Deputy Federal Commissioner of Taxation v. Taylor.Judges:
Supreme Court of New South Wales
These proceedings raise the question whether a notice of assessment of income tax issued under the Income Tax Assessment Act (1936), as amended, and served on the taxpayer by posting it by pre-paid letter addressed to him at his address for service pursuant to reg. 29 and 59(c), operates to create a liability in the taxpayer to pay the tax assessed, even though the notice has not come to his knowledge before judgment for the amount of the tax is signed by the Commissioner.
The proceedings are proceedings by the defendant Mr. Taylor (to whom I shall refer as ``the taxpayer'') to set aside a judgment in the sum of $67,013.19 and $120 costs entered by the Deputy Commissioner on 14th December 1982, the sum of $67,013.19 being tax and additional tax for late payment assessed by the Deputy Commissioner in respect of the taxpayer's income for the years ended 30th June 1970 and 30th June 1976.
The facts are within a short compass. On 12th December 1981 the taxpayer lodged income tax returns for the years 30th June 1970 to 30th June 1974. The form of each return (Form A) made provision for the specification by the taxpayer of a ``Postal Address For Service Of Notices'' and on each form the taxpayer gave this address as ``c/o Keith K. Stiles, Box 467, G.P.O., Sydney, 2001''. Mr. Stiles was the taxpayer's tax agent and he signed each return as such. The taxpayer also signed each return. The taxpayer was absent from Australia between 24th July 1982 and 31st July 1982 and between 19th September 1982 and 6th November 1982. On 3rd August 1982 the Deputy Commissioner posted to the taxpayer at the address ``c/o Keith Stiles, Box 467, G.P.O., Sydney, 2001'' notices of assessment of income tax in respect of the years ended 30th June 1970 to 30th June 1976, inclusive, each notice fixing 6th September 1982 as the date upon which the tax became due and payable (the assessments for 1975 and 1976 were default assessments under sec. 167, but nothing turns upon this). From the affidavits filed, it appears that Mr. Stiles received the assessments and forwarded them by registered mail to the taxpayer at his home address but that they were returned to Mr. Stiles ``unclaimed''. The reason for this was that the taxpayer did not visit his residence between 31st July 1982 and 19th September 1982, and presumably no one was there to take delivery of the letter. On 10th November 1982 the Deputy Commissioner issued a statement of claim out of this Court claiming the tax and additional tax, and this was served upon the taxpayer on 18th November 1982. The defendant filed an appearance but no defence and the Commissioner signed judgment on 14th December 1982. This, on the evidence, was the first information the taxpayer had that the assessments had issued.
The ground upon which the taxpayer seeks to have the judgment set aside is that the regulations made under the Act, authorising service by pre-paid post at the address for service given in the last return (reg. 29 and 59(c)), are ultra vires the Act. He claims that sec. 174 of the Act requires that a notice of assessment shall actually come to the notice of the taxpayer before any liability to pay tax can arise and that accordingly any regulations made must state this requirement. As the regulations do not make such provision and as the Notice of Assessment did not come to his notice until after the Statement of Claim had been served, the Statement of Claim did not, he contends, assert an enforceable cause of
ATC 4541action. It is convenient to set out here those sections of the Act and the Regulations which are of special significance in the resolution of the problem that arises.
Section 174(1) is as follows:
``As soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof in writing by post or otherwise upon the person liable to pay the tax.''
(It is not necessary to set out subsec. (2).)
Section 266(1) provides as follows:
``The Governor-General may make regulations, not inconsistent with this Act, prescribing all matters which by this Act are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for giving effect to this Act, and for prescribing penalties not less than $2 or more than $40 for any breach of the regulations.''
(It is not necessary to set out subsec. (2).)
Regulations 27 to 30, inclusive, are as follows:
``27. Every person who furnishes a return shall, in the return, give an address in Australia for service.
28. Every person who has given an address for service and who subsequently changes his address shall, within one month after the change, give to the Commissioner, at the place where he furnished his return, notice in writing of his new address in Australia for service.
29. The address for service last given to the Commissioner by any person shall, for all purposes under the Act and Regulations, be his address for service, but where no address for service has been given to the Commissioner, or where the departmental records disclose that such person has subsequently changed his address and he has not notified the Commissioner, either in the return or by separate written advice, of such change, then the address of the person, as described in any record in the custody of the Commissioner, shall be his address for service.
