Decision impact statement

Mount Pritchard v Commissioner of Taxation

Court Citation(s):
[2011] FCAFC 129
(2011) 169 FCR 549
2011 ATC 20-288
(2011) 85 ATR 496

Venue: Federal Court of Australia
Venue Reference No: NSD 85 of 2011
Judge Name: Edmonds, Middleton and Jagot JJ
Judgment date: 17 October 2011
Appeals on foot: No.
Decision Outcome:
Favourable - application dismissed with costs

Impacted Advice

Relevant Rulings/Determinations:

• TR 97/22

Subject References:
Validity of assessments where made contrary to a private binding ruling
Declaratory proceedings

Précis

Outlines the ATO response to this case challenging the validity of assessments and seeking to require the Commissioner to assess in accordance with a private binding ruling that had been issued to the taxpayer.

Brief summary of facts

In February 2004, the Commissioner issued a private binding ruling to the taxpayer stating that the taxpayer would be exempt from income tax for the years of income ended 30 June 2003 to 30 June 2010.

The Commissioner ruled that the taxpayer was exempt from income tax because the arrangement as defined in the private ruling was a club established for the promotion of sport. Hence, Item 9.1(c) of section 50-54 of the Income Tax Assessment Act 1997 (ITAA 97) applied.

Subsequently, the Commissioner issued assessments to the taxpayer for the years ended 30 June 2006 and 30 June 2007, on the basis that the arrangement as defined in the private ruling was not the same arrangement that was actually carried out by the taxpayer. Accordingly, the Commissioner was not bound by the private ruling.

The taxpayer objected to the assessment for the year ended 30 June 2006 on the ground that the Commissioner was bound by the ruling and thus he did not have the power to make an assessment for the 2006 income year.

The Commissioner decided to disallow the objection in full on 5 March 2010. On 23 April 2010, the taxpayer applied to the Administrative Appeals Tribunal under Part IVC of the Tax Administration Act 1953 (TAA 53) for a review of the Commissioner's objection decision.

In the meantime, the applicant also applied to the Federal Court for judicial review of the Commissioner's decision, on the ground of jurisdictional error.

Issues decided by the court

The Full Court held that no error has been shown in the process of assessment going to jurisdiction.

The Full Court also concluded that in the absence of jurisdictional error, failure by the Commissioner to comply with a provision of the tax legislation does not make an assessment invalid.

Further, where the taxpayer contends that the Commissioner is bound by a private ruling, the taxpayer can proceed to have heard its arguments in Part IVC proceedings, and if successful in arguing that the private ruling should be applied, will demonstrate that the 2006 assessment is excessive.

ATO view of Decision

The decision supports the proposition that a review or an appeal under Part IVC is the proper avenue for a taxpayer seeking review of an income tax assessment on the basis that it is excessive.

Administrative Treatment

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

None

Implications for Law Administration Practice Statements

None

Legislative References:
Income Tax Assessment Act 1936
6(1)
170BB
175
177(1)

Income Tax Assessment Act 1997
50-45

Taxation Administration Act 1953
PtIVC
Sch1 357-60

Case References:
Deputy Commissioner of Taxation v Richard Walter Pty Ltd
[1995] HCA 23
183 CLR 168
29 ATR 644
95 ATC 4067

FJ Bloemen Pty Ltd v Federal Commissioner of Taxation
[1981] HCA 27
147 CLR 360
11 ATR 914
81 ATC 4280

Federal Commissioner of Taxation v Administrative Appeals Tribunal
[2011] FCAFC 37
2011 ATC 20-248
191 FCR 400

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

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

McAndrew v Federal Commissioner of Taxation
[1956] HCA 62
98 CLR 263

McDonald v Commissioner of Business Franchises
(1992) 175 CLR 472

Perpetual Executors and Trustees Association of Australia Limited v Federal Commissioner of Taxation
(1948) 77 CLR 1

Plaintiff S157/2002 v Commonwealth of Australia
[2003] HCA 2
211 CLR 476

Project Blue Sky Inc v Australian Broadcasting Authority
[1998] HCA 28
194 CLR 355

R v Metal Trades Employer's Association; Ex parte Amalgamated Engineering Union, Australian Section
[1951] HCA 3
82 CLR 208

Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (No 20)
(1980) 44 FLR 455

X v Australian Prudential Regulation Authority
[2007] HCA 4
226 CLR 630

Other References: