Decision impact statement
Commissioner of Taxation v Milne
Venue: Federal Court of Australia
Venue Reference No: NSD 1286/05
Judge Name: Conti J
Judgment date: 4 August 2006
Appeals on foot:
No
Impacted Advice
Relevant Rulings/Determinations:
Subject References:
Administrative Law
Context of liability to income tax
review of decision of AAT to grant relief from income tax in favour of legal practitioner referable to circumstances of serious hardship
implications of that statutory notion in case of long established legal practitioner adversely affected financially by marital breakdown, illness and financial misconduct of former partner
whether Tribunal took into account irrelevant considerations or failed to take into account relevant considerations in its determination or otherwise of the prevalence of serious hardship
 This document is not a public ruling, but provides a statement of the Commissioner's position in relation to the decision and how the law will be administered as a consequence of the decision. Any proposals for changes in the law are matters for government and it is not appropriate for the Commissioner to comment. |
Brief summary of facts
The matter was an application for review by way of an appeal to the Federal Court from a decision of the Small Taxation Claims Tribunal (Tribunal). The Tribunal had set aside the Commissioner's objection decision and remitted the proceedings to the Commissioner with the direction to grant the taxpayer full release of his tax related liability, under section 340-5 of the Taxation Administration Act (1953), on the ground of serious hardship.
Issues decided by the court or tribunal
1. His Honour Justice Conti held that the Tribunal applied the correct test of serious hardship in accordance with the legislation and the Commissioner's policy.
2. Conti J held that in the complexity of the circumstances, exaction of the tax debt from the Respondent would amount to 'serious hardship' in accordance with IT 2440 [para 54].
3. The Tribunal was not bound to approach the test of hardship by 'by way of appraisal of any comparison of the value of Mr Milne's assets with the amount of his liabilities at any relevant point in time' [para 54] as in circumstances peculiar to Mr Milne at the time the Tribunal heard his appeal, exaction of his taxation debt would have amounted to 'serious hardship'. The facts that his estranged spouse held an equal share in the substantially hypothecated real estate assets and that the 'Brindabella' [para 52] property was unsaleable at the time of the hearing, support this notion.
4. The Tribunal did not fail to take into account a 'viable factor of relevance' [para 57]. Essentially this means that if the Tribunal did fail to take a consideration into account, it was not of such relevance or strength to alter the conclusions of the Tribunal.
5. Further, the Tribunal did not take into account irrelevant considerations [para 57]. The facts and considerations taken into account by the Tribunal were relevant and appropriate.
6. Conti J found that it was open to the Tribunal to release the Respondent based on 'the complexity of evidence before it...at least to a substantial or significant extent' [para 53]. As such, Conti J found that the Commissioner had not established any error of law. The implication of this finding is that Conti J found that the Tribunal's finding of serious hardship and the decision to exercise the discretion were both based on probative evidence and were reasonable.
Implications of the decision
The implication of this decision is that the Commissioner's published interpretation of the law as set out in Income Tax Ruling IT 2440 and Chapter 24 of the ATO Receivables Policy which provide guidance in relation to the meaning of the term 'serious hardship' are correct in determining release matters.
The decision turns on its own facts and does not create any direct precedent as to the circumstances which either establish serious hardship or influence the use of the discretion in relation to releasing taxpayers from their taxation liabilities.
Conti J acknowledged there is no special rule for solicitors; that in terms of the Legal Profession Act 2004 (NSW) bankruptcy does not mean a solicitor must lose his or her right to practice.
The Tax Office will not be lodging an appeal to the Full Federal Court.
Administrative Treatment
Although the test for serious hardship refers to normal community standards, each release case will continue to be considered uniquely on its own facts having regard to the community standard.
Implications on Law Administration Practice Statements
None
Court citation:
[2006] FCA 1005
2006 ATC 4503
63 ATR 538
(2006) 153 FCR 52
Legislative References:
Taxation Administration Act 1953 (Cth)
Schedule 1 340-5
Schedule 1 340-15
Schedule 1 Division 340
Bankruptcy Act 1966 (Cth)
Part VI Div 4B
139J
139K
139P(1)
139P(2)
139Q
139T(1)
139T(2)(a)
139T(2)(b)
139T(2)(c)
139T(2)(d)
139T(2)(e)
Income Tax Assessment Act 1936 (Cth)
265
Case References:
NSW Associated Blue-Metal Quarries Limited v Federal Commissioner of Taxation
(1956) 94 CLR 509
Re Filsell and Commissioner of Taxation
[2004] AATA 1012
Re Wilson and Minister for Territories
(1985) 7 ALD 225
Powell v Evreniades
(1989) 21 FCR 252
89 ATC 4415
20 ATR 472
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2)
(1979) 2 ALD 634
New South Wales Bar Association v Murphy
(2002) 55 NSWLR 23
50 ATR 267