30. The address for service as prescribed in the last preceding regulation shall, for all purposes under the Act and Regulations, be deemed to be the last known place of business or abode in Australia of any person.''
Regulation 59 is as follows:
``59. Any notice or other communication by or on behalf of the Commissioner may be served upon any person -
- (a) by causing it to be personally served on him; or
- (b) by leaving it at his address for service; or
- (c) by posting it by pre-paid letter post, addressed to him at his address for service,
and in any case to which paragraph (c) of this regulation applies, unless the contrary is proved, service thereof shall be deemed to have been effected at the time when it would, in the ordinary course of post, have arrived at the place to which it was addressed.''
It will be seen that para. (c), apart from providing for an address for service, follows the definition of service by post in sec. 29 of the Commonwealth Acts Interpretation Act 1901 as amended.
On behalf of the taxpayer, Mr. Collins of counsel has submitted that sec. 174 in requiring service by post ``upon the person liable to pay the tax'' requires that a notice of assessment must actually come to the taxpayer's knowledge as it would if personal service were required, and he points to the consequences to the taxpayer that flow from ``service'' of a notice of assessment. Firstly, the taxpayer, pursuant to sec. 204, comes under a liability to pay the tax on the date specified in the notice not being less than thirty days after service, or, if no date is specified, within thirty days after service of the notice. In this case the date specified in the notice was 6th September 1982 and the notices were posted on 3rd August 1982 so the requisite time was allowed. Service of the notice of assessment is the factor which gives rise to the liability to pay the tax assessed.
Gordon Edgell & Sons Pty. Ltd. v. F.C. of T. (1949) 9 A.T.D. 43;
Batagol v. F.C. of T. (1963) 13 A.T.D. 202.) Secondly, the taxpayer may become liable under sec. 207 to additional tax if the tax or any part remains unpaid after the time when it becomes due
ATC 4542and payable. Thirdly, the taxpayer is given a right to object to the assessment within sixty days, after service thereof (sec. 185) and to apply for review by the Board of Review or to appeal to this Court, if dissatisfied with the Commissioner's decision on the objection (sec. 187). These consequences, says counsel for the taxpayer, are of such significance to the taxpayer, are of such significance to the taxpayer that sec. 174 must be interpreted to mean that the notice of assessment must come to the knowledge of the taxpayer and that this is the significance to be given to the requirement in the section that the Commissioner ``shall serve notice thereof in writing by post... upon the person liable to pay the tax.''
Counsel referred to Fawcett v. Graham (1973) 1 N.Z.L.R. 495 in which the consequences to an occupier of land of not complying with a notice to clear noxious weeds was used by the Court as a ground for holding that the provision in the Act as to service of the notice should be construed to mean that the notice must actually be brought to the knowledge of the occupier. At p. 497 Wilson J. said:
``Ordinarily, service of a document which has, or may have, legal consequences means personal service, and nothing less will suffice; but sec. 28(1) offers a choice of other modes of service. These are:
- (a) by leaving the notice at the addressee's usual or last known place of abode in New Zealand;
- (b) by sending it by post in a registered letter addressed to him at such place of abode;
- (c) (if his whereabouts or last known place of abode is unknown to the sender) by publishing it as described by the subsection.
A perusal of the subsection, and consideration of the consequences of service, not only in relation to the penal provisions of sec. 5(7) but also in relation to the right of appeal given by sec. 5(2) against a notice the requirements of which are considered to be unreasonable (which right of appeal must be exercised within fourteen days after service) satisfy me that it is the intention of the Legislature that, so far as it is within the power of the sender, the notice should come into the hands of the addressee. In this sense the provisions of sec. 28(1) are permissive only and equate other modes of service with personal service only where the facts proved are such that the proper inference is that the addressee actually received the notice or that the mode adopted is that most likely, in the circumstances, to bring it to his attention.''
But each case must be dealt with on its own facts, and a conclusion as to requirements of service under one piece of legislation can provide little assistance in the interpretation of a different piece of legislation. I am not persuaded that the provisions of the Income Tax Assessment Act are to be interpreted to produce the result arrived at in the case just quoted. Of course, it cannot be doubted that the whole object and purpose involved in ``service'' of documents, whether it be service as prescribed by legislative provision or whether it be service in substitution for such methods, is to bring the particular document to the notice of the person to be served, and no doubt it is also true to say that legislative provision for service could, expressly or impliedly, require that service by post or, in any fashion that did not amount to personal service, had to bring the document served to the notice of the person concerned before it was to be taken to be served. But the very fact that a mode of service other than personal service is permitted of itself ordinarily means that service will be complete when the requirements stipulated for service have been fulfilled. Of course if a mode of service were stipulated which did not have as its object the bringing of the document to the attention of the person concerned, or which bore no reasonable relationship to such an object, it may well be that the person concerned would be relieved of the consequences of ``service'' of the notice on grounds of natural justice. But such considerations do not arise in respect of the regulations under consideration here.
