an application to the Administrative Appeals Tribunal under Pt IVC of the Taxation Administration Act 1953 (Ctw include an application to the Administrative Appeals Tribunal under Pt IVC of the Taxation Administration Act 1953 (Cth)

Decision Outcome:

Adverse decision.

Précis

Review rights where the Commissioner refuses to make a determination in relation to contributions under s 292-465 of the Income Tax Assessment Act 1997(Cth) (prior to amendments made by the Superannuation Legislation Amendment Act 2010) (Cth)

Brief summary of facts

•

This was an appeal by the Commissioner against a decision of the Administrative Appeals Tribunal ('AAT') that it did not have jurisdiction to review certain excess contributions tax ('ECT') assessments on the basis of the Commissioner's refusal to exercise his discretion in relation to excess superannuation contributions.

•

The taxpayers in the case before the AAT sought review of certain objection decisions purportedly made under Part IVC of the Taxation Administration Act 1953 ('TAA 1953') in relation to their ECT assessments. The taxpayers argued that the Commissioner should have made a determination in their favour under s 292-465 of the Income Tax Assessment Act 1997 ('ITAA 1997') to disregard excess contributions they had made, or to allocate them to another financial year.

•

On 3 August 2010, the AAT held that it did not have jurisdiction to review the taxation objections on this basis: McMennemin & Anor v Federal Commissioner of Taxation [2010] AATA 573; 2010 ATC 10-145.

•

The Commissioner appealed to the Federal Court under s 44 of the Administrative Appeals Tribunal Act 1975 and, in the alternative, sought relief under s 39B of the Judiciary Act 1903 in relation to the AAT's decision.

•

On 16 November 2010, the Superannuation Legislation Amendment Act 2010 received the Royal Assent. The legislation clarifies that an ECT assessment is reviewable under Part IVC of the TAA 1953 on the basis of the Commissioner's discretion in s 292-465 of the ITAA 1997. However, the legislation only applies where the taxpayer applied for the determination on or after 17 November 2010.

Issues decided by the court

•

By majority, the Full Federal Court held that the AAT was correct to conclude that the assessments could not be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's refusal to make a determination under s 292-465 of the ITAA 1997.

•

The Commissioner argued that his refusal to make the determinations was 'integral' to the process of assessment, or was 'sufficiently connected' to that process to be reviewable as part of the assessment. The majority held that the Commissioner's submission was inconsistent with the scheme established by Part IVC of the TAA 1953, which was designed to avoid uncertainties surrounding the question of what decisions are or are not connected or integral to the process of assessment. The majority found particular difficulty in the fact that a determination could only be made after an assessment had issued, and would not necessarily lead to the making of an amended assessment. Their Honours also found that the legislative amendments made in 2010 suggested, if anything, that prior to those amendments the legislation did not have the effect argued for by the Commissioner.

•

Downes J's dissenting view was that the assessments could be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's decision not to make a determination. His Honour held that an objection to an assessment which challenged that decision was simply an objection to the assessment. His Honour also found that the legislative amendments made in 2010 appeared to reflect an intention that the relevant provisions were always to have the operation which his Honour found them to have had.

Tax Office view of Decision

The effect of the Court's ruling is that taxpayers will not be able to use the process in Part IVC of the TAA 1953 to seek review of certain assessments made under Division 292 of the ITAA 1997.

Specifically, an ECT assessment will not be reviewable under Part IVC of the TAA 1953 to the extent that:

•

the basis for review is a determination, or refusal to make a determination under s 292-465 of the ITAA 1997 (for convenience, 'a s 292-465 decision'); and

•

the taxpayer applied for the determination before 17 November 2010.

In such cases, the s 292-465 decision ('affected decision') is not part of the process of assessment.

Conversely, the Court's ruling is not considered to affect the ability of a taxpayer to obtain review under Part IVC of the TAA 1953 of an ECT assessment:

•

on the basis of a s 292-465 decision where the taxpayer applied for the determination on or after 17 November 2010; or

•

on a basis other than a s 292-465 decision

Although the Court was concerned with the effect of the Commissioner's refusal to make a determination under s 292-465, its conclusion is considered to apply equally where the Commissioner makes such a determination. The Commissioner's inability to make that determination prior to the original assessment indicates that the determination is outside of the assessment process. While a taxpayer may be dissatisfied with the determination, Part IVC review only applies to an ECT assessment; and an amended assessment issued to give effect to a determination could only reduce the taxpayer's liability relative to their liability under the original assessment.

Conversely, the Federal Court appeared to accept that the legislative amendments made in 2010 enabled the review of an ECT assessment on the basis of a refusal to make a determination which the taxpayer applied for on or after 17 November 2010. This conclusion is considered to apply whether the refusal occurs before or after the issue of the original assessment.

Administrative Treatment

The Commissioner will decline to formally consider a taxation objection to the extent that it purports to be made under Part IVC of the TAA 1953 but is based upon a s 292-465 decision which the taxpayer applied for before 17 November 2010.

The Commissioner also expects that the AAT would dismiss, for want of jurisdiction, any application for review of a purported objection decision or ECT assessment to the extent that it purports to be made under Part IVC of the TAA 1953 but is based upon a s 292-465 decision which the taxpayer applied for before 17 November 2010. If any such applications are received, the Commissioner will draw this decision to the attention of the AAT and seek dismissal of the application.