I am unable to see anything in sec. 174 alone or in association with any other sections of the Act which requires a conclusion that a notice of assessment must be shown to have come to the notice of the taxpayer before the liability referred to in sec. 204 arises. It will be observed that the
ATC 4543matter of ``assessment'', that is the quantification of the amount of tax payable (sec. 6(1)), is dealt with in sec. 166 to 177 and that the matter of service of a notice of assessment is dealt with in most general terms in sec. 174. No mention is made of any address or place to which the notice is to be directed by post, and the word ``otherwise'' indicates the complete generality of the section. That word is obviously intended to refer generally to other modes of service besides service by post. It would thus include personal service, as well as other methods of service, of a notice. Far from the section indicating that communication of the notice of assessment to the taxpayer is a requirement of service, the use of general words and the fact that service by post and not personal service is selected for express mention point away from a conclusion that the section requires personal knowledge by the taxpayer of the fact that the assessment has been made and the notice dispatched. In short, the section does no more than refer in the most general way to the subject matter of service of a notice of assessment, and there is nothing in the section, alone or in association with other section, which indicates a requirement that service of the notice must come to the knowledge of the taxpayer. This conclusion in my view is reinforced by the fact that the expression ``serve notice... by post or otherwise'' is found in sec. 160AI(3). That section requires the Commissioner, after making a determination as to whether a credit is allowable under the Act to give notice of the determination. Except for the fact that the section is referring to a determination and not a notice of assessment the verbiage of that section is identical with that of sec. 174. My reading of the Act has not disclosed to me any other provision dealing expressly with service except sec. 252(1)(e) which permits service on a company to be made at the address for service of the company or on the Public Officer and sec. 214 which permits service by post in certain circumstances of process for the recovery of tax. There is no general provision in the Act dealing with service of documents. The generality of the provisions in sec. 174 and 160AI(3) taken with the nature of the Act and the requirements in regard to its administration point to the necessity for provision to be made as to modes of service of notices and communications by the Commissioner to the taxpayer, and the circumstances are plainly appropriate for regulations to be availed of to provide the detail as to how service is to be effected.
The only matter that remains for consideration then is whether the regulations, particularly reg. 29 and 59(b) and (c) which permit service by use of an address for service given by the taxpayer, are, in fact, authorised by sec. 266 of the Act.
It is well established that a regulation-making power such as that set out in sec. 266 cannot be availed of to expand the legislative field over which the Act, itself, operates. In the present case, the Act contains no express provision ``requiring'' or ``permitting'' regulations as to service to be made and, accordingly, the regulations under consideration will be valid only if they ``are necessary or convenient to be prescribed for giving effect to this Act''. In Willocks v. Anderson (1971) 124 C.L.R. 293 the joint judgment of six Justices dealt with the meaning of these words at pp. 298-299:
``The power which they give does not extend to everything which the Governor-General considers to be necessary or convenient: cf.
Commonwealth v. Progress Advertising & Press Agency Co. Pty. Ltd. (1910) 10 C.L.R. 457 at p. 469, per Higgins J. The effect of the authorities was summarised as follows in
Shanahan v. Scott (1957) 96 C.L.R. 245 at p. 250 in a passage approved by the Judicial Committee in
Utah Construction & Engineering Pty. Ltd. v. Pataky (1966) A.C. 629 at p. 640; (1965) 39 A.L.J.R. 240 at p. 242:
- `The result is to show that such a power does not enable the authority by regulations to extend the scope or general operation of the enactment but is strictly ancillary. It will authorise the provision of subsidiary means of carrying into effect what is enacted in the statute itself and will cover what is incidental to the execution of its specific provisions. But such a power will not support attempts to widen the purposes of the Act, to add new and different means of carrying them out or to depart from or vary the plan which the legislature had adopted to attain its ends.'''
Their Honours went on to refer to the requirement expressed by Isaacs J. in Carbines v. Powell (1925) 36 C.L.R. 88 at p. 91, namely, that the regulations should be ``confined to the same field of operations as that marked out by the Act itself''.
The factors to be taken into account in determining whether regulations made under such power as that contained in sec. 266 are within the power were defined in
Norton v. Union Steamship Co. of New Zealand Ltd. (1951) 83 C.L.R. 402 at p. 410:
``A power expressed in such terms to make regulations enables the Governor-General in Council to make regulations incidental to the administration of the Act. Regulations may be adopted for the more effective administration of the provisions actually contained in the Act, but not regulations which vary or depart from the positive provisions made by the Act or regulations which go outside the field of operation which the Act marks out for itself. The ambit of the power must be ascertained by the character of the statute and the nature of the provisions it contains. An important consideration is the degree to which the legislature has disclosed an intention of dealing with the subject with which the statute is concerned.
In an Act of Parliament which lays down only the main outlines of policy and indicates an intention of leaving it to the Governor-General to work out that policy by specific regulation, a power to make regulations may have a wide ambit. Its ambit may be very different in an Act of Parliament which deals specifically and in detail with the subject matter to which the statute is addressed.''
The regulations under consideration in the present case deal expressly with the matter of service of notices and communications from the Commissioner, and the provision of an address for service, and by providing for service at an address for service they in no way extend the field of operations marked out by the Act - indeed, they plainly operate within that field which contemplates a flow of communications and notices from the Commissioner to taxpayers throughout the nation. The very generality of sec. 174 (and sec. 160AI) and the absence of any section in the Act making provision in detail for modes of service points to the need for regulations specifying modes of service, as pointed out in
Morton v. Union Steamship Co. of New Zealand Ltd., supra.
O'Sullivan v. Hannagan (1960) S.A.S.R. 266 is an illustration of generality in the provisions in a Statute forming a basis for holding that regulations made thereunder were valid. The regulations under consideration here ``give effect'' to the Act because they enable its provisions to be effectively administered (
Carbines v. Powell (1925) 36 C.L.R. 88, per Isaacs J. at p. 91).
When sec. 266 refers to regulations being ``necessary or convenient to be prescribed for giving effect to this Act'', it is referring to necessary or convenient from the standpoint of administration
Gibson v. Mitchell (1928) 41 C.L.R. 275, per Isaacs J. at p. 279), and the proper administration of the Act requires that there be specific provision both for personal and other service in regard to notices of assessment and other documents. Section 29 of the Acts Interpretation Act, although defining service by post, requires that any letter sent be ``properly addressed'' and this would place an enormous burden upon the Commissioner if he were restricted to this method. What has been done in reg. 27 to 30 is to leave it to the taxpayer to stipulate in every return which he files the address to which he wishes communications to be sent, and that address then is to be regarded for all purposes as his address for service, subject to the qualification introduced in the latter part of reg. 29. There can be no suggestion that such a scheme is not in every respect fair to the taxpayer. It places no hardship upon him nor does it do him any injustice. He is given the opportunity of deciding where he shall receive documents sent to him. He can always make his own arrangements to ensure that mail sent to the address he stipulates does in fact reach him. The proper administration of the Act by the Commissioner with his extensive and varied powers, involving as it does a vast number of taxpayers and a continuous flow of communications from the Commissioner to taxpayers, requires that the Commissioner have available to him an address to which he
ATC 4545can, with confidence, direct communications to the taxpayer, and what better method than to allow the taxpayer, himself, to stipulate what that address shall be (reg. 27) and then provide for service by post at that address (reg. 29 and 59). The regulations here are in my opinion plainly ``necessary and convenient to give effect to the Act'', within sec. 266 of the Act.
Counsel for the taxpayer, I should mention, sought to contend that because the address given by the taxpayer was that of the taxpayer's tax agent, this went beyond what sec. 174 would permit. I see no basis for such a conclusion.
In the result, then, as service of the notices of assessment upon the appellant was made by forwarding to him a registered letter addressed to him at his address for service as provided by reg. 59(c), and as no ground exists for holding that that regulation or the associated regulations, 27 to 30, are invalid, the taxpayer became liable to pay the tax assessed on the date specified in the notices of assessment, viz. 6th September 1982 and the Deputy Commissioner was entitled thereafter to take proceedings to recover that tax and additional tax for late payment, as he has done. The judgment entered by the Deputy Commissioner on 14th December 1982 against the taxpayer was thus a judgment to which the Commissioner in law was entitled.
It follows that the motion to set aside the judgment is to be dismissed.
The defendant is to pay the plaintiff's costs.
These orders may be entered.
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