The Commissioner will not formally consider a subsequent application to disregard or reallocate contributions which are already covered by a valid s 292-465 decision. Once such a decision has been made, the Commissioner's statutory power to make or refuse to make a determination is considered to have been exhausted.

While the law does not allow taxpayers to formally object to an affected decision under Part IVC of the TAA 1953, taxpayers can still talk to the ATO about the decision in order to ensure that there has not been any misunderstanding. If a taxpayer asks, in most cases the ATO will review the decision, consistent with good administrative practice.

Depending on the circumstances, a taxpayer who is dissatisfied with an affected decision may be able to seek review of that decision outside of Part IVC of the TAA 1953; for example under the Administrative Decisions (Judicial Review) Act 1977. Taxpayers requiring information on alternative avenues of review should seek independent advice.

Implications for ATO precedential documents (Public Rulings & Determinations etc)

None

Implications for Law Administration Practice Statements

None

Court citation:
[2011] FCAFC 37
2011 ATC 20-248

Legislative References:

Administrative Decisions (Judicial Review) Act 1977 (Cth)


Administrative Appeals Act 1975 (Cth)


Income Tax Assessment Act 1936 (Cth)


Income Tax Assessment Act 1997 (Cth)


Judiciary Act 1903 (Cth)


Superannuation Legislation Amendment Act 2010 (Cth)


Taxation Administration Act 1953 (Cth)


Taxation Laws Amendment Act (No. 3) 1991 (Cth)


Tax Laws Amendment (Simplified Superannuation) Act 2007 (Cth)

Case References:
Allina Pty Limited v Commissioner of Taxation
(1991) 28 FCR 203
21 ATR 1320
91 ATC 4195

Balnaves v Commissioner of Taxation
(1985) 8 FCR 589
16 ATR 892
85 ATC 4592

Deputy Commissioner of Taxation v Clarke and Kann
(1984) 1 FCR 322
15 ATR 483
84 ATC 4273

Commissioner of Taxation v Energy Resources of Australia Ltd
[2003] FCAFC 314
135 FCR 346
2003 ATC 5179
54 ATR 608

Commissioner of Taxation v Futuris Corporation Limited
[2008] HCA 32
237 CLR 146
69 ATR 41
2008 ATC 20-039

Constable Holdings Pty Ltd v Commissioner of Taxation
(1986) 11 FCR 136
17 ATR 640
86 ATC 4329

Deputy Commissioner of Taxation v Richard Walter Pty Limited
(1995) 183 CLR 168
95 ATC 4067
29 ATR 644

Domaine Finance Pty Ltd v Commissioner of Taxation (Cth)
(1985) 8 FCR 538
16 ATR 778
85 ATC 4465

Grain Elevators Board (Victoria) v President, Councillors and Ratepayers of the Shire of Dunmunkle
[1946] VLR 372
73 CLR 70
[1946] ALR 273

Federal Commissioner of Taxation v Administrative Appeals Tribunal and AC Goode & Co Ltd
(1990) 21 ATR 250
90 ATC 4342

George v Federal Commissioner of Taxation
[1952] HCA 21
86 CLR 183

Hadfield Finance Pty Ltd v Federal Commissioner of Taxation
(1988) 19 ATR 1083
88 ATC 4300

Harts Australia Ltd v Federal Commissioner of Taxation
[2001] FCA 1188
48 ATR 37
2001 ATC 4572

Hepples v Federal Commissioner of Taxation
[1992] HCA 3
173 CLR 492
22 ATR 852
92 ATC 4013

Interlego AG v Croner Trading Pty Ltd
(1992) 39 FCR 348

Kennedy v Administrative Appeals Tribunal
[2008] FCAFC 124
168 FCR 566
2008 ATC 20-037
73 ATR 276

Isaacs v Commissioner of Taxation
[2005] FCA 832
144 FCR 194
2005 ATC 4537
59 ATR 693

Intervest Corporation Pty Ltd v Commissioner of Taxation
(1984) 3 FCR 591
15 ATR 1204
84 ATC 4744

McKinnon v Department of Treasury
[2006] HCA 45
228 CLR 423
63 ATR 409

Mercantile Credits Ltd v Commissioner of Taxation (No 1)
(1985) 8 FCR 510
16 ATR 855
85 ATC 4544

Meredith v Commissioner of Taxation
[2002] FCAFC 271
125 FCR 308
2002 ATC 4730
50 ATR 528

Minister for Industry and Commerce v Tooheys
(1982) 60 FLR 325
42 ALR 260

Re Command Recruitment Group (Qld) Pty Ltd v Commissioner of Taxation
[2008] AATA 619
108 ALD 177
73 ATR 388

Re O'Reilly; Ex parte Bayford Wholesale Pty Ltd
[1983] HCA 27
151 CLR 557
83 ATC 4534
14 ATR 610

Shi v Migration Agents Regulation Authority
[2008] HCA 31
235 CLR 286

Spencer v The Commonwealth
[2010] HCA 28
241 CLR 118

Tooheys Ltd v Minister for Business and Consumer Affairs
(1981) 54 FLR 421
36 ALR 64